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Low Taxes for Whom? Flaherty’s Rhetorical Retreat

I missed last week’s federal budget, but was pleased to see the quantity and quality of same-day analysis posted on this blog. Jim wrote an excellent piece, “Corporate Taxation and Investment in the 2011 Federal Budget,” about the corporate tax debate in post-budget media panels. But what struck me was David’s point about how the budget itself did not address corporate tax cuts.

The budget was entitled, “A Low-Tax Plan for Jobs and Growth.” Jim Flaherty’s speech began by listing the GST cuts, child-care cheques, TFSAs and higher personal tax credits, but never got around to mentioning the deepest and costliest tax cuts of all. Indeed, he never used the term “corporate tax,” “corporate income tax” or “business tax.”

Of course, the 352-page budget plan had to use those terms in projecting corporate tax revenues and outlining modest but welcome initiatives to extend accelerated depreciation for manufacturing investment and limit the use of partnerships to defer corporate tax payments. However, previous budgets had presented schedules of future corporate tax rates, graphs of Canada’s “marginal effective tax rate,” etc. Budget 2011 did not even try to make a case for falling corporate tax rates.

A couple of months ago, the Conservatives seemed to think that a rock-ribbed defence of corporate tax cuts was a winning strategy. They even organized a road show promoting these cuts. Surely the budget would have been the ideal document to marshal some evidence (if any exists) in support of claims that lower corporate taxes will pay for themselves, prompt investment, create jobs, and make Canada internationally competitive.

Instead, the Conservatives seem to be retreating into general rhetoric about “low taxes” and “securing our economic recovery.” That is probably a wise political strategy given the unpopularity of corporate tax breaks.

The good news is that the right is losing the public debate about corporate taxes. Budget 2011 implicitly conceded what this blog has long argued: targeted measures linked to actual investment (like accelerated depreciation) are far more compelling than across-the-board giveaways.

If the Conservatives win the election, they undoubtedly will press ahead with corporate tax cuts. However, they cannot win the election by campaigning for lower corporate tax rates.

Enjoy and share:

Comments

Comment from Travis Fast
Time: March 27, 2011, 1:49 pm

Yes and in a newly minted minority mandated to govern as a legitimate majority further corporate income taxes will be the democratic will of the people.

It gets so sticky down here
Better butter your cue-finger up
It’s the start of another new year
Better call the newspaper up
2.50 for a hi-ball,
And buck and a half for a beer
Happy hour, happy hour
Happy hour is here

The long days of Shockley are gone
So is football Kennedy style
Famous last words taken all wrong
Wind up on the very same pile
2.50 for a decade
And a buck and a half for a year
Happy hour, happy hour
Happy hour is here

I can cry, beg and whine
T’every Rebel I find
Just to give me a line
I could use to describe

They’d say, “Baby eat this chicken slow
It’s full of all them little bones.”
“Baby eat this chicken slow
It’s full of all them little bones.”

So regal and decadent here
Coffin cheaters dance on their graves
Music, all it’s delicate fear
Is the only thing that don’t change
2.50 for an eyeball
And a buck and a half for an ear
Happy hour, happy hour
Happy hour is here

Well nothing’s dead down here, just a little tired
Nothing is dead down here, it’s just a little tired
Oh nothings’s dead down here, it’s just a little tired
Nothing is dead down here, it’s just a little tired
Oooh, “Baby eat this chicken slow
It’s full of all them little bones.”
“Baby eat this chicken slow
It’s full of all them little bones.”

Comment from Richard
Time: March 30, 2011, 5:15 am

Travis .Well said.

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