Liberals Reply to Bay Street

Michael Ignatieff sent an April Fool’s Day letter to the Canadian Chamber of Commerce. It marshalled compelling evidence against more corporate tax cuts, but insisted that the Liberals still favour more corporate tax cuts:

In a study that KPMG describes as “the most thorough comparison of international business locations ever undertaken by KPMG,” it was demonstrated that Canada is already among the most competitive countries in the world in terms of the cost of doing business. This is a reflection of the previous Liberal government’s record of reducing corporate taxes by nearly one third since 2000, giving us a 25 percent advantage over the United States. We agree that even lower corporate tax rates are an ideal outcome – when the country can afford them. Now is not that time.

In response to the Liberal Fiscal Update of 2005, the Chamber praised our corporate tax reduction plan, but lobbied for a rate of 17% by 2009, as opposed to the current government’s trajectory to 15%. At 18%, we are very close to the level that you advocated for.

Mark Carney said last week, “governments have put in place conditions for a productivity revival. Business, thus far, has disappointed.”

This letter provides a timely reminder of how far the goalposts have been moved. In 2005, the Liberals proposed to cut the federal corporate income tax rate to 19%. The Chamber of Commerce responded by demanding 17%. So, in 2007, the Conservatives enacted a schedule going down to 15%. In the 2008 federal election, the Liberals ran on 14%.

The Liberals have clearly not become reliable opponents of corporate tax cuts. However, their new position reflects and facilitates the goalposts edging back in the other direction.

One comment

  • I always get a chuckle when the flat earth society within the economics profession keep saying that economic geography within a nation specific sense, is a dead field , yet here we are with a major report focusing on the opposite.

    However I am not convinced that in a high productivity/ high wage economy the rate of CIT is an independent variable that I would put into my equation as a major explanatory variable for capital location. In a less developed economy- yes- as the back bone of an export processing zone is zero taxes.

    Potentially as a binary variable- based on a filter of say the country has a 70% tax rate or some outlier like rate.

    Have a good holiday all you whacky progressive economists

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