Layton, Corporate Tax Cuts and Economic Efficiency

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:

http://www.fin.gc.ca/wp/2004-10e.html

4 comments

  • If Layton were a socialist he would be opting for socialisation of the means of production through public ownership instead of finding ways to help private industry through accelerated capital cost allowances on new investment in machinery and equipment. While this may be an improvement upon the Liberals or Conservatives it makes no attempt to change the system.
    Layton also insists on a balanced budget. That is about as progressive as Harper or Dion! I guess Keynes was a radical!

  • Right you are, Ken! It is hard to see any difference at all now between Layton’s NDP, with its commitment to “sound finance”, and Dion’s Liberals — in fact Dion was heard last week (for a day or two before backtracking) to muse that deficit finance might be necessary depending on the state of the economy left by the Conservatives. Plus Dion is actually for saving Canada’s national social infrastructure, whereas Layton’s current popularity stems from his willingness to sell out to separatists, not exactly showing political courage, which Dion has in spades. Dion’s Liberals may actually be to the left of Layton’s NDP — at least in terms of their electoral programs. Still one has to give credit to Layton for attacking Harper instead of Dion: here’s hoping for a Liberal plurality with an NDP balance of power.

  • Ken what we are seeking is a progressive responsible government not revolution for revolutions sake. If you wish to espouse tired bromides, well I guess that is your choice, but in the meanwhile the NDP gets damned with the brush of having friends like you…As for RentierFungicide you are too contradictory for words. So I wont bother to spell it for you other than to state that your “lefty” Dion wants to cut corporate taxes even more than Harper.

  • Ken I fear you are receiving or at least embracing a far too romanticized view of revolution. Karl Marx understand that revolution may very well be the only solution, but as he declared in the famous quote; “Peace when possible, arms when necessary”, you don’t NEED to lead an insurrection to improve things. Layton is a revisionist Socialist but I respect him and support him nonetheless. While the NDP might seem abit “folky” and Populist, it is trying to work for some Progressive change. And for that it receives my support.
    You can’t expect a Workers of the World Unite speech to go over well, especially in the post-stalinist world.

    – a Marxist opinion.

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