Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Report looks at captured nature of BC’s Oil and Gas Commission August 6, 2019
    From an early stage, BC’s Oil and Gas Commission bore the hallmarks of a captured regulator. The very industry that the Commission was formed to regulate had a significant hand in its creation and, too often, the interests of the industry it regulates take precedence over the public interest. This report looks at the evolution […]
    Canadian Centre for Policy Alternatives
  • Correcting the Record July 26, 2019
    Earlier this week Kris Sims and Franco Terrazzano of the Canadian Taxpayers Federation wrote an opinion piece that was published in the Calgary Sun, Edmonton Sun, Winnipeg Sun, Ottawa Sun and Toronto Sun. The opinion piece makes several false claims and connections regarding the Corporate Mapping Project (CMP), which we would like to correct. The […]
    Canadian Centre for Policy Alternatives
  • Rental Wage in Canada July 18, 2019
    Our new report maps rental affordability in neighbourhoods across Canada by calculating the “rental wage,” which is the hourly wage needed to afford an average apartment without spending more than 30% of one’s earnings.  Across all of Canada, the average wage needed to afford a two-bedroom apartment is $22.40/h, or $20.20/h for an average one […]
    Canadian Centre for Policy Alternatives
  • Towards Justice: Tackling Indigenous Child Poverty in Canada July 9, 2019
    CCPA senior economist David Macdonald co-authored a new report, Towards Justice: Tackling Indigenous Child Poverty in Canada­—released by Upstream Institute in partnership with the Assembly of First Nations (AFN) and the Canadian Centre for Policy Alternatives (CCPA)—tracks child poverty rates using Census 2006, the 2011 National Household Survey and Census 2016. The report is available for […]
    Canadian Centre for Policy Alternatives
  • Fossil-Power Top 50 launched July 3, 2019
    What do Suncor, Encana, the Royal Bank of Canada, the Fraser Institute and 46 other companies and organizations have in common? They are among the entities that make up the most influential fossil fuel industry players in Canada. Today, the Corporate Mapping Project (CMP) is drawing attention to these powerful corporations and organizations with the […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

The Conference Board on Weak Business Investment

I do not know if the Conference Board intended its latest release on sluggish investment in machinery and equipment to be taken up during the election campaign. However, as Canadian Press reports:

The Conference Board report comes at a time when the issue of corporate taxes is a key demarcation point among the parties in the election campaign, with the Conservatives favouring lower taxes to boost investment and the opposition parties calling for the rate to be hiked.

Labour economists such as Jim Stanford and Erin Weir, as well as the Canadian Centre for Policy Alternatives, have published charts showing investments did not increase as combined federal-provincial corporate tax rates slid from about 42 per cent at the turn of the century to the current 28 per cent. . . .

The perceived lack of payoff for the many carrots thrown at firms has frustrated policy makers. Finance Minister Jim Flaherty has on several occasions urged firms to play their part. . . .

[The Conference Board’s Glen] Hodgson says the issue of why Canadian firms have lagged behind for such a long time is complex, but he believes most business decisions are rational. “It’s not a question of blame.”

I agree with Hodgson that it is not a matter of blaming or jawboning corporate Canada. Businesses do try to make rational investment decisions and corporate tax rates have little effect on those decisions.

Enjoy and share:

Comments

Comment from Denise Freedman
Time: April 30, 2011, 6:52 am

It is rational for corporations not to invest when they have made the ‘rational’ decision they will not make money, an appropriate rate of return on their ‘investment.’

They why is it ‘rational’ for us to create a political economic environment since 1980, as Stanford has shown us, to create the conditions for corporations, many foreign, to do exactly this? When they do not do so?

Is it not ‘rational’ for those of us who are actually living persons, not corporate entities, to create an environment of public goods–education, health care, social assistance, etc.–for OUR good and not THEIRS?

And it is just this stark.

Comment from Travis Fast
Time: April 30, 2011, 9:56 am

And the Zombie replies: “But, But without the tax cuts investment would have been even lower!”

Comment from jdean
Time: May 3, 2011, 12:50 pm

If corporate tax cuts have not lead to increased investment or jobs, what is the theoretical explanation for this? It’s possible to use standard economic analysis to give an answer: much of corporate profits are economic rent, also known as monopoly profits. Taxing them or untaxing them has very little effect on the behaviour of corporations – on their decisions about whether to invest in productivity or hire new workers.

Mainstream (aka neoclassical) economists de-emphasize the concept of monopoly power and economic rent simply by assuming that markets tend towards perfect competition and in the long run, surplus profits get competed away. But what if this isn’t the case? What if companies are able to consistently earn economic rents through their sheer market power or through controlling the laws of the land? In short, through rent seeking.

The economist.com says this about economic rent: “Reducing rent does not change production decisions, so economic rent can be taxed without any adverse impact on the real economy, assuming that it really is rent.”

http://www.economist.com/research/Economics/alphabetic.cfm?letter=R#rent

Write a comment





Related articles