CEO's Blog

Good morning!

The latest Labour Force Survey (LFS) recently indicated that employment in Canada fell by 71,000 in November. These horrendous numbers will likely be repeated in the coming months if the federal and provincial governments do not take bold and appropriate actions. Unfortunately, the kinds of economic stimulus that have been proposed are unlikely to have the intended effect and should be resisted.

A specific idea that is frequently cited is massive spending on infrastructure. I don’t dispute that Canada’s crumbling infrastructure is in need of renewal. The evidence is all around us. However, the construction industry is not suffering. In fact, it continues to see employment growth. Moreover, as economist Stephen Gordon notes in his excellent blog, several recent tenders are receiving few or even no bids, as construction firms are currently overworked. Stephen Gordon ends with the question: “If new infrastructure projects are promised, who will build them?” Indeed.

I believe it would be far wiser to direct any economic stimulus at small businesses. Over half of private sectors jobs in Canada are created by small businesses. Small businesses, including start-up companies like Picomole, are the economic engine of this country. Any stimulus package that doesn’t target small businesses will not have the maximum impact.

My proposal is simple: declare a temporary tax holiday on capital gains resulting from investments made into small and medium enterprises (SMEs) during the first half of 2009. This would greatly encourage investments into SMEs, giving them much-needed access to capital and spurring economic growth. All governments would risk is the loss of potential tax revenues in the future, once the investments made during this 6-month window result in capital gains for the investors. But after all, the creation of capital gains for investors implies that the SMEs are succeeding (and likely employing more people), which is exactly what is needed right now to keep our economy from stalling further.

If you think a temporary tax holiday on capital gains is a good idea, then talk to your federal and provincial elected representatives. And let me know too.

Yours truly,
John