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I’m running a lemonade stand. I have two people investing in my lemonade, which I have told them is the best lemonade on the block. Person A has contributed 30% to my lemonade stand, while person B has contributed 70% (I bet you don’t want to be person B, so you?). Everything is going well and I’m making a good profit. Person A comes to me and tells me that they have another lemonade stand interest who will only ask them to pay 24% as a contribution. They don’t know if their lemonade is as good, but to them, cheaper is cheaper. I tell them not to worry, and I offer them 20% for a contribution. Suddenly, person B now has to shoulder 80% of the contribution (hope this person has two paper routes) simply because the threat of competition scared me into lowering the contribution of person A. I have no regard for person B because I’m providing a great product.
In a nutshell, here is the problem with corporate tax cuts. If you flat out reduce the amount that corporations have to pay, that burden is shifted elsewhere…onto us, the taxpayer. Now, I know most of us will grind and bare paying taxes because we appreciate (most of us) the services we get for our tax dollars. But the race to the bottom isn’t slowing down, and reducing the corporate tax burden does nothing but decrease government revenues and increase the demand on an already stretched tax base.
On top of that, we have the elimination of two percentage points on the GST, money that means much more when it’s being put into government projects, then if it’s divvied up among people across the country for what, an extra cup of coffee a month. I mean seriously, the GST is a good tax that increases government revenues. Rather that then a payroll tax or an increase to income taxes. It’s a consumption tax that comes right off the top of what we buy. We see it, we know it, and we expect it.
Lowering corporate taxes has proven time and time again to provide no real incentive to investment. A real incentive would be to encourage corporations to invest in the country where they operate. If they want to be in Canada then make them invest in the jobs that are here. Give them a stake in the jobs they are themselves developing so it’s harder for these fat cat CEOs to shutter the doors and chain up the gates.
Thanks to the HST my tax bill has shot up considerably, the same cannot of course be said about corporations as they are exempt from the HST.This has rightly been described as the greatest shift of tax burden from the corps unto individuals in our history as a nation.
However this is only part of the story as the feds continue to reduce corporate income taxes year after year. We are told this is necessary because our corps are taxed at an uncompetitive rate,This is not true. According to the data compiled by the OECD our corporate tax income as a percentage of GDP is competitive with our peers.
Corporate tax rates (source KPMG)
2009-19%
2010-18%
2011-16.5%
2012-15%
Personal tax rates (KPMG)
15-29%
http://www.oecd-ilibrary.org/docserver/download/fulltext/191500051e1t002.pdf?expires=1294252043&id=0000&accname=freeContent&checksum=CD658948064E9512D81F4CA55D6FD1FE
Please explain how the GST and it’s spawn the HST are good taxes. I’m not a fan of consumption taxes (outside of “sin” or “luxury” taxes). They’re regressive and when you’re living at the edge, waiting for that rebate cheque just isn’t feasible.
When the GST was introduced, my understanding was that it was replace the manufacturing sur-tax. OK, I thought, a little more math at the check-stand, but no biggie. Assuming, of course, that the cut gets passed along to the consumer. An assumption which (a) I was nowhere near naive enough to believe, and (b) for which my skepticism proved well founded.
It’s also ridiculously hard to create the right exemptions for these sales taxes. The GST was waived for some food items only when bought in large enough quantities that I, at the time a single student, could never use in time, just as an example.
OTOH, income taxes can be easily weighted through brackets to ease the burden on those earning less and you know it’s coming off your paycheck (assuming you’re an employee).
I totally agree that reducing corporate taxes does not affect investment and I think history agrees with this. But I just want somebody to explain to me why consumption taxes are a good thing.
I’m in no way a can of the HST. To me, it seems ludicrous that the BC government received billions of dollars (I think the figure was 6 billion, but correct me if I’m wrong) and is still able to siphon more money our of taxpayers. A friend of my mother-in-law had to pay an extra 15,000 on the sale of her house, just because of the HST. She wishes she would have sold it two years ago. I don’t blame her.
As far as consumption taxes, the GST and income tax are both considered consumption taxes, though the GST to me at least, is one that can be seen directly at the cashregister. It isn’t hidden. Income taxes, and indeed they are, can often mean that we have to pay at the end of a business year. We never know REALLY how much we might owe until we do our taxes (or some of us have an accountant that does our taxes and tells us). Is it irnoic that I had to pay back 500 dollars last year and I’m still in the lowest tax bracket? I think it is. So income taxes, as a proportion of income, are fairly secretive, but at the till consumption taxes (including those on liquor and cigarettes) are more easily seen by the average consumer and they can make financial decisions on the basis of the at the register price of something.
I’m still largly in favour of a form of progressive taxation. Don’t tax anyone making less then 100,000 a year and then charge everyone making more then that 30-35%, and tax corporations at a competative, but not ludicrous level (like the current 16%-15%). This is redistribution as it was meant to be, but also allows many small businesses to make tax free income and invest back in our economy.