So what is patronage, subsidy, tax incentive, and government innovation program? These are terms bantered about with little substance. They are terms designed to receive a reaction more than anything else.
When political entities use phrases like corporate welfare bums, they are playing to emotion and not separating fact from circumstance. There is a place for government involvement. I know some disagree but there are instances where the community as a whole benefits.
First patronage an elephant in the shadows that no party wants to discuss or acknowledge while they are engaging in the practice. It rarely becomes an issue because once in power it will be invoked by the new people in power. Patronage is where those in power make political appointments to Boards of Directors to crown corporations. These are people who will steer the companies in question in the ideological direction of the party in power. Patronage is sometimes a matter of ensuring certain business firms are favored in the selection of government contracts. Usually not outright but in the selection process. With today’s scrutiny this is becoming more difficult.
What is the definition of a government subsidy? The Cambridge Dictionary gives us this. Monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest.
We have seen this in manufacturing, and in agriculture over the years. Sometimes it is given more liberally than others. It is also often as not used as a secondary compensation for decisions that adversely affected a sector of the economy. It can also be administered through other government avenues. Subsidies have been reduced and in some sectors eliminated over time as they often conflict with World Trade Organization international trade policy. There are loopholes and other levers of government that allow for some subsidies to exist.
Tax Incentives and grants and retraining policies. Here again the waters flow in different pools of the stream. Tax incentives are not limited to the federal government. The province and even municipalities can provide tax incentives to attract businesses and industries to come to areas they might not be immediately attracted to or persuade a company to rethink its policy of relocation. These are not only instances where a company benefits it has implications for workers and a regions tax base to provide community services. In addition to tax incentives it can include non repayable loans or grants, in exchange for other considerations that would otherwise adversely affect a community or a local workforce for example.
Tax incentives and or grants are in exchange for a community benefit.
Where this become murky is at the more senior level of government policy. Without becoming too technical and keeping in mind I am not a tax expert or even trained in the art, I will attempt to have enough frame to prevent the financial skeleton from collapsing. There are programs where people can invest say one hundred thousand dollar in a venture, say a mining exploration company. If it does well the person would pay tax on half the amount.
There are also programs where taxes are deferred and other deductions apply. I think the only ineligibile program would be trust funds. A financial expert would better define that. There is likely a custom kit for detecting loopholes.
The Job incentive programs are another way to provide the involvement of government that some include as subsidies and this argument will go on forever. Yes government economic intervention is involved. The infrastructure program serves as a melting pot for initiatives.
Upgrading commercial, private and government institutions. It is designed to implement innovative design to improve say environmental standards for residential, commercial and government buildings and business structures. One that caused great controversy was the twelve million Loblaws got to upgrade their freezers. This was a program with a set of procedures that the company applied and qualified for. It had some benefit as well. It reduced energy consumption and provided hundred of jobs in the trades. Others would have qualified had the explored the criteria of the program.
I remember a personal experience in agriculture when I was the President of the BC Fruit Growers Association. It is the replant program in BC. Most think this is a program merely to replace the varieties to be more competitive in the marketplace and that is true, but it goes much deeper than that. Prior to the Columbia River Treaty the tree fruit industry was on a level playing field with Washington State. Each side of to border produced about twelve million boxes of apples each year.
The treaty had as it’s goal to produce electrical power and reduce flooding down stream. The unintended consequence saw water diverted for irrigation of millions of acres of land for US Agriculture. The result, the Americans were able to grow over a hundred fifty million boxes of apples a year while we were reduced to about four million. The competition was one sided. We produced quality while our neighbors flooded not only our market but international markets with quantity.
It was a case of they used our water resource against us and we are just getting around to addressing the issue after fifty years as part of the renegotiation of the Columbia River Treaty.
Why is the tree fruit replant program a good investment? Most people do not realize the tree fruit industry directly or indirectly contributes an economic generator of seven hundred seventy-six million dollars a year to the Okanagan Valley. This figure comes from the last information I was up on and that was in two thousand seventeen.
So while some are critical it should be seen as an investment in community tax bases, jobs and tourist attraction and a prime revenue generator. It is an example of a valid use of government dollars on a cooperative program. For example the farmers cost is somewhere between thirty-five and forty thousand dollars and acre and the government incentive portion is about seven thousand.
Tax incentives in the public interest are part of the nations involvement in partnering with business to keep us on the cutting edge in competition with the world. However there are a number that are over subsidized and some by the time they have gone down every tax loophole in the book of loopholes they pay nothing or almost nothing and those are the ones who need a tax adjustment. The NDP coined the term welfare bums and it stuck. It should never have been a blanket statement. However nearly thirty years later, the conservatives are engaging in the same rhetoric and threatening to close some of the loopholes. It should also be remembered the two governing parties in this country also created them. I have attempted to keep this as simple as I can but there are many kinds of government assistance to provide for long and short term strategies and each should be examined for their benefits value. Not all incentive measures are bad or good or of equal value.
Publisher’s note – A bit long but I think, for the first time, I have brought out Fred the Farmer – to explain things to me and maybe even you. I think the reason people get upset with incentives, subsidies and grants by government (them) is that little is given back to the common income earner – slaving away at his job – with little incentive given other than pride of
job, family, land, and security. Would it NOT be nice if all of us thought we were being respected as the same.