McGuinty’s Graph Misleads on Corporate Taxes

Further to Jim’s excellent critique of the Ontario Conservative platform’s graphs, I am similarly struck by the Liberal platform’s lone graph.

“Cutting Ontario’s Taxes on New Business Investment in Half” (page 25) purports to show that corporate tax cuts are required to get the province’s “Marginal Effective Tax Rate” below the US and OECD averages.

It compares projections of those averages for 2012 with Ontario rates for four other years. It cites no sources for any of these figures.

The Liberals have often invoked Jack Mintz in support of corporate tax cuts. However, his figures confirm that Ontario has been below the US Marginal Effective Tax Rate of 35% all along (table 2, page 7). The Liberal graph incorrectly displays a US average of 31% to imply that Ontario needed corporate tax breaks to compete.

The comparison to a raw average of OECD countries is also disingenuous. This average is dragged down by ultra-low taxes in very small OECD members like Ireland, Chile, Iceland, the Czech and Slovak Republics, Hungary, Slovenia and Estonia. All of those economies combined are smaller than the Canadian economy.

UPDATE (September 18): I noticed a couple of days ago that a more detailed version of this graph appeared in the last provincial budget. That’s what I get for having been overseas at the time.

The budget graph cites Finance Canada, but its graph shows a US Marginal Effective Tax Rate of 33% (Chart 4). So, it still appears that the provincial Liberals tweaked the numbers to produce a US rate below Ontario’s 2009 rate.