Wednesday, March 30, 2011

Wednesday Morning Links

Assorted content for your mid-week reading.

- Gregory Lang makes the case for targeted tax breaks designed to encourage the types of corporate activity we most want to see, rather than constant slashing of general corporate tax rates in hopes that it will produce the desired results:
The variance between corporate income tax rates and the actual tax corporations pay represents the tool kit of social policy and the means to support every corporation in becoming a better corporate citizen. Low corporate income tax rates necessarily mean that tax-benefit incentives are less valuable to the corporation. For example, capital equipment investment tax write-offs are more attractive the higher the corporate income tax rate.

Tax credits and other tax accounting “loopholes” simultaneously provide a government with mechanisms to influence the competitive conditions in our economy and may also be the least expensive and most effective regulatory tools available. Environmental policy and carbon emission regulations, for example, while now seeming “so last recess,” can be more effectively implemented when the incentive for the corporation is lower actual taxes instead of increased regulations. Corporations are already keenly aware of their bottom line, and an available tax policy that serves to improve it will be pursued when it makes economic sense for them to do so.

High corporate income tax rates, along with aggressive social policy-driven tax accounting benefits, can create the conditions for the lowest effective corporate tax burden and the most efficient social policy mechanisms in the world.

Zero corporate income tax has merit only where every citizen is employed and paying personal income and sales taxes. The tax burden must fall somewhere. High corporate income tax rates, along with social policy-based tax credits, can create the conditions for zero corporate taxes payable – when corporations cause zero unemployment.
Low corporate income tax rates are both an unsustainable “cost” advantage globally and a disincentive to innovation for other competitive advantages. Low corporate income tax rates empty the proverbial social policy tool box and make our economy less flexible. And with less flexibility, we inherently increase our risk of succumbing to catastrophic failure: an economic recession.
- Which leads nicely to the NDP's proposal to target tax breaks toward businesses who actually create jobs:
If the NDP formed the government, Mr. Layton said he would cut the small business tax rate to 9 per cent from 11 per cent. But he would also boost the corporate tax rate to the 2008 level of 19.5 per cent from its current 16.5 per cent.
“I’ll ensure that Canada’s corporate tax rate contributes to our competitive edge,” Mr. Layton said. But the Conservative “money for nothing” scheme has led to the disappearance of 600,000 “family-supporting, highly skilled” jobs, “many of them in communities like Oshawa.”

The New Democrats would also bring in a job creation tax credit for employers of $4,500 for every new hire. And they would extend the capital cost allowances for the next four years.
- Sure, the fact that it's sex-scandal-ridden Bruce Carson makes for a nice addition to the story. But shouldn't it be enough of an embarrassment for the Cons that a member of Stephen Harper's inner circle specifically worked to turn an environmental research group funded by millions of public dollars into a PR front for the tar sands?

- Finally, I'm not sure that shaming and scolding the public is quite the best way to go. But David Akin's appeal to Canadians to vote is nonetheless worth a read.

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