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Does cutting the Corporate Income Tax (CIT) promote growth?


cybercoma

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Yet there's nearly a 90% positive correlation between CIT and R&D spending. There might be some external variable influences that cause both CIT and R&D spending to increase at the same times. I'd like to hear it if anyone knows what that might be. That's a fair question that arises out of these findings.

I wish I had a pat answer. Business in Canada, very much as in the USA, has swung from making things to looking how to score as much money as one can. We are emulating a failing model. This is because you can make a LOT more money speculating on an asset, equity or commodity than you could ever earn by adding any value. Worse, we encourage that behaviour by giving speculative gains a free ride on the tax system - further penalizing business from going back to being business.

R&D is a function of making product or bettering product quality. Since we can score Warren Buffet or Bill Gates hits by simply giving ourselves massive stock options from the company, and run that stock value through the roof by kissing up to Wall/Bay Street, why would you want the fuss of actually having to MAKE something? What the heck, we can just send a copy of a competitor's product over the China, and they weill send us back one with our name on it and the mavens of the Street will be thrilled to death that we have a new product and up our stock value some more.

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All the tax does does is get passed down to the consumer.

If you put tax dollars into the government's hands, it is redistributed according the privilege granted by government and bureaucracies to those who are most effective at lobbying or provide most expedient political advantage to the party in power.

Only the physical marketplace is effective at distributing value equitably.

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Hyperbole is also a bad thing. It's not quite that dire.

Do you deny that any of those things happened? I'm stating facts here. If you read that as "dire" then that's on you. You don't have veterans organizing against the CPC for no reason here. The delayed response to the oil spill in BC was a direct result of federal changes. The increasing number of rail accidents are a result of federal policy. The number of food borne illnesses that we've seen recently are also due to lack of resources due to cutbacks. It's all part of the CPC's ideology. Let industry police itself. We don't want to pay for it. The results of industry policing itself are pretty clear. And the result of the CPC flipping off veterans is a group of them organizing against Harper.

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Do you deny that any of those things happened? I'm stating facts here.

Sure you are, they just conveniently lack context.

You don't have veterans organizing against the CPC for no reason here.

I don't think they'll ever be happy, as with many groups. There have been recent changes that cost the government over a billion dollars in one year alone. That's a lot of money for veterans.

The delayed response to the oil spill in BC was a direct result of federal changes.

The station that was closed was not equipped for spill response, or much of anything really. The delay in response (there wasn't much of one, actually) appears to have been the result of communication fumbles.

The increasing number of rail accidents are a result of federal policy.

You're right, we should really be forcing those pipelines through faster.

The number of food borne illnesses that we've seen recently are also due to lack of resources due to cutbacks.

Has there been an increase? In comparison to say, a few years ago, with listeria?

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It's time to increase the corporate rate to get the economy moving again.

Cyber....assuming you are correct, then how do you suggest that Canada raises its taxes if our neighbor to the south keeps theirs lower. Its like owning a bakery and the bakery down the street has lower prices. It would be nice if everyone respected a market rate which would allow both sides to bring in cash to pay for the business....but that's not the case.

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Cyber....assuming you are correct, then how do you suggest that Canada raises its taxes if our neighbor to the south keeps theirs lower. Its like owning a bakery and the bakery down the street has lower prices. It would be nice if everyone respected a market rate which would allow both sides to bring in cash to pay for the business....but that's not the case.

Have you actually compared those corp. tax rates. We have room to move.

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Cyber....assuming you are correct, then how do you suggest that Canada raises its taxes if our neighbor to the south keeps theirs lower.

There are a number of additional costs of doing business in the United States that they do not incur here. For instance, we have a single-payer healthcare system that alleviates the need to provide health care benefits in the US. We have OAS and GIS, which also alleviates the need for more expensive retirement compensation that businesses pay in the US. Point being, a straight comparison is not possible, but let's make one anyway.

