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Revealing the Lies About Corporate Tax Cuts

Blog posts reflect the views of their authors.
Corporate tax rates 2000 & 2006
Corporate tax rates 2000 & 2006
Federal tax revenue 2005-2006
Federal tax revenue 2005-2006
Imports of Goods and Services
Imports of Goods and Services
Exports of Goods and Services
Exports of Goods and Services
Current Account Balance 1
Current Account Balance 1
Current Account Balance 2
Current Account Balance 2

Revealing Conservative Lies About Corporate Tax Cuts

The Conservative Government of Stephen Harper has reduced the federal income tax rates of Canadian corporations to the point where they are among the lowest in the world and intends to continue reducing them even further. He uses the catch all slogan of “keeping Canada competitive” as his excuse for this outright theft of your lifestyle expectations which he then transfers into the offshore bank accounts of his friends in the corporate elite.

The general corporate income tax rate has been falling since 1960 when it was arguably too high to be competitive on the international market. On Jan. 1, 2011 it fell from 18% to 16.5% and is scheduled to fall to 15% on Jan. 1, 2012.

PricewaterhouseCoopers expects the ongoing federal reductions to corporate tax rates to be maintained as planned in Tuesday’s budget.

 

Federal Corporate Income Tax Rates, Selected Years, %

 

Corporate tax rate on general income

Corporate tax rate on manufacturing and processing income

Federal surtax rate

1960

41

41

0

1970

40

40

1.5

1980

36

30

1.8

1990

28

24.5

0.84

2000

28

21

1.12

2001

27

21

1.12

2002

25

21

1.12

2003

23

21

1.12

2004

21

21

1.12

2005

21

21

1.12

2006

21

21

1.12

2007

21

21

1.12

2008

20.5

20.5

0

2009

20

20

0

2010

18

18

0

2011

16.5

16.5

0

2012

15

15

0

 

When compared to personal tax rates, the scheduled reduction in corporate taxes to 15% will result in corporations being taxed at the same rate as the lowest level of personal income tax. That means that Canadians with the lowest earnings in the country will be paying the same rate of tax as the wealthiest corporations in the country and far less than anyone who has higher income than the poorest of us.

Federal personal income tax rates for 2011 are:

·         15% on the first $41,544 of taxable income, +

·         22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088), +

·         26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800), +

·         29% of taxable income over $128,800.

Let us not ignore another crucial factor. Corporate taxes are payable on net earnings, (actual profits after deducting all expenses) while personal taxes are calculated on gross income, (every cent you receive from any source whatsoever regardless of expenses)

It is important to understand that our government has to have a certain level of revenue in order to maintain its credit worthiness on the global marketplace. If it does not maintain an acceptable level of revenue, its ability to borrow on the international market will be hampered or ultimately terminated. Since the primary source of government revenue is income tax, both corporate and personal, a reduction in revenue from one of these sources will automatically result in pressure to increase revenue from the other source, You and me!

Federal Tax Revenues and Social Security Contributions,
Fiscal Year 2005-2006
(this pie chart indicates that in 2005-2006 when the corporate tax rate was 21% as opposed to the current 16.5% revenues from corporate taxes were a measly $33 Billion while we, the citizens paid a whopping $107 Billion. Canadian actually paid nearly half of all government revenue in income taxes while corporations paid less than 15% of these revenues and the disparity is growing as corporate tax levels are falling. Furthermore, the bulk of personal income tax revenue is extracted from the middle class. That’s you and me folks. We are carrying the largest portion of the cost of running this government while the sources most able to bear this burden, the corporations and the people in the highest income brackets pay the least. All in the name of maintaining our competitive advantage.) See Federal tax revenue 2005-2006

The question remains, “Is this disparity between what the rich corporations pay and what the average Canadian pays really necessary to maintain our competitive position in the global marketplace? Let’s look at the facts.

Statutory Corporate Income Tax Rates, Selected Countries,
2000 and 2006
(in this chart we see that in 2000, Canada was indeed in an extremely uncompetitive position, second only to Germany which had the highest corporate tax rates, but was still able to maintain its position in the top 5 strongest economies on the world. see Corporate tax rates 2000 & 2006

In the following graphs we see that at the turn of the Century, Canada was outperforming our strongest competitors in both imports and exports when measuring International Trade. Since the rurn of the century we have indeed seen a decline in our competitive advantage towards a more reasonable comparison. However we continue to maintain the top position in exports with a slight decline in imports which in my view is healthy, for our balance in trade. see Imports of Goods & Services and Exports of Goods & Services

In the graph for Current Account Balance, which measures the ratio of imports as compared to exports, it is notable that there is a sharp decline in all countries except Japan which maintains rigid controls on imports. This decline is measurable in virtually all industrialized countries and is the result of globalization. The industrialized nations of the world have allowed corporations to export the manufacture of their products and many services, such as customer support to third world nations where labour rates often remain at slavery levels of approximately 1% of our labour rates. That’s ONE percent folks. There is absolutely nothing that will compensate for this imbalance in labour rates and no tax incentive will ever induce corporations to return their operation to the developed countries as long as this disparity in labour rates exists. As the following charts show, Canada is doing far better in the balance of trade area than all of our competition except where strong restrictions on imports are maintained as they are in Japan. see Current Account Balance 1 & 2

I’m not alone in opposing corporate tax cuts. You should read this recent Globe and Mail article which strongly denounces further cuts. Five reasons to say no to more corporate tax cuts

The bottom line is that as long as we allow corporations to export our jobs to countries with labour rates that we cannot compete with and resist instituting import restrictions as Japan has, our balance of trade will suffer. Our government knows this and any explanation they use for continuing to reduce corporate tax rates that quotes competitive advantage is an outright lie.

The real reason is far more sinister. Reducing corporate tax rates and placing an ever increasing proportion of the burden of paying for operating our government on the average middle class tax payer is one of the primary tools in the arsenal of the elite to eliminate the middle class altogether and create a global two class society; the elite as world rulers and the rest of us who will live as economic slaves to do the grunt work for these masters.

We Canadians will soon be having a federal election. It behoves each and every one of us to remember this when we cast our ballots. Stephen Harper is no friend of the middle class. His agenda is clearly to destroy our socio/economic democracy and replace it with an oligarchy of elitist masters and their economic slaves.

 


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