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  • 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
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Jason Kenney’s tax plan full of holes

Jason Kenney has proposed that he will revive the Alberta economy and create jobs by cutting corporate taxes from 12% to 8%. The thinking goes that profitable businesses already located in Alberta will take their larger tax returns and make capital investments or hire more workers. This also assumes that businesses in other provinces will decide to move their operations to a lower tax jurisdiction, increasing the tax and employment base for the province.

In practice, cutting tax rates for profitable corporations doesn’t create jobs. It didn’t work for the BC Liberals when they tried it. And recent experience at the federal level showed that it only made it more likely for corporations to sit on ‘dead money’, as former Bank of Canada Governor Mark Carney put it. Bigger tax returns from rate cuts can be, and often are, used to buy back shares to boost share prices or pay bonuses to executives, which have limited benefit beyond the pocketbooks of those who are already wealthy.

Like most tax cuts, this policy would only benefit those businesses who made enough money to be paying taxes in the first place, and arguably aren’t most in need of help funding new investments. The timing of a tax rate cut also blunts the benefits, as it disproportionately benefits those who have made investments in the past, rather than only rewarding new investments.

As for attracting out-of-province relocation, if Alberta’s existing overall tax advantage and competitive real estate markets haven’t prompted significant movement from other jurisdictions, it’s hard to see how this policy will make much of a difference. Even if it did encourage businesses to move, it’s a zero-sum game that steals from neighbours and sets up the expectation that we need to bribe businesses to set up shop. That’s an unsustainable foundation for long term economic growth.

Another difficult truth is that investing in machinery and equipment doesn’t necessarily create jobs. We need look no further than oil sands investments in self-driving trucks to see how corporate investment doesn’t always trickle down to more or better jobs for workers.

The success and impact of such a policy can’t be viewed in isolation, either. Many economists who support corporate tax cuts will tell you that they prefer a more ‘efficient’ form of taxation, such as a broad based sales tax. That’s not what’s on offer here, so we have to look at what Kenney might cut when the predicted jobs never arrive, and how that would impact the Alberta economy. This is especially true if he plans to follow through with promised cuts to education, the foundation for long term prosperity of any economy.

As government expenditures go, a corporate tax rate cut has the lowest bang for the buck in creating jobs and growing the economy. If we really want to encourage more productive investment, a more targeted approach could be used, such as the Alberta Investor Tax Credit (AITC). Or the provincial government could allow businesses to write off the cost of investments in capital faster, like the federal accelerated Capital Cost Allowance (CCA) introduced under Stephen Harper and extended by Justin Trudeau. But overall corporations and holders of capital need to pay higher taxes, not lower. It’s important to remember that decisions around corporate investment are guided by a number of factors, but most significant among them is demand, not corporate tax rates.

Trickle-down economic policy is one of those zombie economic myths that will always find strong support among those who stand to benefit from it.

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Comment from Larry Kazdan
Time: April 5, 2019, 6:40 am

Research desk: What’s a dollar of stimulus worth?

By Dylan Matthews

“Direct government spending — through unemployment benefits, food stamps, work sharing or infrastructure spending — top the list, giving you more than a dollar’s worth of stimulus for a dollar’s worth of spending, while cuts to taxes affecting businesses and upper-income individuals — such as the corporate, dividend, capital gains and alternative minimum taxes — give you less.”


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