Tory claim that lowering corporate taxes equals more jobs unfounded

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by admin on April 13, 2011

The Editor,

 

There seems to be little discussion this election campaign regarding to the truth behind the claim that lower corporate taxes (for large corporations) encourage job creation and growth.

The Conservatives continuously push the idea that they are cutting the Corporate Tax Rate down to 15 per cent next year (from 16.5 this year) in order to create jobs. The Liberals want the rate to return to the 2010 level (18 percent), which ultimately allows the government to deal with the financial deficit more easily and to pay for the various services that it is currently providing and/or will be providing Canadians, all while making it easier to balance the federal budget.

The Liberals had cut the rate 22.12 per cent before the Conservatives came to power in 2006, which was in line with the strategy presented in the 2000 budget. The strategy was to bring about broad-based tax reductions, only in the event that the Government did not borrow money to finance the cuts.

The Conservatives continue to claim that a tax increase will kill job growth and create more unemployment. Furthermore, they claim that Ignatieff will be raising taxes. The Liberal leader has made it clear he would raise the corporate tax rate to 18 per cent. However, he has obviously not made it clear enough that raising the corporate income tax rate will not kill jobs.

The Conservatives are claiming “Lower corporate taxes = More jobs,” but, from my own research, I see no evidence to support this claim. In 2006, the corporate tax rate was higher and unemployment was lower. The government had a surplus financial position.

Today we have the opposite and if we look at a country like Ireland, where the corporate tax rate has been 12.5 per cent since 2003, we can see that unemployment is significantly higher there. Raising the corporate rate back to 18 per cent will benefit Canada as the government will be in a better position to balance the budget.

The point I am making is that we should all be tired of hearing the rhetoric about corporate tax cuts increasing jobs. We simply need to ask ourselves: are we better off today than we were five years ago?

While lower corporate taxes will allow a corporation to retain more of its income, the idea that using that extra income to create jobs is false. In summary, a large corporation will only hire if wants to expand but will be more inclined to lay people off in tougher times. One needs to remember that no matter the tax rate, a corporation will reduce its  taxes when it expands, as wages are tax deductible.

I will certainly be supporting Cindy Duncan McMillan in this election.

 

Jed Cross,

Brennan’s Hill, Quebec