Taxes - Blog

Does Canada benefit from attracting wealthy tax dodgers to invest in local business while enjoying the low tax rates of the “Switzerland of the North?” A story by Macleans business writer Jason Kirby this week argues that Canada should avoid the urge to tax the wealthy because these “Golden Geese” bring with them innumerable economic benefits. The article highlights how Canada’s comparatively low personal and corporate income tax rates, combined with its lack of inheritance or gift taxes, appeal to those super-rich who are tired of paying higher taxes elsewhere.

But while Macleans is singing the praises of low taxes for the high income, other business voices are sounding a message of concern about growing income inequality. In January, the Risk Report of the World Economic Forum called increasing wealth and income disparities a significant concern, linking the rising disparity to the evolution of most other global risks. Min Zhu, a special advisor to the Director of the International Monetary Fund, told the Forum’s gathering in Davos that “The increase in inequality is the most serious challenge for the world.” Read more »

Last month I participated in a press conference on behalf of Canadians for Tax Fairness, arguing for fairer taxes instead of service cuts. A reporter called me afterward and asked me if tax cuts weren’t necessary to ensure economic growth. “Oh no,” I assured him. “The Finance Department’s own calculations show that investing tax revenues in public services that Canadians need has a higher rate of economic return than tax cuts.”

My answer was true, but I nonetheless wondered later if I had in fact given the right answer. The reporter’s question assumed that economic growth was so important that we should do anything to achieve it – even lose valuable public services for the sake of cutting taxes if tax cuts were necessary to stimulate growth. My answer to him accepted this assumption. Read more »

In 2007, CCPA-BC economist Marc Lee studied tax incidence in Canada and discovered that our tax system had become an inverted u-shape, with middle-income Canadians paying the highest proportion of their income in taxes and the richest Canadians paying the lowest proportion of their income in taxes.

Yesterday, CCPA-BC released an even more disturbing report – a study of tax incidence in BC reveals that the tax system in BC is downright regressive. Not only does the richest 20% of British Columbians pay the smallest proportion of their income in tax, but the poor pay the highest! This shift has taken place over the last decade as the province has cut income taxes (which are still modestly progressive) and increasingly relied on regressive sales taxes. Read more »

Don Drummond had a bit of a strange op-ed in the Toronto Star on Sunday. On the one hand, he acknowledged the debate over the option of corporate tax cuts and called for the impact of cuts to be monitored so that we know whether or not they are actually delivering on their goals. On the other, he reviewed and dismissed all of the arguments against corporate tax cuts as negligible. Read more »

The Basic Income Earth Network Newsflash arrived in my mailbox this morning, and I was surprised to learn that one of the candidates pursuing the French presidency in the 2012 election is basing his campaign on a citizen’s income, also known as a Guaranteed Livable Income. And not just any candidate: former prime minister Dominique de Villepin, best known for his opposition to the Iraq war as France’s Foreign Minister in 2003.

I went to school in France for a year and a half and witnessed a historic presidential campaign up close, and I have retained a fascination with French politics ever since. The French political system is quite different than the Canadian system, with an elected President who selects the Prime Minister who may or may not be elected him/herself. Read more »

The OECD released a report last week highlighting the rapid growth of inequality in Canada and other rich OECD countries. The report covers the period from the mid-1980s to the late 2000s, meaning that this rapid growth of inequality took place during a period of strong economic growth. In other words, trickle down is a complete and utter failure – it’s led to the rich getting richer, not to a rising tide that lifted all boats.

The OECD report offers several reasons for the rapid growth of inequality. Not surprisingly, distribution of salaries and wages is primarily responsible (that’s not hard to figure out when the best paid CEOs make 155 times more than the average worker). This also reflects the growing trend of precarious labour, in which nearly one-third of jobs are low paid, part-time or temporary, offering few or no benefits, and provide no job security. The OECD report identifies globalization as a driver of change in employment structure impacting wages. Read more »

There was an excellent op-ed on corporate tax cuts yesterday from an unlikely source: the Globe and Mail's Report on Business. Lawyer and business owner Tony Wilson argues that he's happy to pay not only a high personal income tax bill but also a high corporate income tax bill because he knows he'll reap the benefits. "My tax bills are huge, which is good," he says. Read more »

The debate over corporate tax rates often seems to ignore the fact that corporations receive benefits for the taxes they pay. Those who demand corporate tax cuts rarely demand lower government expenditures that favour corporations, points out Greg Lang in The Mark News this week. But while the cynic might suggest that we eliminate corporate taxes and the free services corporations receive – including free road use – Lang suggests that there is an alternative way to think about corporate taxes. Read more »

The Globe and Mail has an excellent op-ed today by Peter Shawn Taylor and Ben Sand highlighting the conclusions of a Frontier Centre for Public Policy study on tax expenditures. They argue that tackling the deficit requires a good, hard look at tax expenditures.

Tax expenditures are a different form of government spending. Rather than writing a cheque, the government chooses not to collect certain tax income. The RRSP tax deduction or the Charitable Donations credit are two examples. Taylor and Sand report that “Ottawa annually gives away more than $100 billion worth of tax expenditures on personal taxes through various deductions and credits.” Read more »

Public debate about how to deal with Canada’s $53.8 billion deficit has largely focused on spending cuts. Prime Minister Stephen Harper has explicitly ruled out the possibility of tax increases (except for an increase in EI premiums), while Liberal leader Michael Ignatieff has suggested a freeze on continued corporate tax cuts until Canada is in better fiscal shape. The New Democratic Party has consistently called for the repeal of corporate tax cuts to restore government revenue. In April, nearly three-fifths of senior executives polled said they believed some kind of tax increase would be necessary to deal with the deficit. So far, however, there hasn’t been much debate about this option in Canada.

While responding to the deficit and appropriately and sufficiently investing in social security may require a rise in several different taxes, today I want to take a closer look at corporate taxation. Read more »