Jeffrey Simpson Walks the Party Line on Corporate Taxes

Yesterday’s Jeffrey Simpson column was entitled, “Walking the Line on Corporate Tax Cuts.” Incredibly, he walks the narrow 1.5% line between the Liberal and NDP proposals.

To his credit, Simpson takes an open-minded look at the evidence, which indicates “no discernible links” from corporate taxes to employment or investment. On this basis, he accepts the Liberal proposal to raise revenue by restoring the 2010 federal corporate tax rate of 18%.

He mysteriously goes on to conclude that the NDP proposal to restore the 2008 rate of 19.5% “is a move in the wrong direction.” He offers no theory of why 18% is reasonable but 19.5% “is unwise.”

To put these figures in perspective, the federal corporate tax rate (including surtax) was 22.1% in 2007, before the Conservative cuts began. It was 29.1% in 2000, before the Liberals started slashing.

If one accepts the excellent analysis in the first three-quarters of Simpson’s column, then the NDP proposal is somewhat better (not to mention more trustworthy) than the Liberal proposal.

However, having Simpson and the Liberals on board for even a modest corporate tax increase is definitely a move in the right direction.

UPDATE (April 18): I have the following letter in today’s Globe and Mail.

In Walking the Line on Corporate Tax Cuts (April 15), Jeffrey Simpson correctly explained that differences in corporate tax rates have no discernible effect on employment or investment. After arguing that the Liberals’ proposed federal corporate tax rate of 18 per cent is reasonable, he concludes that the NDP proposal of 19.5 per cent “is a move in the wrong direction.”

To put both cautious increases in perspective, this rate was 22 per cent as recently as 2007 and 29 per cent until 2000 (including the corporate surtax). The NDP would go modestly further than the Liberals in what Mr. Simpson’s own evidence indicates is the right direction.

Erin Weir, senior economist, International Trade Union Confederation, Brussels

One comment

  1. thank you so much for your analysis. Henri Mintzberg gives a great analysis as to how corporations really don’t care about tax breaks.

    Why aren’t politicians demanding fair pricing from retailers? Or, can they? Our dollar has been at or near par for four years and continues to hang around $1.04. Yet, we are still paying 20% more for goods. Would fair pricing not stimulate econimic growth at home and bring tax dollars back to Canada. I would speculate that Canada is losing billions across the border.

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