Here’s how the Ford government can actually make Ontario ‘open for business’ again

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Appeared in the Toronto Sun, July 24, 2019
Here’s how the Ford government can actually make Ontario ‘open for business’ again

Premier Doug Ford likes to say his government will make Ontario “open for business” again. His (correct) implication was that the previous government undermined Ontario’s attractiveness as an investment destination. He promised to implement policy reforms to reverse this trend.

The Ford government has made progress on some fronts. Reversing the ill-conceived Wynne-era expansion of rent controls has helped encourage investment in rental housing, which is certainly good news. On government spending, the government has exercised slightly more spending restraint than its predecessor during its final years in office.

Still, much more must be done for the Ford government to consider itself a successful reform-oriented government transforming Ontario’s attractiveness as a destination for investment. Here are just a few things.

First and foremost, Ontario must address its tax competitiveness problem. On personal income taxes, Ontario’s top marginal rate is the second-highest in Canada and the United States. This creates terrible incentives for work, savings and investment. On the corporate income tax, recent tax reform in the U.S. has badly undermined the province’s competitiveness. A meaningful reduction in Ontario’s general corporate income tax rate (such as is being implemented in Alberta) would be a prudent response to increased competitive pressure.

Second, Premier Ford can’t claim to have successfully made Ontario “open for business” unless he restrains spending to address Ontario’s daunting debt problem. Again, there has been some progress in this area, but not nearly enough. The government’s current fiscal plan calls for continued deficits throughout its entire first term, leaving the job of balancing the budget to a second term—or a future government. A much more ambitious approach, which recognizes the need to reform and reduce spending, is needed to get the job done faster and stop the flood of red ink.

Third, the Ford government must recognize that Ontario’s labour laws are not optimal for investment. For instance, one 2017 study showed that the minimum wage in Ontario is currently set at 51.3 per cent of the median wage. That’s fully 10 percentage points higher than in Pennsylvania, for example. Such a large gap makes a difference when firms in industries that employ younger, less-skilled workers decide where to invest. Given the lack of evidence that high minimum wages significantly reduce poverty, and the strong Canadian evidence that they reduce employment growth, the Ford government should hold to its commitment not to further raise the wage floor.

Lastly, to restore the province’s manufacturing sector, the government must clean up the policy fiasco that drove Ontario’s electricity prices through the roof for residents and businesses. The Wynne government’s only real “solution” to this problem was to transfer the burden onto future taxpayers by taking on debt through the “Fair Hydro Plan” to provide short-term relief. Obviously, more ambitious strategies and a long-term commitment to affordability as a key objective of electricity policy is badly needed.

Making Ontario “open for business” is a big job—so big it’s sometimes difficult to define. The policy reforms listed here, however, constitute a checklist we can refer to at the end of Ford’s mandate to determine how much progress has been made on the biggest issues facing the province and its people.