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But here’s the good news. Canada can regain its business tax advantage, without requiring Ottawa or the provinces to dig deeper into debt.

So what’s this silver bullet? Scrap corporate welfare and use the fiscal room to cut corporate tax rates.

Business subsidies — also known as corporate welfare — distort the economy by giving advantages to particular businesses or industries, putting businesses that may be otherwise more innovative or productive (but lack the contacts or political clout to receive subsidies) at a disadvantage. Academic evidence finds that corporate welfare generally does not stimulate the overall economy. Instead, it redirects resources from particular businesses or industries to those favoured by government.

Business subsidies can also irritate our trading-partner countries, threatening Canadian access to foreign markets such as the U.S.

A recent study identified $29 billion in business subsidies — both spending and tax measures — from Ottawa and Canada’s four largest provinces (B.C., Alberta, Ontario and Quebec). The federal share represents $14 billion, and eliminating just $8.5 billion (60 per cent) of that federal corporate welfare would allow Ottawa to cut the general corporate income tax rate by five percentage points, from 15 per cent to 10 per cent.

There’s really no excuse for Minister Morneau not to respond to U.S. tax reforms. Ignoring the problem will further harm Canada’s investment prospects. There’s a cost-neutral way to restore Canada’s business tax advantage and end the harmful practice of corporate welfare, which is a very poor use of taxpayer money.

Charles Lammam is director of fiscal studies at the Fraser Institute (www.fraserinstitute.org)