Corporate Taxes: Waiting On The Trickle Down

A decent read today takes issue with all sides on the corporate tax debate. The Liberals simply disingenuous, the Conservative exaggerating, the entire issue "laughable".

I’m no economist, but it’s also true that many economists deal in theoretical arguments, that don’t necessarily translate to the real world. For example, if you looked at the predictions made in 2000, when the federal government began cutting corporate taxes, you will see many of the "claims" don’t hold water. Business investment hasn’t increased as was first argued, in fact it has remained stubbornly flat, rather than re-invest, wealthy corporations have HOARDED, providing no measurable benefit to anyone, other than themselves apparently. Did you know that Canadian corporations now sit on more cash than at any time in our history, inflation included? As well, the job claims simply haven’t panned out. Google "bank job cuts" and you will see the BIGGEST corporate tax payers have been slashing jobs like mad since 2000, despite record profits.

Here is the perfect example, one that certain people scoff at (article included) as a misread of how it all works- the CEO of the Royal Bank made 11 million last year, up from 10.4 million. According to the experts, I make an error by noting this obscene salary, bonuses, stock options, plus god knows what other goodies(wonder what his dental plan is, kids get glasses?). I saw bull, because we are dealing with a FINITE amount of capital here, so if we’re paying the top echelon more, it is coming out of somewhere, this money isn’t separate, it is part of the equation. This particular CEO is not unique, his 5.8% RAISE, during a year when the economy was shaky is obscene and no amount of trickle down arguments will undo the blue sky as it presents itself.

Here’s another number which is fascinating, the gap between rich and poor is growing, by any measure you choose. A bit of an odd development, considering all these tax cuts are supposed to re-distribute wealth, lower cost to consumers, etc. In the real world, what we see is the top wage earners making a killing, while SIMULTANEOUSLY trimming cost elsewhere. We have a serious problem, that free market types merely ignore, GREED is rampant and corporate tax cuts only reinforce this dynamic.

The argument that consumers benefit also seems a weak proposition. Are you telling me that if Suncor doesn’t get a break, gas will go up? We live in a international climate- as proponents argue- which also means that prices, particularly COMMODITY prices core to the Canadian example, aren’t set here, our little regime has no bearing on world supply and demand.

I supported corporate tax cuts years ago because every measure showed Canada wasn’t competitive, multi-nationals didn’t find us attractive, other jurisdictions were stealing manufacturing jobs. However, those same statistics used in 2000 now show a very competitive climate, thank you very much, so there is little fear mongering required on the economic front. Maybe some provincial rates are still to high(not the debate here), but last time I checked combining the total does a disservice to the FEDERAL reality.

We have the HST, we have all these incentives for business, all these ways they can ALREADY manipulate taxes and credits to maintain profitability. We have jurisdictions everywhere, provincial, municipal, offering corporations "deals" to set up shop. In other words, I see nothing but effort everywhere to make thing competitive, to make things attractive, to basically move the burden from the corporations to the consumer. Enough is enough.

The largest amount of corporate taxes are collected from Canadian banks. Proponents don’t like to talk about this fact, because the bank reality is so obnoxious, their support brings a red blush. However, this is a fact, this is your quintessential example of the corporate tax cut legacy. Where are the jobs? What does the profit graph look like? How does that co-orelate to salaries, who seems to be benefiting and who seems to be lagging behind? Yes, it’s laughable all right and we’ve clearly reached the stage of diminishing returns on the corporate tax front.

Click HERE to read more from Steve Val.

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