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Wednesday
Apr062011

Canada's Corporate Tax Cut Study: Jobs don't follow

Check out this study, in particular the Appendix, by David MacDonald of the Canadian Center for Policy Alternatives, entitled: 

Corporate Income Taxes, Profits and Employment: Performance of Canada's Largest Companies.

Analyzing a decade of data on the top 200 Canadian copies tax rates and payments, MacDonald makes the point that if anything, lower corporate tax rates over the past decade, have led to a lagging of the employment contribution of the companies most benefitting from the reductions. Yes, Canada isn't the United States. But, this research supports the notion I wrote about yesterday, that if you give corporations an inch of tax rate decreases, they'll take a mile of paying less taxes proportionately. 

"Canadian governments  are now losing $12 billion a year to 200 of Canada’s strongest companies, who are making 50% more in profit while paying 20% less in income tax; all while creating proportionally fewer jobs than the economy-wide average."

Do we really want to lose hundreds of billions of dollars more a year plus not have more jobs to show for it? (We only have $187 billion to go, before we hit zero contribution of corporations to the overall tax receipts of the country using last year's figures.)

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Reader Comments (6)

Yup, more of that super-race to the bottom, like those studies out of EPI, and that landmark study back in the '90s from those guys at Florida State University, tracking those estimated hundred billions lost to transfer pricing on imports and exports.

Every study I've seen to date tracks one particular category of tax evasion: transfer pricing, profit shifting, SIVs ans SPVs, etc., offshore, ad infinitum.

And each individual category is estimated at tax avoidance to the tune of hundreds of billions, bringing the sum total to something in the nature of over a trillion dollars or more.

Definitely, real tax recovery is the only way to go, and with 70% or more of American-based multinationals and corporations (amply demonstrated by those GAO studies) now refraining from paying any federal taxes, the future looks revolutionary.

April 7, 2011 | Unregistered Commentersgt_doom

In my opinion, we need a constitutional amendment guaranteeing natural persons rights that are at least equal, if not superior, to those bestowed upon artificial persons. What the hell, just add it to the ERA.

April 7, 2011 | Unregistered CommenterJerry

DO corporate tax reductions apply to all entities that file tax as a corporation regardless of size

April 9, 2011 | Unregistered CommenterGarry

that's a good question. for one related thing, the Treasury Department doesn't distinguish the size of the corporations when they tabulate the total percentage that corporations pay in taxes, so that would imply small and large ones are lumped together. In terms of tax deductions, some are very specific to a line of business and would only apply for a certain industry or type of company, but generally, the larger companies have the bigger accounting wherewithal to exploit deductions and move profits and such off-shore, something say your favorite local pizza place won't have the ability to do. In fact, if the local pizza place decided to open a Cayman Island branch, it's likely it would be pounced upon by an IRS audit, not so the big corps.

April 9, 2011 | Registered CommenterNomi Prins

After the Fed's release of the document explaining all the trillions pumped out to foreign banks and foreign corporations, thanks to Bloomberg's FOIA-instituted action (sadly, the journalist who initiated is now deceased) there can never really be any further argument about any such thing as a "free market" or "competitiveness" - etc., etc.

And that certainly applies to the 70% plus of all American-based multinationals and corporations who refuse to pay federal income taxes.

http://www.bloomberg.com/news/2011-03-31/federal-reserve-releases-discount-window-loan-records-under-court-order.html

April 9, 2011 | Unregistered Commentersgt_doom

In Canada there is a federal election and one of the planks, as this report eludes to, is the subject of corporate taxation.

The empirical evidence for corporate tax cuts commensurate with the stated objectives of more employment and greater tax revenue for the state has always been dubious. However, it really has little to do with "growth" of an economy. This is an ideological position, not dissimilar to that advocated by Norquist and his ilk to "starving the beast." Less revenue, means government has to cut government spending, which invariably is associated with slashing health care, welfare state amenities, and standard rogue's gallery of conservative grips.

A OECD commentary by a Danish economist, from 2007, stated the same:

"Within the last 20 years, corporate tax rates have fallen from around 45% to less than 30% on average in OECD countries. And lately, with increased mobility of multinational corporations, tax competition has intensified. Thus from 2000 to 2005, 24 out of the 30 OECD countries lowered their corporate tax rates while no member economy raised its rates. The consequence is that average rates in all OECD countries dropped from 33.6% in 2000 to 28.6% in 2005....

Yet at the same time corporate profits are booming and wages are stagnating. After-tax profits in the US are, as a proportion of GDP, at their highest in 75 years, and in the euro area and Japan they are also close to 25-year highs. Wages, on the other hand, are making up an ever smaller part of national income, down from 68% in 1982 to 59% in 2005 in the 15 EU members. And at 56.9% in the US in 2005, they are, except for a brief period in 1997, at their lowest level since 1966. Hence, relying on the income and spending of wage earners to fund ever larger parts of public finances will either hollow out government budgets or lower workers’ incomes."

http://www.oecdobserver.org/news/fullstory.php/aid/2229/Corporate_tax_warning.html

The fact that these "anti-growth" arguments continue to persist only validates that the professions of economics and business journalism as a whole are little more than propaganda units for the kleptocrats in government and business.

April 13, 2011 | Unregistered CommenterThe Lifer

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