SRED Times, Buying Your Votes, and What's Good for Alberta?

It is not clear to me how Covid-19 has affected CRA’s processing of SRED claims. I find that assessing claims seems to be taking about 2 months now on average, except where a claim has been flagged for intermediate action such as an FTCAS. Actually, the recent processing time seems perhaps better than the norm has often been, so it could be that CRA is being less stringent in the application of review standards. The mandate seems to be to get money into the hands of business to keep the doors open and the staff employed.

I expect that the distribution of subsidies such as the CEWS will continue until the next federal election. I think that the government will simply keep extending the end dates to keep up their popularity. The Liberals have the electorate’s support now; they don’t want to lose it. Once the election is done, I think the subsidies will be also. That’s when we will hear that we can’t afford them.

How much can we afford? Well, the current PM’s dad ran a government that had some major deficits in the early 80s when interest rates were excruciatingly high. Adjusting for inflation (and the higher GDP now) I estimate that it would take a budget deficit of about 300 billion dollars to be the same burden as a 30 billion dollar deficit 35 years ago. So I think we can handle the current programs for quite awhile. I don’t say they are a good idea though. This country needs to strengthen its income statements now more than its balance sheets. We need economic activity more than savings accounts.

Jason Kenny thinks he can get the needed economic action for Alberta by lowering provincial corporation income tax rates. I think he’s wrong. The provincial rate accounts for too small of a portion of the total corporation income tax bill to make a 2% reduction in the rate meaningful. Further, the taxation of dividends paid to individual shareholders is so onerous now that a reduction in the corporation income tax rate is to a large extent offset by the tax bite out of dividends. Moreover, companies have to actually have a taxable income for a tax rate reduction to be appealing.

No, what Mr. Kenney ought to do is support the development of Alberta technology in fields other than oil and gas. Get Alberta diversified, and do it quickly. Reinstate the provincial SRED credit and the investor tax credit, and develop fundings for companies developing twenty-first century industries.