The federal corporate tax rate in Canada is 15%. Down considerably from when Conservatives were in power in the 1980s and nobody accused them of being socialists or communists or anti-business. But that's only half the story because provinces charge their own rates. So we're looking at an additional 11-16% corporate tax from the provinces as well. Putting the Canadian rate between 26%-31%.

The United States has a 40% federal rate for corporate income tax, putting aside all the ways businesses hide money so they don't have to pay taxes. This gives us at least 9 points room, putting aside all of the benefits of our social programs and more educated population.

So I have to reject your premise that they have lower rates in the US because they don't and that's without considering the other benefits of operating in Canada.

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The United States has a 40% federal rate for corporate income tax, putting aside all the ways businesses hide money so they don't have to pay taxes. This gives us at least 9 points room, putting aside all of the benefits of our social programs and more educated population.

So I have to reject your premise that they have lower rates in the US because they don't and that's without considering the other benefits of operating in Canada.

If I showed you that the average Corporate Tax Rate in the US was less than 15% - instead of 40%, would that make any difference to the way you look at things?

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There are a number of additional costs of doing business in the United States that they do not incur here. For instance, we have a single-payer healthcare system that alleviates the need to provide health care benefits in the US. We have OAS and GIS, which also alleviates the need for more expensive retirement compensation that businesses pay in the US. Point being, a straight comparison is not possible, but let's make one anyway.

The federal corporate tax rate in Canada is 15%. Down considerably from when Conservatives were in power in the 1980s and nobody accused them of being socialists or communists or anti-business. But that's only half the story because provinces charge their own rates. So we're looking at an additional 11-16% corporate tax from the provinces as well. Putting the Canadian rate between 26%-31%.

The United States has a 40% federal rate for corporate income tax, putting aside all the ways businesses hide money so they don't have to pay taxes. This gives us at least 9 points room, putting aside all of the benefits of our social programs and more educated population.

So I have to reject your premise that they have lower rates in the US because they don't and that's without considering the other benefits of operating in Canada.

First off...the tax rate in the US is not 40%, its a graduated level that is around 35%. Also don't be confused with nominal tax rate versus actual tax rate.

At 35%, the United States has the highest nominal top corporate tax rate in any of the world's developed economies.[1] However, the average corporate tax rate in 2011 dipped to 12.1%, its lowest level since before World War I, largely due to the great recession and a bonus depreciation tax break.[2]
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If I showed you that the average Corporate Tax Rate in the US was less than 15% - instead of 40%, would that make any difference to the way you look at things?

That is on the federal level. Keeping in mind that state and local taxes are considered expenses and taken off as deductions along with other items. Like I said in my post above, one can't confuse nominal tax rate with actual rates.

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That is on the federal level. Keeping in mind that state and local taxes are considered expenses and taken off as deductions along with other items. Like I said in my post above, one can't confuse nominal tax rate with actual rates.

Yes - I was being generous in addressing Cyber's claim that we had "9 points of room" to move. As I asked him, I wonder if these facts will alter his plan to agreement that it's OK to raise taxes. I'm not holding my breath on that one.

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First off...the tax rate in the US is not 40%, its a graduated level that is around 35%. Also don't be confused with nominal tax rate versus actual tax rate.

So in comparison to an analysis of the top 60 firms in Canada, you want to talk about the lower limits of their graduated tax scheme? The fact is their corporate tax rate is higher than ours and I already said at the beginning of that post that a direct comparison is nearly impossible due to the myriad other factors of operating in both countries.

Edited by cybercoma
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So in comparison to an analysis of the top 60 firms in Canada, you want to talk about the lower limits of their graduated tax scheme? The fact is their corporate tax rate is higher than ours and I already said at the beginning of that post that a direct comparison is nearly impossible due to the myriad other factors of operating in both countries.

Who's looking at the lower limits? Do you know how a graduated scale works? They only pay 39% in certain gradients. For the most part its 34% which again is the nominal rate. The US has many deductions that drops that rate.

