The issue of corporate taxes is becoming an issue, and it may even be an issue that provokes an election. Perhaps unsurprisingly, the debate has deteriorated even faster than I had feared. Here are five Bad Talking Points that I wish people would stop talking about.
2. Reducing the CIT will NOT generate jobs. Corporate tax policy is not about job creation; it's about increasing output, productivity and wages; see Bad Talking Point 1.
3. Corporate taxes are already 'competitive'. This is the same thing as saying that Canada is already rich, so why bother trying to increase our incomes? If we can do better, then we should. The efficacy of raising or lowering the CIT depends only marginally on what other countries are doing.
4. Corporate tax cuts are part of a 'race to the bottom'. This point confuses 'low corporate taxes' with 'low overall taxes'. The most successful social democracies have long understood that the recipe that reconciles high economic growth rates with high government spending includes low corporate tax rates.
5. Rescinding the corporate tax cut will help fight the deficit. If it's government revenues we need - and I agree we need them - then the CIT is the worst way to raise them. Even if we set aside the effects on income and wages (and we shouldn't), the effect on the budget balance of a CIT reduction of 1.5 ppt is on the order of $1b-2b - less than one percent of the federal budget, and only a fraction of the structural deficit we have to deal with. The best way to a balanced budget is to rescind instead the cuts to the GST.