September 6, 2000

Alliance policies would benefit SMEs...if it can get elected

With the Canadian Alliance's new leader running unopposed by the governing Liberals in an upcoming British Columbia bi-election, and therefore poised to enter Parliament, it is worth taking a moment to look at the stance a Stockwell Day-led party would take toward small-to medium-sized businesses.

This is especially true given an impending federal election, which could be called by Liberal leader Jean Chrétien as early as this fall.

Small to medium sized businesses are one of the most natural constituencies for any small "c" conservative party. The Canadian Alliance is no exception. Like its predecessor the Reform Party, the Alliance takes positions on a wide variety of issues, from taxes to free trade and deregulation that reflect the crucial role that small-to-medium sized enterprises (SMEs) play in creating jobs and wealth in the Canadian economy.

On the key issue of taxes, the Alliance favors a variety of measures that would relieve the onerous tax burden that faces Canadian SME's and sole proprietorships. The party's proposed 17 per cent flat tax for example, would significantly boost the incentives for sole proprietors and small office home office (SOHO) businessmen to create new wealth.

In terms of corporate taxes, the Alliance favors eliminating the 7 per cent gap that separates the mostly old-economy manufacturing and resource-based businesses from service businesses which tend to be more closely tied into new the economy. This will be achieved by reducing the corporate tax rate for service businesses from 28 per cent to 21 per cent. The rate applicable to manufacturing and resource businesses will remain unchanged at 21 per cent.

For small businesses whose income is under $200,000, the corporate tax rate will be reduced from 12 per cent to 10 per cent. Capital gains taxes will also be reduced since only 50 per cent of any capital gain will be taxable, as opposed to 66 per cent under the current regime. Cuts in the Employment Insurance program - which is sometimes called a "job tax," since, in addition to amounts deducted from employees paychecks, the program also taxes companies paying salaries - are also planned.

But taxes are just one element of the Canadian Alliance's broadly pro-SME policies. The party in general favors freer markets, increased competition, more trade with other countries and less intrusive government regulations.

For example in the crucial area of banking reform, the Alliance would be more likely to favor measures that increase competition in the sector by, for example, giving foreign banks, and credit unions more latitude to operate. Such measures could potentially boost SMEs' access to credit by giving them more doors to knock on.

Even in areas where specific policies are not clearly spelled out, the Alliance can often be given the benefit of the doubt to come up with measures that favor economic growth.

The big question, as always in a country where the Liberals can with some justification, claim to be the country's natural governing party, is whether the Alliance can put together a strong enough coalition to make a serious bid for the Prime Minister's Office.

At first glance the numbers don't seem to add up. Although the Alliance continues to rise in many polls, it still lags the Liberal party by double digits. The Alliance continues to show strength in the Reform Party's traditional Alberta/ British Columbia base. On the other hand the Atlantic provinces appear to be a total write off, given the Alliance's policy of not lavishing huge government grants and large subsidies on the regions.

With the backing of Mike Harris's Conservative party, the Alliance should pick up some seats in Ontario. However the federal Tories' roots run deep in the province, so the vote splitting between the two parties that we saw in the 1997 election will continue to be a factor.

The key to any Alliance bid for power is Quebec. Ironically, according to one party insider, it may be easier for the Alliance to pick up seats in that province than in Ontario. A lot has changed in La Belle Province since the 1997 election when the Reform Party ran its infamous ad where red crosses were drawn through the faces of Quebec leaders.

Day, with his French lessons, his support of the Meech Lake Accord and his constitutional policies that favor greater provincial autonomy, has put together many elements that under the right circumstances could initiate a strong breakthrough in this volatile province.

By appealing to the large block of soft nationalist Quebecers the party has recruited some key organizers, two new candidates from the Bloc Québécois and a flood of executives from Joe Clark's Quebec organization. And a recent poll shows the party jumping to third place in the province and that 10 per cent of the province's voters would now consider voting for the Alliance.

With the Bloc Québécois seemingly at a dead end and accomplishing close to nothing in Ottawa it is worth considering that Quebecers' have demonstrated the occasional tendency to vote as a herd in federal elections to maximize their political clout at the national level.

It is possible that should Day continue to build strength, that the Alliance could pull off a significant chuck of seats in the province, not unlike Brian Mulroney did in the 1984 and 1988 elections.

For the time being this remains pure speculation. Businesses, which under ordinary circumstances would give the lion's share of their political contributions to a party of the right, continue to hedge their bets by also contributing to the centrist Liberals and the remains of Joe Clark's Tories.

E-mail can be sent to Diekmeyer at peter@peterdiekmeyer.com

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