EDITORIAL: Taxing Our Credulity

CCPA Monitor, June 2005 | Go to article overview

EDITORIAL: Taxing Our Credulity


The case for further lowering business taxes in Canada rests on three highly dubious arguments. The first is that our corporations are more heavily taxed than those in other countries, and so need more tax relief to remain internationally competitive. The second rationale is that they need the extra cash to invest in the latest equipment and technologies, and to expand their operations. And the third is that more tax cuts would enable companies to create more jobs, or at least preserve those that are left.

To deny them further tax breaks, business leaders contend, is to undermine their competitiveness in the global economy, cause investment to shrink, and deter job creation. They were incensed when the Prime Minister, in a deal with the NDP to save his minority Liberal government, agreed in April to rescind or defer the $4.6 billion in corporate tax cuts originally planned in the 2005 federal Budget.

Of course, none of the arguments for maintaining these latest corporate tax cuts had any validity, but that didn't muffle the shrieks of outrage emanating from Bay Street and the editorial offices of the major newspapers. Their Goebbels-like approach to propaganda is that, if a lie is big enough and repeated often enough, most people will come to believe it regardless of the lack of hard evidence.

This time, however, the big lie about the need for more corporate welfare stretched public credulity to the point where most Canadians just wouldn't buy it. They knew that the corporations were awash in excess cash and profits from all the previous tax cuts they received since 2000 that slashed the federal corporate tax rate from 28% to 21%. And what have the business leaders done with all these record-high profits? They certainly haven't invested much of it in plant and equipment, since investment spending in Canada has actually dropped in the past five years as a percentage of GDP. Nor have they created more good, well-paying permanent jobs. On the contrary, as the CCPA's research has shown, 39 of the largest Canadian companies actually reduced their combined workforce by over 100,000 during the first 15 years of the free trade era.

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