Taxes and tax cuts
Inside this issue:
Reluctantly (and pending significant reforms in the next few weeks), I’ll be voting against the HST this June. It’s a difficult decision (and indeed some associated with my organization have landed on the other side of this question).
I come to my position reluctantly because: a) I do not relish joining anti-tax campaigns (they tap into a current in political culture that ill serves us in the long term); and b) I accept the arguments that a value-added sales tax such as the HST is more economically efficient than the old PST.
CCPA Senior Economist Armine Yalnizyan gets up close and personal in this pivotal lecture on income inequality and democracy. Watch the TVO video of the lecture, which was produced in collaboration with the Literary Review of Canada.
OTTAWA—Canada’s financial sector has been the greatest beneficiary of recent corporate income tax cuts, says a study released today by the Canadian Centre for Policy Alternatives (CCPA). The study, by economist Toby Sanger, says Canada should join other countries in introducing fairer taxes on the financial sector that could generate over $10 billion a year.
OTTAWA—The Conservatives’ proposed 3-point reduction in corporate tax rates would cost the public purse $6 billion per year, yet only stimulate about $600 million of new business investment annually, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).
OTTAWA – La réduction en trois points des taux d’impôt que proposent les Conservateurs coûterait au Trésor 6 milliards de dollars par année, mais elle entraînerait seulement quelque 600 millions de dollars de nouveaux investissements des entreprises par année, affirme-t-on dans une étude dévoilée aujourd’hui par le Centre canadien de politiques alternatives (CCPA).
This study examines historical data on business investment and cash flow from 1961 through 2010, and, using econometric techniques, finds no evidence in the historical data that lower taxes have directly stimulated more investment.
Business fixed capital spending has declined notably as a share of GDP and as a share of corporate cash flow since the early 1980s—despite repeated tax cuts that have reduced the combined federal-provincial corporate tax rate from 50% to just 29.5% in 2010.
This study tracks 198 companies on the S&P/TSX composite from 2000 through 2009 and finds those companies—Canada's largest corporations—are making 50% more profit and paying 20% less tax than they did a decade ago.
However, in terms of job creation, they did not keep up with the average growth of employment in the economy as a whole. From 2005 to 2010, the number of employed Canadians rose 6% while the number of jobs created by the companies in the study grew by only 5%. In essence, the largest beneficiaries of corporate tax cuts are dragging down Canadian employment growth.