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Shocked and Dismayed
How sensible tax policy gets mired in politics
Posted by Susan L on 04/25 at 10:36 AM
The Globe and Mail's business writer, Stephen Gordon offers this story:
The Conservatives implemented two major tax cuts in the past five years: the two-point reduction in the GST, and the three-point reduction in the corporate income tax (CIT) rate. The GST cut was almost certainly a mistake, but no opposition party has challenged this decision in the election campaign.

On the other hand, every opposition party has promised to increase the CIT -- the tax that is most harmful to economic growth. What is going on? Read the complete Globe story here...
Comment by LivingTO2 11/04/25

Of course, the couple of people to comment are silent on the issue of the decrease to the GST rate.

The reality is that the “fairest” tax is a consumption tax. This should be obvious to everyone - the person who drives a Rolls Royce will pay much higher GST than a person driving a Honda Fit. This is a no brainer.

Government can then increase tax credits to offset the added cost to folks who earn a lower income (whatever the cutoff is).

Companies create wealth, employment, opportunity, investment in capital assets, export sales, and pay employee taxes, realty taxes, WSIB, GST/HST and, of course income taxes.

To me, it only makes sense that our corporate tax rates be attractive compared to other countries so that we can attract international capital investment. It is as simple as that.

From a political perspective, what the parties should be saying is that the last 2 rounds of corporate tax reductions - to level out at 15% Federal Corp Tax rate - be deferred until the deficit is eliminated. This would mean likely a 2 year deferral and then it is implemented. This would achieve two things:
1. It would continue to support Canada’s growth both now and in the future, and 2. There would not be a continuing drag on the deficit when the country needs to find its equalibrium again (fiscally speaking).

As far as the 2% that was reduced from the GST rate, well, I do not think any of the parties have the cohones to put it back, even gradually. Too bad.


Comment by Master of my domain 11/04/25

Politicians will do what they need to do to get elected, Blaming hte politician for giving hte electorae what they want is like blaming a salesman for selling you a product.

It is we the voters who have to become educated, understnad hte issues and look beyond hte polticial rhetoric and my party is better than your party mentality to vote. Unfortunately, we do not.

When everything was booming, we could afford certain entitlements. Now, we need to make choices. Unfortuantely, we voters will demand those choices get deferred to continue our must have now mentality. And we will therfore vote thsoe politicians who cater to this mentality to get elected regardless of what makes sense in the long run.


Comment by Mouthy 11/04/25

The argument “I am right, you just don’t understand ...” is only valid when you can give prove your belief. There are lots of common sense thinkers and economists that believe increasing corporate taxes will decrease investor returns, NOT wages or the economy. The theory has NOT been proven. It is a convenient excuse for bad behavior ... just like the argument that “we must pay our CEO $1 Million because no one willing to work for $5 Million would be able to do the same job.”

* To the extent that corporate profits are paid out as dividends, the decrease in corp taxes is DIRECTLY paid for by Canadian investors. The gross-up and the tax credit are reduced to compensate. Whether that changes the corporations growth (capital gains) is very much debatable.

* To the extent that Canadian corporations are ‘captive’ because they are tied to a physical resource base, corporate capital is NOT free to move to lower tax jurisdictions.

* Statutory rates of corporate tax are meaningless. After all the incentives given from all levels of government, the effective rate is quite different and MUCH lower. I think most individual Canadians want these ‘pick-your-friends’ type of benefits stopped.


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