The scary corporate tax number generating machine

What a surprise! The NDP makes a proposal for a very modest increase in corporate tax rates – not even to their level before Stephen Harper took office – and defenders of all things corporate in Canada turn on their scary corporate tax number generating machine and produce – wait for it – scary corporate tax impact numbers.

The thing about the scary corporate tax number generating machine is that it always generates the same numbers. Just like its cousin, the scary minimum wage increase number generating machine.

And just like the case with its cousin, the numbers generated by the scary corporate tax number generating machine are always wrong. Not just a little bit wrong. Wildly wrong. And not randomly wrong. Always wrong on the dramatically high side.

There’s nothing wrong with the machine itself – it generates big scary numbers because that’s what it was designed to do. The problem is with the people who keep using the numbers it generates to try to scare us into doing things and supporting things that may be consistent with corporate interests, but are inconsistent with the public interest. The fact that things never ever turn out the way the scary number generating machine says they will doesn’t slow them down one bit.

Federal corporate income tax cuts were supposed to generate hundreds of thousands of jobs. That didn’t happen. Instead, the extra after-tax money went straight into fattening up corporate balance sheets.

Provincial corporate tax cuts were supposed to generate hundreds of thousands of jobs. That didn’t happen. Instead, the extra after-tax money went straight into fattening up corporate balance sheets.

Harmonizing provincial sales taxes with the GST was supposed to generate hundreds of thousands of jobs on Ontario and British Columbia. That didn’t happen.

Getting rid of the HST in British Columbia was supposed to augur in an economic disaster. That didn’t happen. This year, BC is expected to lead the country in economic growth.

But just as conservative economists are reluctant to allow actual evidence to get in the way of a satisfying theory, business lobbyists are reluctant to let facts get in the way of a good political story.

Two of my children’s favourite movies are the Wizard of Oz and American Tail. And two of my favourite scenes offer important insights into the scary corporate tax number generating machine and the men behind it. In Oz, as the terrifying spectre of the wizard is revealed to be a man behind a curtain frantically yanking on levers and yelling into a microphone, the man declares “pay no attention to that man behind the curtain. I am Oz, the great and powerful.” In American Tail, as a rat masquerading as a leader of the mice is exposed as a cat in disguise, he declares “What are you going to believe, me or your own eyes?”

So before anyone gets too excited about the latest scary corporate tax numbers, let’s pay some attention to the man behind the curtain. Of course, he doesn’t want to see corporate taxes go up. Not because jobs will be affected but because corporate bottom lines will be affected. And before we get too excited about the scary corporate tax numbers, maybe we should consider what actually happened – or more precisely didn’t happen – the last time we saw numbers like that, and the time before that, and the time before that.

Hugh Mackenzie is a CCPA research associate. Follow him on Twitter @mackhugh.

One comment

  1. When we include the moneys that are sheltered by big businees in offshore tax havens, what is the REAL rate of corporate taxation? Is it only big business that hides money offshore, or do small & medium sized corporations do so as well? What about individuals?

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