With many economic pundits attacking Jack Layton’s proposed freeze on the corporate income tax rate at 2007 levels, it is worth noting that Layton has also proposed to extend the accelerated (two year) capital cost allowance on new investment in machinery and equipment. This latter measure is supported by the Canadian Manufacturers and Exporters, who heavily criticized the 2008 Budget decision to pahase it out.
A 2004 Department of Finance Working Paper “Taxation and Economic Efficiency” by Baylor and Beausejour found that fast write-offs have a much bigger impact on economic efficiency than across the board cuts to the corporate tax rate. This is because the impact is entirely on new investment, while rate cuts primarily reward those who have invested in the past.
The paper can – at the time of posting – be found at:
- PEF Session at the House of Commons Finance Committee (December 2nd, 2013)
- A Nuclear Error: Uranium Royalty Cuts (December 1st, 2013)
- Canada’s (not so incredible) shrinking federal government (November 20th, 2013)
- Good Time to Rethink Corporate Tax Cuts (November 14th, 2013)
- Do C. D. Howe’s Numbers Support its Policies? (November 6th, 2013)