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Business

Cut Corporate Income Taxes massively to increase growth, prosperity

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4 minute read

From the Frontier Centre for Public Policy

By Ian Madsen

The federal Liberal government’s current budget proposal to increase the inclusion rate for capital gains tax was met with justifiable criticism and opposition – primarily from business groups.  There is another corporate income tax increase looming.  A 2018 corporate tax reduction, intended to make Canada less uncompetitive versus the 2017-enacted tax reform and cut in the United States (which came into effect fully in 2018), is set to expire starting this year.

According to a study by University of Calgary’s School of Public Policy’s Trevor Tombe, Canada’s corporate income tax rate on new investments will jump from 13.7% to 17% by 2027. Even worse, for Canada’s high-value-added manufacturing sector, taxation will triple.  For a nation that is having a hard time, encouraging both domestic or foreign investors to invest in new plant, equipment and related goods and services, to reverse meagre productivity growth – as noted by the Bank of Canada – this development is beyond questionable.

This rise will hinder future improvement in incomes and the standard of living – making it a serious issue.  It should be obvious to policymakers that increasing income tax on businesses and investment should be avoided.  The legislation to make the 2018 provisions permanent is, alarmingly, not urgent to politicians seeking to appease certain types of class warfare-cheering voters.

There is at least one policy that could make Canada more attractive to business, investors, and hard-pressed ordinary citizens.  It would be, dramatically and substantially, slash corporate income taxes  – plus make paying taxes easier, as Magna Corporation founder Frank Stronach has suggested.  It may surprise some Canadians, but, Ottawa’s take from corporate income taxes is a relatively small, but fast rising proportion of  federal overall revenue: 21%, in fiscal 2022-23, according to Ottawa, up from 13% in fiscal 2000-21 notes the OECD.

This may seem ‘just fine’: let companies pay the taxes and reduce the tax burden on ordinary people.  However, what actually happens is that every corporate expense, including taxes, reduces cash flow.  The money remaining could either be reinvested or paid out as dividends to owners. A reminder: owners are founding families; pension fund beneficiaries (employees, citizens); and ordinary individuals.

As to reinvesting available funds, the less there are, the less capital investment can occur. Investment is required to replace existing equipment, or add new equipment, devices, software and vehicles for businesses.  This not only keeps companies competitive, but also makes employees more productive.  This, in turn, makes the whole economy more profitable, thereby increasing taxes paid to governments.

As for the dubious reason for the tax hike, gaining more revenue – recent experience in the United States is instructive.  The 2017 Tax Cut and Jobs Act reduced corporate income tax from 39% of pre-tax income to 21%.  The result:  U.S. federal corporate income tax revenue rose 25% from 2017 to fiscal 2021.  Capital investment rose dramatically too, by 20%, a key goal of many Canadian policymakers.

Taxes should be cut, enabling productivity improvement and bringing a future prosperity that we all yearn for.  It would also keep us internationally competitive.  We are currently mediocre, being around a 25% rate (OECD).

Canada has a hard time attracting investors. Now, our trading partners are leaving us in the dust.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy

National

Trudeau must prove he won’t tax our homes

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From the Canadian Taxpayers Federation

Author: Franco Terrazzano 

Actions speak louder the words. That’s especially true when those words come from a politician with a track record of breaking promises and hiking taxes.

Prime Minister Justin Trudeau says he won’t send the taxman after Canadians’ homes. But if Trudeau wants Canadians to believe he won’t impose a home equity tax, there’s one thing he must do: end the CRA’s home reporting requirement.

In 2016, the Trudeau government made it mandatory for Canadians to report the sale of their primary residence even though it’s tax-exempt. If you sell your home, the CRA wants to know how much money you received from that sale. But if the taxman isn’t taxing it, why is the taxman asking that question? Is the CRA just curious?

Official Opposition Leader Pierre Poilievre confirmed to the Canadian Taxpayers Federation he would remove this reporting requirement if he forms government.

Trudeau must do the same. Otherwise, Canadians should worry a home equity tax is right around the corner. As Toronto Sun Columnist Brian Lilley recently wrote, “For Justin Trudeau and his Liberal Party, taxing your primary residence is a bad idea they just can’t quit.”

On June 25, Trudeau attended “a private town hall about generational fairness,” hosted by Generation Squeeze, a group advocating for home taxes.

What do you notice about the theme of that town hall? The government recently used the cloak of generational fairness to impose its capital gains tax hike.

The Trudeau government also spent hundreds of thousands funding and promoting a report from Generation Squeeze that complained of the “housing wealth windfalls gained by many home owners while they sleep and watch TV.”

