Thursday, December 12, 2013

Latest con job: forget reversing corporate tax cuts, they won't pay

Remember when free-market ideologues were saying Harper’s corporate tax cuts would create jobs, boost productivity, raise economic growth and make Canada more competitive?

How did their economic “wisdom” mesh with the real world? Not surprisingly, it was a policy failure on all fronts.

Corporations ended up pocketing the “dead money.” They closed down plants. Killed hundreds of thousands of good-paying jobs. Productivity growth fell to all time lows. Our trade surplus turned to a massive trade deficit.

Now these same neo-cons — utterly unfazed by their sheer economic incompetence — are saying forget reversing these tax cuts, because corporations simply won’t pay.

Excuse-o-nomics

If you were to believe right-wing economists, you’d think corporations paid whatever level of tax they felt like. According to Kevin Milligan, corporations, “when faced with higher rates, sharpen their pencils and implement tax strategies to lower their burden.”

This excuse for not reversing failed tax cuts is belied by the fact that corporations are always in the business of finding ways to cut costs. It’s what drives up share value and corp exec bonuses. So corporations are always “sharpening their pencils” to lower their tax burden regardless of the tax rate — which in Canada is ultra-low.

Canada’s ultra-low corporate tax rate

Another fact that makes these lame excuses absurd is that Canada has the lowest effective corporate tax rate among all major economies — including China! According to KPMG’s international guide for businesses:

Corporate income taxes are lowest in Canada (7.3 per cent effective corporate income tax rate), France (14.7 per cent), and China (14.8 per cent).
At the other end of the scale, effective corporate income taxes exceed 30 per cent in Japan (31.5 per cent), Brazil (36.1 per cent), and Italy (37.6 per cent).

Laffer curve

These neo-cons are simply rehashing the same lame Reaganomics based on the “Laffer curve.” This suggests that if taxes are too high, people will find ways to stop paying them. Hence the ridiculous concept that tax cuts “pay for themselves” and raising taxes lowers tax revenues.

Given America has gone bankrupt waiting for tax cuts to pay for themselves, Canadians would do well to avoid these “voodoo economics.” Fact is, this flaky economic theory is nothing more than self-serving ideology cooked up by corrupt businessmen.

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