Corporate Tax Cuts: How Low Can You Go?

Hey Australia, race you to the bottom!

The Liberal Party should heed a lesson Barack Obama learned recently, writes the National Post’s Kelly McParland, namely that “bashing business produces short-term approval on the left but provides little in the way of electoral support or presidential job security.” While Obama sought to heal relations with corporate America by announcing corporate tax cuts this week, the Liberals have made scrapping corporate tax cuts a major plank in their platform. Considering that experts like Jack Mintz say tax cuts will help with the economic recovery, McParland gauges that the Liberals’ anti-tax stance is little more than a chance to score points with voters by demonizing big business. It’s a losing strategy, he says. Just look at the NDP.

The Post’s John Moore thinks the Grits might be onto something, however, writing, “Taxes are like food. You can slim down a fat guy by putting him on a diet, but when he reaches his ideal weight he still needs to eat.” His argument is that at some point cutting taxes brings about “diminishing returns,” and that despite Conservatives’ assertion that low rates are needed to attract international business, taxes are only one of many factors that lead corporations to do business in a country. On those other factors, like infrastructure, government stability, and an educated and healthy workforce, Canada continues to excel. Whether now is the right time to raise taxes is another matter, Moore says, but the Grits aren't crazy for asking.

Now, the writers of The Mark Newsroom aren’t economists (not that we had you fooled), but we’re inclined to agree with the idea that nobody can be for, or against, corporate tax cuts in perpetuity. Yet both politicians and commentators talk about being “for tax cuts” as though it were an absolute value like being “for capital punishment.” Case in point is this column Sun Media’s David Akin, who, while making no reference to actual figures, suggests that Ignatieff should be for tax cuts because Ontario Premier Dalton McGuinty and Barack Obama have both proposed them. The U.S. rate is 35 per cent, by the way, and Canada’s 16.5.