The report recommended charging a tax on the value of homes above $1 million. The tax would cost Canadians up to $5.8 billion every year, and it would hit many normal Canadians. In British Columbia and Toronto, the typical home price is above $1 million.

Trying to improve affordability with tax hikes is like trying to boil water with your freezer. Higher taxes won’t make homes affordable. Consider this insight 50 pages into the report.

“Owners of homes valued over $1 million that include informal rental suites may try to recover the surtax by passing some of its cost on to renters,” reads the report.

It turns out higher taxes can make things cost more.

The head of Generation Squeeze was invited to a cabinet ministers’ retreat in Charlottetown last summer.

Documents uncovered by the CTF show staff in the prime minister’s office met twice with the head of Generation Squeeze, which included “a briefing about the tax policy recommendation.”

Trudeau has an appetite for taxing people’s homes. His recent capital gains tax hike will impact Canadians who sell secondary residences and cottages. He imposed a so-called anti-flipping home tax. And Trudeau taxes homes the government deems “underused.”

With Trudeau scrounging through the couch cushions looking for more money to paper over his deficits, Canadians should worry a home equity tax is next.

A home equity tax would come with a big bill for a young couple looking to upgrade to a family home or for grandparents who rely on the equity in their home to fund their golden years.

As an example, Canadians that bought their Toronto home for $250,000 in 1980 and sold it for $1.2 million today would pay between $50,000 and $190,000, depending on the type of home equity tax.

The Trudeau government has repeatedly flirted with home equity taxes. The only way for Trudeau to put Canadians’ minds at ease is to act and remove the requirement for taxpayers to report the sale of their home to the CRA.

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International

‘Really, Really Difficult’: Bureaucrats Worry Behind Closed Doors They’ll Be Sent Packing Under Trump

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From Heartland Daily News

“He’s going to get people in place that are more intelligent and are more loyal to him,” a park service employee said. “Now I think he could do a lot of damage.”

Government workers are reportedly in a state of panic over the prospect of former President Donald Trump winning another term in office, according to E&E News.

Bureaucrats up and down the federal hierarchy are concerned that a second Trump administration could cost them their jobs and put an end to liberal programs they worked to implement under President Joe Biden, E&E News  reported.  Trump has, if elected, pledged to implement reforms that would allow him to fire up to 50,000 civil servants at will, with the former president singling out workers who are incompetent, unnecessary or undermine his democratic mandate.

“The first rendition of the Trump administration was really, really difficult, and we saw a mass exodus of employees retiring,” a National Park Service employee told E&E News. “If we do have an administration shift, other employees will also reconsider their positions and move to the private sector. I don’t know what I’ll end up doing.”

Of the civil servants that didn’t exit during Trump’s first term, many worked internally to deliberately obstruct his agenda, according to Miles Taylor, who served as chief of staff in the Department of Homeland Security from 2017 to 2019 and admitted to engaging in such behavior. Bureaucrats are worried that Trump may seek to appoint administrators who agree with his agenda this time around.

“He’s going to get people in place that are more intelligent and are more loyal to him,” a park service employee said. “Now I think he could do a lot of damage.”

To replace large numbers of federal employees, Trump would reclassify them as Schedule F employees, allowing him to fire them at will. The Biden administration finalized a rule in April that would prevent their status from being changed involuntarily, however, allies of the former president have shrugged off the rule by pointing out that a Trump administration could simply reverse it, according to The New York Times.

Amid fear that Trump’s plans may come to fruition, bureaucrats are making moves to ensure the Biden administration’s policies are as hard to repeal as possible, a senior employee at the Interior Department told E&E News.

“The concern hasn’t been focused on who the Democratic nominee is as much as concerns about Trump winning and what that would mean,” they said. “From everyone’s perspective it is get as much done as possible. Also trying to bury into the agency programs [like environmental justice] so they can survive a Trump administration.”

Conservatives are increasingly optimistic about Trump’s chances of defeating Biden in November as the president lags behind Trump in the polls and the Democratic Party grapples with internal disputes regarding whether or not he should be their nominee.

“The mood is somber and incredulous,” one long-time employee of the Department of the Interior told E&E News. “The hope is we will not suffer through another term with the prior leadership, but the fear [is] that if we do, they will target employees they don’t like, make things up to justify whatever punishment they want and just cripple the good work we are doing.”

Staff at the Environmental Protection Agency (EPA), meanwhile, are also upset and agitated, the president of a union representing some of the agency’s employees told E&E News. “So many of our members lived through the absolutely disastrous first Trump administration and his attempted dismantling of EPA,” she said.

Originally published by The Daily Caller. Republished with permission.

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