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“Corporate income tax cuts could go down as one of the great Canadian public policy blunders of recent times.”
From the Canadian Centre for Policy Alternatives
Ottawa, Ontario, November 30th, 2015 —Corporate income tax (CIT) cuts have not only failed to lead to faster growth, there is evidence to suggest that CIT rate reductions contributed to slower growth, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).
The study, by Unifor economist and CCPA research associate Jordan Brennan, examines the relationship between the Canadian CIT regime and various dimensions of growth and finds there is no empirical or statistically significant relationship between corporate tax cuts and growth.’
“Corporate income tax cuts could go down as one of the great Canadian public policy blunders of recent times,” says Brennan. “The problem is the facts stubbornly refuse to support the notion that corporate tax cuts accelerate growth.”
According to the study, the level of business investment since 1980 has oscillated around a historic low, despite several rounds of cuts to corporate income taxes. Employment growth has been anemic among large firms and the business sector. And GDP per capita has grown at its slowest rate since the Depression-laden 1930s.
“In short, corporate tax reductions happened alongside under-investment, a job crisis, and deep stagnation,” says Brennan. “Far from spawning higher levels of business investment and GDP growth, corporate income tax reform has indirectly fostered slower growth.”
The study builds an argument for why a moderate degree of stagnation is desirable from a business standpoint. The hoarding of corporate cash, which is generally recognized as having a depressing effect on growth, is closely associated with the increased corporate and national income share of large firms.
“By reducing corporate income tax rates, Canadian governments contributed to the increased income position of large firms,” Brennan says. “Instead of investing their increased earnings into growth-expanding industrial projects, Canada’s corporate sector—especially its largest firms—has stockpiled cash. This ‘dead money’ is one ingredient in the heightened stagnation of recent times.”
Find the study ‘Do Corporate Income Tax Rate Reductions Accelerate Growth?’ on the CCPA website at http://policyalternatives.ca
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The Canadian Centre for Policy Alternatives is an independent, non-partisan research institute concerned with issues of social, economic and environmental justice.
Founded in 1980, the CCPA is one of Canada’s leading progressive voices in public policy debates. Read more…
Learn more about the work of the Canadian Centre for Policy Alternatives at its home site – https://www.policyalternatives.ca/ .
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Niagara At Large 
The salient phrase here is…”hoarding of corporate cash”.
Hoarding of cash benefits only the hoarder and not anyone else. That is common sense, not university level economics. Of course such a fact will be purposely ignored by those who are the hoarders because it does not allow them to financially run rampant over everyone else.
The second problem is, as the article states, underinvestment. You have to spend (invest) money to make money.
Economics now centres on making great wealth for a few, not making wealth for the benefit of society in general. Boy, do I sound like a Commie?! I suspect the wealthy would label me as such.
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“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” (Proverbs 21:20, NIV)
Who determines the grey area between “hoarding” and prudent care of earned money? Think pension funds. Do you really want pension funds to “invest” in dodgy and unsustainable schemes?
What about personal savings? is that “hoarding” or good judgement?
Why are banks forced to keep an increased amount of liquidity on hand to prevent a 2008 style melt down? Is that “hoarding” or good practice?
Should this not also apply to the industrial sector? Why does the tax code encourage borrowing instead of saving? Why is “saving” being demonized as “hoarding”?
And is it not the politicians with their poor judgement and lack of accountability who cause economic “rainy days”? Is it not prudent for the rest of us at our respective levels of wherewithal to keep a “rainy day fund” until things improve?
Why has Ontario become a “have-not” province, and when did that become the fault of the hard working business community? Is it not prudent to protect one’s sustainability?
Maybe Ontario would be in better shape if McGuinty had “hoarded” more of our taxes instead of “investing” in boondoggles and political pandering.
Maybe Kathleen Wynne would not be inventing new “revenue tools” with which to raid the hard won earnings of Ontario’s job creators and loot the people’s savings accounts had the politicians not squandered Ontario’s bounty.
Maybe Hydro would still be affordable if the politicians had been more careful and “hoarded” more of the ratepayers’ money when things were good.
Maybe Stelco and others would still be around if they had been more careful with their money and “hoarded” some for a rainy day.
Maybe the NHS should have let Port Colborne and Welland hospitals keep their “hoarded” legacy funds … maybe they would have been able to stay open to serve their communities properly.
Maybe Welland would still be financially solvent if City Hall had “hoarded” some of the taxpayers’ money instead of squandering it on a herd of white elephants.
Just because you’ve got it doesn’t mean you have to squander it like “found money” or lottery winnings.
You don’t eat the seed corn if you want to have a harvest next year.
We should be careful what we wish for.
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