TORONTO - The Ontario Liberals are cutting business taxes to stimulate growth in the province, Premier Dalton McGuinty said Thursday as he defended his government's strategy for tackling the province's economic woes.

Capital taxes were eliminated for Ontario's troubled manufacturers and resource industries on Jan. 1 and have been reduced 21 per cent for everyone else, McGuinty said late Thursday in a speech at a glitzy Liberal fundraiser in Toronto.

The premier also pledged to do more to help laid-off workers retrain for new jobs, saying he would make it a "major focus'' for his government in the weeks ahead.

Tax cuts have become a bone of contention between McGuinty and federal Finance Minister Jim Flaherty, whose ideological differences over the economy have erupted into a war of words in recent weeks.

Flaherty wants Ontario to slash taxes further to attract investment, while McGuinty has argued for more direct government help for struggling industries.

The premier's speech to about 2,600 party supporters didn't cover much new ground, but did contain a number of thinly veiled jabs at Flaherty.

"Now there are always those who suggest that all we need to do is cut taxes,'' McGuinty said.

"But we believe that growing our economy demands a thoughtful approach, suited to the times, that goes beyond the slogans. That's why there's more to our plan -- a lot more, in fact -- than just tax cuts.''

Ontario Finance Minister Dwight Duncan announced the cuts in December as part of a plan to cut $1.1 billion in business taxes over three years.

The Liberals had been looking for Ottawa to spend some of its larger-than-expected, $13-billion surplus on struggling Ontario manufacturers in Tuesday's federal budget, but were disappointed by the "thin gruel'' offered up to the province.

The Conservatives pledged $250 million over five years to support research and development in Ontario's weakened auto sector and a program that gives manufacturers a tax break on new equipment for another three years.

McGuinty also repeated his complaint that the Employment Insurance system is shortchanging Ontario workers, who he says are getting $4,000 less each than workers in other parts of the country.

He also hinted after his speech that his government may be considering policy aimed at filling that gap, since Prime Minister Stephen Harper isn't moving to fix a system that is hampering the province's ability to transform unemployed workers into skilled labour.

Producing skilled workers will be key to weathering the current storm, brought on by a high Canadian dollar, record oil prices and a faltering U.S. economy, McGuinty explained.

But employment programs designed to help laid-off workers are finding jobs that pay the bills, rather than improving their skills. His government is looking at longer-term training programs to change that, he said.

"In so many cases now, it's actually in the greater public interest that we invest a bit more in that individual, so they can acquire more sophisticated skills and pick up jobs that have been going begging for a long, long time in Ontario,'' McGuinty said.

Flaherty, who was called a "cartoon character'' by Ontario Economic Development Minister Sandra Pupatello for criticizing the Liberals' "lack of leadership'' on the economy, urged McGuinty on Wednesday to do more for business.

"I'm going to continue to plead with the province, when they do their budget this spring, to provide some relief to businesses in Ontario, if they're sincere about their concern,'' the former Ontario finance minister said in a breakfast speech in Toronto.

McGuinty acknowledged Thursday that the province is facing "some challenges,'' but said it's also strong in financial services and technology.

He pointed to billions of dollars the province has earmarked for building and fixing Ontario infrastructure such as schools, hospitals, roads, public transit and energy over the next decade, as well as the government's support of "innovative'' businesses -- all to create more jobs.

"We're saying to business, `We're not here to bail you out -- we're here to build us all up,''' he said in his speech.

"So if you're investing to grow stronger, to create more jobs, to build a stronger economy, we want to work with you. And these partnerships are working.''