OPINION: Ontario's ‘tax action plan’ should include a 2026 business tax cut

As a new year dawns, many Ontarians will make resolutions for 2026. Premier Doug Ford’s government has promised to present a “tax action plan” next year to make Ontario’s tax system more competitive. That’s a New Year’s resolution that it should keep, because an ambitious pro-growth tax reform plan is long overdue. And if the government wants to encourage economic growth and competitiveness, the plan should include a substantial reduction in business taxes.  

Ford once recognized the importance of reducing business taxes to help companies compete and thrive. In his initial campaign for premier in 2018, he promised to reduce the province’s business tax rate from 11.5% to 10.5% to help “make sure we have the most competitive region in North America to do business.” Unfortunately, like many of his early commitments, Ford did not follow through on this promise and the provincial business tax rate remains at the level he inherited from former premier Kathleen Wynne.  

But in his upcoming “tax action plan,” Ford can make good on his commitment to reduce business taxes. There are many reasons to do so.  

According to a study appropriately titled The Costliest Tax of All,  across the provinces, business taxes are the most economically harmful tax (measured on a per-dollar-of-tax-revenue-raised basis). In other words, business taxes hurt economic growth, which drives government tax revenue.   

Conversely, because business tax cuts help spur economic growth, the tax cuts often reduce government revenue less than one might expect. For example, according to a recent study, if the Ford government reduced the business tax rate to 10.5% (again, like Ford promised back in 2018), the tax cut would likely only reduce total provincial government revenue by a small amount. In fact, because business tax reductions spur economic growth, the extra revenue from a larger tax base partially offsets the revenue reduction from a lower rate. In some circumstances, according to the research, provincial governments can reduce business tax rates and experience no loss of revenue at all.   

Given these positive effects on economic growth, the Ford government should consider a much more ambitious business tax reduction than it envisioned back in 2018. If it reduced the business tax rate to 8% to match the lowest rate in the country (in Alberta), the government would send a clear signal that Ontario is committed to pro-growth policy and competitive tax rates.

Of course, some will argue that reducing business taxes will only help “the rich,” but such claims are unfounded.

Extensive economic evidence shows that the owners of a company share the cost of business taxes with their employees (in the form of lower compensation). In short, this type of tax relief would benefit Ontarians across the income distribution, not just at the top of it.   

The Ford government should have delivered on its promise to reduce business taxes immediately upon taking office in 2018. However, better late than never. The Ford government should resolve in 2026 to finally reduce the province’s business tax rate.  

Ben Eisen and Jake Fuss are analysts at the Fraser Institute