The Globe and Mail reports today that, “Stephen Harper and his Conservatives are spoiling for an election fight with Michael Ignatieff over the controversial issue of tax breaks for big corporations.”
“In separate interviews Wednesday, both the Prime Minister and Finance Minister Jim Flaherty dared the Liberal Leader to keep campaigning on what they characterize as his policy of tax increases. Mr. Ignatieff has said the Liberals would not support the minority Tory government if it continues with its plan to cut the corporate tax rate while Canadians families are struggling and the deficit sits at record heights. But Mr. Flaherty turned around the Opposition Leader’s arguments. Speaking to The Globe and Mail, he said he has no plans to back down on his decision to cut the corporate tax rate – and if Mr. Ignatieff wants to campaign on that, then bring it on.”
“(Ignatieff has) said it doesn’t make sense to give corporations a break when the deficit is at $56-billion, calling the tax cuts one of the key differences in priorities between the Liberals and Tories. The Conservatives, Mr. Ignatieff charged, are more interested in big spending on new stealth fighter jets and prison cells while his Liberal are focused on helping families cope with aging parents, their children and their retirement savings.”
The 2010 Alternative Federal Budget states that, “Canada’s current Conservative government has adopted and deepened corporate tax cuts announced by the previous Liberal government. Specifically, it has legislated a 15% federal corporate tax rate by 2012. However, according to Finance Canada’s own numbers, corporate tax cuts are the least effective form of stimulus. It estimates that every dollar of annual corporate tax cuts adds only 10 cents to Gross Domestic Product (GDP) in the current year and 20 cents in the next year. By comparison, each dollar of annual infrastructure spending adds a dollar to current GDP and $1.50 to next year’s GDP.”
The AFB also notes, “About one-third of the revenue lost through corporate tax reductions will simply be transferred to the U.S. government, which taxes American corporations on a worldwide basis. When an American company repatriates profits from Canada to the United States, it pays the 35% American federal corporate tax rate minus taxes already paid in Canada. If our federal plus provincial rate is at least 35%, these corporations do not owe American tax on their Canadian profits. Ongoing federal and provincial corporate tax cuts are reducing our combined rate from 36% in 2007 to 25% by 2013. American companies operating here will have to pay this rate difference back to Washington, shifting up to $6 billion annually from Canadian governments to the U.S. Treasury.”
The Globe and Mail article is at http://www.theglobeandmail.com/news/politics/ottawa-notebook/tories-draw-line-in-election-sand-over-corporate-tax-cuts/article1868330/. The AFB commentary on corporate tax cuts is on pages 28-29 at http://www.policyalternatives.ca/sites/default/files/uploads/publications/reports/docs/AFB%202010%20Main%20Budget%20Document_0.pdf.
