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A little more on corporate tax cuts

Last week we released results from a survey that found large majorities of Canadians do not support the Federal government’s plan to continue its planned corporate taxes.  Our findings added some context to an intense debate reported in news stories and columns and among political leaders about whether the corporate tax cuts are good economic policy or not.

I do not presume to know much about economics, so I will stay out of the debate about the merits of the tax cuts and whether now is an appropriate time to continue with reductions.

But I did want to take a moment and dig a little deeper into the data to see if there were any other insights that might offer some sense of how the issue might play out with Canadians.

One question I ‘ve been consideringis what effect would this debate have on the public’s opinion of the federal government’s ability to manage the economy.  By all accounts, (as a new poll we will be releasing tomorrow shows), Canadians who care about the economy think the Conservatives have the best policy to deal with it.  The Conservatives have been successful at linking their party brand to the economy recovery.  But would the debate over corporate tax cuts hurt that brand?

Consider this: For respondents who said managing the economy was an important issue for them and believed the Conservative Party had the best policy on the issue, 38% sided with the opposition party on the corporate tax cut debate.  Similarly, when asked if they supported continuing the planned corporate tax cuts, 34% said no, they opposed the tax cuts.

These two results could become a liability for the government if this debate continues until the budget is finally tabled and we all find out if there will be a spring election or not.  Why?

Because up until now, a large plurality of Canadians who are worried about the economy, have bought into the Conservative government’s argument that they are the best managers of the economy.  They argue their plan is working and it is not worth the risk to change course now.  About a third of Canadians agree with this notion.

But if the opposition parties can raise doubts about the Conservative plans – that they are just in it for Bay Street and not for Main Street – then there may be some opportunity to chip away at some of the softer Conservative vote.

However, the problem  for Michael Ignatieff and Jack Layton is that opposition to PM Harper is fragmented. Add to the fact that he can still win an election (even if only a minority) with 33-35% of the vote.  With voters having three to four alternatives (with the BQ in Quebec) to choose from, coordination becomes difficult.  This was the problem facing the right between 1993 and 2003 when the Reform Party/Canadian Alliance and PC Party had a public ready to turf the Liberals (especially in 1997) but neither could attract enough support to make it happen.

Corporate tax cuts will probably not be the ballot issue when the next election comes.  If they do, it may not end up making much difference on the result for the same reason that free trade didn’t impact the 1988 election.  A majority of the country opposes them, but there isn’t one clear alternative to the government to deliver the change.  Until that happens, the Conservatives will be holding firm on their plan (because they can’t change course while asking Canadians not to) and smiling as the Liberals and NDP jockey to see who is the “real” alternative to Stephen Harper and the Conservative Party.