Friday, September 11, 2015

Friday Morning Links

Assorted content to end your week.

- Jordan Brennan details (and expands on) how corporate tax cuts have served solely to further enrich the people and businesses who already had the most:
(F)ar from improving economic outcomes, there is evidence to suggest that corporate income tax reductions depressed Canadian GDP growth. I present a detailed explanation of why that's the case in a forthcoming study to be published by the Canadian Centre for Policy Alternatives. Given the election debate around raising the CIT rate, I thought it worthwhile to summarize my findings.

In my study I contrast three Canadian corporate income tax rates -- the effective federal CIT rate, the combined Canadian statutory CIT rate, and the weighted average effective rate on the top 60 Canadian-based firms -- with five growth variables: investment in fixed assets, employment, GDP per capita, labour compensation and productivity. Based on the findings, I conclude that there is no empirical or statistically significant relationship between CIT regime and growth. Business investment is a key determinant of GDP growth, employment and labour compensation, but over the long-term it is unresponsive to changes in the statutory or effective CIT rate.
Canadian CIT rate reductions not only failed to lead to faster growth, there is evidence to suggest that CIT rate reductions contributed to slower growth. By reducing CIT rates, Canadian governments contributed to the increased income position of large firms. Instead of investing their enlarged earnings into growth-expanding industrial projects, Canada's corporate sector -- especially its largest firms -- have increasingly stockpiled cash on their balance sheet. This "dead money," as former Bank of Canada governor Mark Carney called it, is one ingredient in the heightened stagnation of recent times.

As the leading firms claim a larger share of national income through enhanced size and market power, their capacity to stockpile cash increases. By hoarding cash these firms stabilize dividend payments, thus reducing risk, and this leaves them with more liquidity for acquisition activities and to hedge against market downturn. One consequence of the stockpiling of cash, then, is that a smaller share of national income is deployed to expand employment and industrial capacity.
- Andrew Perez wonders whether Canadians will wind up voting strategically, while noting that it would be for the best if we can move past it (which, fortunately, is an option). And it's worth noting that the seemingly large pool of Canadians inclined mostly to vote for change in the identity of the Prime Minister should improve the chances of bringing at least that much about due to likelihood that late deciders will reach relatively similar conclusions as to the best option based on their observations of the same campaign.

- But then, as Jamey Heath points out, we should be demanding more than the same policies with different branding - making the NDP the better choice as a matter of principle as well as strategy.

- Jorge Barrera reports on the revelation (pointed out by Robert Jago) that the Cons saw the federal government's apology for residential schools as an "attempt to kill the story" rather than a means of rather than an actual expression of contrition. And Faisal Kutty calls out the Cons' Muslim-bashing.

- Finally, Michael Harris writes that the Cons have finally and permanently lost any benefit of the doubt from the Canadian public. And Antonio Zerbisias concludes that the refugee crisis has exposed the compassion gap between the Cons and Canadians, while Tim Harper is the latest to weigh in on Stephen Harper's crumbling campaign.

No comments:

Post a Comment