- Jim Stanford offers a warning to Australia about Canada's history of gratuitous corporate tax giveaways:
(S)uccessive cuts reduced combined Canadian corporate taxes (including provincial rates, which also fell in several provinces) from near 50 per cent of pre-tax income in the early 1980s, to 26 per cent today. In theory, the resulting boost to profits should have stimulated a strong response in business investment. Unfortunately, hopes for this “jobs and growth” dividend have been repeatedly dashed.- In a similar vein, Marc Lee points out that British Columbia's poorly-designed carbon tax system has fallen short of what's possible on several fronts - particularly in its "revenue neutrality" including corporate tax cuts.
Instead of growing, business spending on fixed capital (machinery, structures, etc.) declined under lower company taxes, by about one full point of GDP since the reforms began. Business innovation spending (one of Mr. Turnbull’s top priorities) fared even worse: business R&D outlays shrank by over one-third as a share of GDP, to a record low of just 0.8 per cent. In fact, over the last decade real business investment performed worse than during any other era in Canada’s postwar history. Several provincial governments have given up waiting for the promised investment boom, and are now increasing company tax rates to help address chronic deficits.
One especially painful side-effect of lower company taxes has been the sustained accumulation of liquid assets by Canada’s non-financial businesses. Corporate cash hoarding accelerated dramatically after the turn of the century. Non-financial firms now hold cash and other liquid assets equal to over 30 per cent of GDP. IMF researchers have shown that corporate cash holdings grew faster in Canada than any other G7 economy (and twice as fast as in Australia).
With businesses investing less than they receive in after-tax cash flow, lower taxes only add to the stockpile of idle liquid assets, draining spending power from the economy. In this regard, lower corporate taxes may very well have weakened growth and job-creation, not strengthened it. In any event, Canada’s experience is a sobering reminder to Australian policy-makers: anyone expecting a tax shift to generate a big growth dividend is likely to face chronic disappointment.
- And Charles Mandel highlights the dangers of Brad Wall's addiction to fossil fuels (which I'd hasten to add includes reliance for the purposes of providing both political funding and provincial revenues).
- Ned Simons reports on Joseph Stiglitz' observation that the UK would be better off taking a step back from trade arrangements which tilt the playing field toward investors at the expense of the public. And Scott Sinclair notes that revisions to Canada's trade deal with Europe fall short of the mark.
- Finally, the Globe and Mail points out that it shouldn't be hard for the federal government to adopt a policy of openness as the Libs so regularly promised.