Its tough to make a direct comparison but it does happen. Hence the reason major corporations like Burger King pick and choose where they want to have their headquarters.

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The increase is still more than the increase in health spending in almost every province.

and still you persist with this nonsense! A cut is not an increase... and... you keep matching that up to provincial expenditures - which is completely bogus man! Again, Harper refuses to meet with the Provincial Premiers... Harper eliminates the Health Accord (doesn't continue it), Harper dictatorially sets the transfer level irregardless of what provinces actually need, etc., etc., etc.. You suggest/imply that the provinces are all managing their health care needs based on those spending figures. And you know this how/because of?

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And an increase isn't a cut.

ya, ya... in your HarperConservative world, a 6% drop to 3% is an increase!

but c'mon... you managed to quote only a part of my post. Somehow you forgot about this following part: (is there a problem, for you)?

... and... you keep matching that up to provincial expenditures - which is completely bogus man! Again, Harper refuses to meet with the Provincial Premiers... Harper eliminates the Health Accord (doesn't continue it), Harper dictatorially sets the transfer level irregardless of what provinces actually need, etc., etc., etc.. You suggest/imply that the provinces are all managing their health care needs based on those spending figures. And you know this how/because of?
Edited by waldo
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Lets get back to the "its all Harpers fault" mantra.

Question, how does low CIT rate affect the provinces like Ontario whose economy is in the toilet? Well it makes it a tiny bit more attractive for a company to operate in Ontario and turn a profit. How us that not good for Ontario to have a low vs high CIT?

Another question, why does the left think that a low CIT is only supported by the Conservatives and not the NDP and Liberals? Answer is to accept that low CIT is supported by all parties but that does not fit well with the anti-Harper mantra.

My proof of that conclusion, thd opposition parties have both said they wont change the rate (liberals), or may add 1 or 2% (ndp).

Further proof, each and every time the feds lowered the cit, the provincial ndp, libs, and con governments held provincial rates or lowered. Only BC bucked the trend by adding 2% and now Alberta. So what do we learn from this? That all parties think low corporate taxes are a good idea. And what else? That if the feds keep cit low it actually gives the provincial govs room to implement their own tax policy. Does it not make sense that if Harper set the CIT extremely high to stick it to those evil corps that the provincial ndp and libs would have far less leeway to determine their own fiscal policy.

In short, Harpers low CIT helps the left wing provincial governments manage their own fiscal plans.

And lets talk about those evil corpirations, who knows who they are even referring to? Well, a company with retained earings of $50M is a large corporation - correct me if i am wrong. In Saskatchewan i can think if Startco, Honeybee, Great Western Brewing Co, Degelman, Brandt, Bourgault, Seedhawk, and SeedMaster that i would think fit that bill. Why do you think the ceos of these companies are rolling in cash and need to be heavily taxed? Why do you insist on destroying the idea of a group of guys taking a risk, being sucessful, expanding, hiring more people and inturn making a profit as reward fir their risks?

When you talk of large corporations, flip open your phone book and find out which businesses in your imediate area you are going to put the screws to.

I got more to go on where those profits go in these so called "large corporations" but will pause there.

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Lets get back to the "its all Harpers fault" mantra.

Harper was responsible for the Mulroney and Chrétien Governments too? Because in the OP, I pointed to decades of CIT cuts. So you might want to check that Harper Victimhood narrative.

Edited by cybercoma
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Ok, cybercoma i clearly have no clue what your response is saying. Since i have clearly stated that all parties agree with the ideology of low corporate taxes, i can assume you agree and are on Harpers side for staying the course rather than raising the cit to make the fed budget look better and leave the provinces twist in the wind?

Good, because it is a very simple concept.

So next point is, what do you have against corporations that would warrant anyone to consider raising their taxes and stiffle growth? I mean other than the nerve of the people to take a risk in their life and be rewarded because that is so much against tge socialist way.

Lets keep on track because that last post lost me completely.

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