Toward a lower corporate tax

Posted on January 28, 2011 in Policy Context

Source: — Authors: – news/canada/politics
Thursday, Jan. 27, 2011.   editorial

This week, the Conservative government’s corporate-tax cuts found another champion: Jack Mintz, head of the public policy school at the University of Calgary. Mr. Mintz has co-authored a paper concluding that reducing taxes from their current level of 16.5% to 15% would produce $30-billion in additional business investment and 102,500 new jobs over a seven-year period.

Liberal party leader Michael Ignatieff, on the other hand, claims that these cuts are going to whack individual taxpayers in the wallet. In the Liberals’ new ads, they claim the government is “giving your tax dollars to the wealthiest corporations.”

But according to Mr. Mintz, the cost to government revenue would be “relatively small” — though the associated benefits would be substantial: “Multinational corporations will shift profits from a country with a high corporate tax rate to jurisdictions with low tax rates … While the budgetary cost of the rate reduction is negligible, we find that the resulting increase in capital investment and employment could be significant.”

Instead of cutting corporate taxes, Mr. Ignatieff proposes to jack rates back up to 18% and spend the additional revenue on home care for the elderly and daycare for toddlers. But as the response to similarly ambitious Liberal initiatives in recent years shows, the public has little appetite for a new nanny-state program. (Moreover, one only has to look at the experience with state-subsidized daycare in Quebec, where costs ballooned due to underestimated demand by parents, and fights for higher wages by unionized child care workers.)

Reducing corporate tax cuts will keep Canada competitive and attract investment, at a time when our economic recovery needs all the help it can get. This is not the time for new social programs and grandiose government schemes. The Conservatives should stay the course, and ensure that these tax cuts remain in the upcoming federal budget.

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