How about a tax holiday on vehicle sales

Please bear with me as I write yet another column on the economy. Since last Spring, other members of the Opposition and I have been accused of fear mongering. However, the numbers, on lost jobs, keep coming in.

Canada just lost 71,000 jobs in November; 66,000 of them used to be in Ontario.

For close to five years our Haldimand-Norfolk economy has been dealing with tough times.  Now it seems Ontario and much of the developed world is on the ropes.

Cash crop, pork, beef and horticultural producers have been seeing high costs and low return. Government has been putting the people who grow and sell tobacco, out of business. And our steel-based, petroleum based, auto, auto parts and general manufacturing sector has been kicked in the stomach. Those dealerships, autoparts, aftermarket, and manufacturing enterprises play a very large role in our economy.

The automotive sector is Canada’s largest direct employer – over 700,000 workers are employed and millions of other jobs are indirectly affected. In total, about 40,000 firms are directly involved with manufacturing, distributing, selling and repairing vehicles.

There are 3,100 car dealers across Canada – employing over 155,000 people and contributing over $100 million to local charities.

Our love affair with the car continues and will continue for many, many years. Eighty per cent of Canadians drive to work. Meantime, the driving age population continues to grow each and every year.

The critical question is whether there is enough time for these important structural changes to play out positively for these companies. The free fall in the US market is making this very questionable; hence the discussion of government assistance in the U.S. and Canada, and indeed most countries around the world.

But any bail-out appears to have to wait for the US federal government. Obama was elected on the backs of the unions - voted in by Pennsylvania, Ohio, Indiana, and Michigan. However, for whatever reason, these States don’t appear to be asked to help fund the federal program. In contrast, the Ontario taxpayer will eventually be asked to join the Canadian taxpayer in providing assistance.

Just what shape government aid takes remains in question – will it be loan guarantees, lower capital taxes, lower environmental taxes, bridge financing, money to retrain workers, relieving them of pension liabilities.

Auto analysts tell us the credit crisis means their potential customers can’t get a car loan or a truck loan, thus vehicle sales have plummeted. As I travel Haldimand and Norfolk, people tell me to cut the PST/GST on vehicle sales, and customers will buy. Each province could temporarily cut sales tax, and federal government could match this with an equal cut in GST on all new vehicle sales. However, this could only be part of the solution as 85 to 90 per cent of the vehicles we manufacture go to U.S. customers.

A sales tax holiday would certainly be welcome news to Toyota and Honda and Cami and lift any concerns of a backlash from these companies over helping their competitors and not them. They have publicly stated that they are not against aid as long as it is “fair” – a GST/PST holiday would be fair.

Some things are clear – stimulus is needed, and the automotive sector needs help.