Sunday, May 01, 2011

Corporate Tax Cuts in Canada a Windfall for the US Treasury

Throughout the election campaign Stephen Harper has claimed the political high ground on the management of the economy. The surprise is that the opposition has pretty much let him get away with this.

During the English language television debate the first question focused on $6-billion tax cuts to corporations. Harper said there were no tax cuts 'right now,' something that was only true for that second.

Corporate taxes were cut from 21 per cent in 2008 to 16.5 per cent now and will be further cut to 15 per cent in 2012.

Jack Layton and Michael Ignatieff more or less abandoned the issue and did not press Harper about the inefficiency of these cuts. However, the week before the debate two credible studies showed that corporations mostly hoard the money they save from the tax cuts and don't reinvest it in the economy or jobs.

Munir Sheikh, former head of Statistics Canada, and former associate deputy minister of finance, has shown that the real winner of Canadian corporate tax cuts is the U.S.

Tax cuts here give corporations bigger profits and because the U.S. corporate tax rate is about twice as high as ours, U.S. corporations in Canada then just pay more American tax on their Canadian profits. This transfer from Canadian to U.S. treasuries amounts to $4-6 billion a year

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