November 8, 2000

Can Day keep small-biz promises?

Stockwell Day's performance in this week's French-language leader's debate highlights a key problem in the Alliance's lavish promises to small business. Even if the party prevails in the general election, it is unlikely to draw enough Quebec seats to form the majority government that would be needed to implement its platform.

The Alliance program, released in early October, calls for an end to government waste and cuts to corporate welfare and regional subsidy programs. Key, are substantial, across the board personal and corporate tax cuts, many targeted directly at Canada's small businesses. Of these two stand out.

The first is a cut in the federal corporate tax rate on income under $200,000, from 12 to 10 per cent. This cut is targeted at the 75 per cent of Canadian businesses that have less than five employees. This contrasts with the Liberal plan, which cuts corporate tax rates on businesses earning more than $200,000 a year. Small business owners already pay taxes when they draw salaries from their companies, so corporate taxes - even though the tax code tries to minimize this -- amount to double taxation.

A second Alliance proposal of interest to small business owners, is a reduction in Employment Insurance rates from $2.40 per $100.00 of income, to $2.00, a step further than the Liberals' proposed reduction to $2.25. The cut is important because for every dollar that employees pay in to the EI fund, business owners kick in an additional $1.40.

Since the company's portion of EI taxes doesn't show up on anyone's pay stub, few people know it exists, except for the business owners who write the checks each month. That means governments continue to milk small businesses year after year, despite the fact that there is a huge surplus in the EI fund.

The Alliance is now widely regarded as having made a crucial tactical error when it released its platform early. This allowed the Liberals to co-opt the most popular tax cuts and include them in Paul Martins's mini-budget. Unfortunately the finance minister left out the two measures directly targeting small business.

However Alliance is unlikely to be able to implement those measures either. Unless the party is able to broaden its base, the best that it can hope for is to form a minority government. Despite recent advances in the polls, the Alliance remains primarily regional-based with strong support in the West, but struggling to gain a foothold in the rest of the country.

The party's stand against regional subsidies means that it has little hope of getting any traction in the Atlantic provinces. Its only hope of achieving power is to try and rebuild the old Mulroney coalition: a strong Western base, with support from rural Ontario ridings and a good showing among Quebec's soft-nationalist voters.

But Day's poor performance in the French language debate pulls any hope of putting that coalition together off the table. The Alliance leader was relegated to the background and forced to read prepared policy statements on a variety of issues.

Day was eclipsed by both Jean Chrétien and Bloc leader Gilles Duceppe. But most painfully of all, even arch-rival Joe Clark rose from the dead to make him look bad. Although his mastery of French is improving, Day has nowhere near the vocabulary required for him to be able to communicate effectively directly to the Quebec electorate.

This would not be a problem if the Alliance leader had a strong francophone Quebec lieutenant, to speak on his behalf and defend his views in television interviews and media gab-fests. But no such figure has emerged, and for all practical purposes, the Alliance is dead in Quebec for this election at least.

That means the best Day can hope for is that the Bloc to picks enough Quebec seats so the two parties can combine to form a minority government. Indeed the Alliance leader has been forced to deny that the party is soft pedaling its Quebec campaign to allow for that possibility.

But a minority government that depended on Bloc support would mean the death of both small business initiatives. During the debate, Duceppe indicated that the EI surplus should be distributed to workers. In addition the Bloc has given no indication of sensitivity to the needs of small business.

As broad and ambitious as the Alliance's small business policies are, the bottom line is that unless it can obtain support across the country, there is very little chance it will be able to implement them.


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