Overview Budget 2007 erodes the federal government’s capacity to improve the lives of working people. Tax cuts will benefit profitable corporations without increasing investment in the Canadian economy. The federal government will continue subsidizing oil-sands extraction for nearly a decade. Increased transfers to provincial governments may serve important public purposes, but the Budget’s general thrust is to reduce the proportion […]
Read moreMonday’s federal budget will certainly reaffirm the corporate-tax reductions already scheduled through 2011 and may announce further reductions. Between 2001 and 2004, the federal government reduced its corporate-income-tax rate from 28% to 21% and began phasing out its corporate-capital tax. It has committed to eliminate the corporate surtax and reduce the corporate-income-tax rate to 18.5% between 2008 and 2011. These latter reductions […]
Read moreWith a surplus that has swelled in recent months to around $13 billion, the Conservatives may be once again contemplating income splitting for next week’s federal budget. The annual cost is high at $5 billion, but this is a perfect wedge issue for Canada’s New Harperment, reducing the size of government while giving most of the tax benefit to its […]
Read moreOur politicians are obsessed with tax cuts. The next election will now feature the battle of the tax cuts, with the Canada’s New Harperment pushing for more GST cuts (and who knows what other plans to reduce the size of the federal government) versus Dion’s plan for more personal and corporate income tax cuts. Meanwhile, poverty and homelessness will continue […]
Read moreThe Globe Report and Business has a story today (can’t find it online) to the effect that the federal Budget will improve depreciation rates for new capital equipment investment, but not lower the general corporate income tax rate beyond already planned levels. As noted by Erin in an earlier post, this reflects Finance thinking as reflected in the recent report […]
Read moreYesterday, Finance Canada released “Tax Expenditures and Evaluations 2006.” The tax-expenditure figures confirm Andrew’s suggestion that the partial inclusion of capital gains now costs the federal government about $3 billion per year of forgone personal taxes: the 2006 projection is $3.1 billion. This partial inclusion cost an additional $3.4 billion of forgone corporate taxes that year. By comparison, the research-and-development […]
Read moreTo flesh out the cost-effectiveness issue outlined below, consider the following figures. McKenzie estimates that a 10% decrease in the cost of R&D due to a tax credit increases R&D by 2% in the short term and 7% in the long term, but that a 10% decrease in the effective tax rate on production increases R&D by 3% in the […]
Read moreThis afternoon, I attended Kenneth McKenzie’s presentation at Industry Canada on “Taxes, R&D and Enterprise Formation.” To a large extent, it was based on his C. D. Howe Institute Commentary. His main message is that governments seeking to promote R&D can “push” by reducing its cost through incentives (i.e. subsidies) or “pull” by increasing its benefit through lower taxes on […]
Read moreI bet you didn’t expect to see this title on Relentlessly Progressive Economics, and it’s not just an attempt to get more Google hits. This story highlights some important questions about inheritance. Not surprisingly, men have lined up for DNA tests to stake a claim on her late husband’s fortune via her baby. While some individuals have been criticized for […]
Read moreAs we have been hearing about the legacies of the great minds of economics, a name that has not cropped up much lately is Marx. The first article below suggests that Marx’s ideas live with us in the global economy, and growing inequality has awoken the old guy’s spirit. With it we are seeing a resurgence of the word “capitalism” […]
Read moreThe December, 2006 OECD Economic Outlook (full text unavailable on line) points to sudden tax revenue windfalls in most member countries due to large capital gains and the fact that “the process of income and wealth distributions becoming more skewed has picked up pace lately …. and may be interacting with progressive tax systems to produce more than usual increases […]
Read moreI don’t entirely agree with Jim Stanford that RRSPs are a bad way to save for those not fortunate enough to be covered by a good pension plan, but I am struck by the absence of sober, independent analysis as we head into RRSP season. Today’s special Report on RRSPs in the Globe and Mail is, predictably, totally uncritical, and […]
Read moreIn terms of pure economics, Jim’s most interesting comparison may have been of investment to GDP, which has sparked a discussion about how to properly measure investment. For public policy, I think that Jim’s most interesting comparison was of investment to business finance/profits. If one accepts Stephen’s interpretation, then falling capital prices have allowed firms to make adequate or appropriate […]
Read moreLast week, John Baird publicly questioned federal tax loopholes for the oil and gas industry. Although his comments were more about partisanship than policy, they still sound like a step in the right direction. There seem to be some grounds for cautious optimism on this issue. At the beginning of the decade, there were only a few lonely voices talking […]
Read moreLast week the Fraser Institute released a report arguing for a shift in Canada’s tax mix that would increase the GST to pay for personal and corporate income tax cuts. The proposal would be a massive gift to the richest among us. It is kind of like asking everyone to make out a cheque for $300 to Jimmy Pattison. Such […]
Read moreRecent publicity given to the CCPA report on the huge gap between the compensation of CEOs and ordinary workers should prompt some discussion on what should be done about it. Part of the answer undoubtedly lies in reforms to corporate governance. Shareholders can potentially exert some control over the compensation committees of Boards of Directors who set senior executive pay […]
Read moreI recently had occasion to re-read Jim Stanford’s contribution to an excellent CCPA book on Paul Martin’s Record (Hell and High Water), in which Jim pointed out that fiscal retrenchment in Canada under the Chretien government had been far, far more severe than the OECD norm. Few Canadians seem to perceive just how exceptional Canada has been compared to the […]
Read moreOne wonders how much the Government of Canada could recover by offering an amnesty to tax evaders who come forward and pay up, followed by a serious effort to identify and prosecute those who do not. The Times December 30, 2006 Mystery billionaire pays $200m in back tax – and keeps a state afloat Chris Ayres in Los Angeles $200m […]
Read moreEric Reguly on the Accelerated Capital Cost Allowance and Big Oil, from today’s Globe: Oil sands may be federal Tories’ Achilles heel … For the opposition parties, the beauty of the oil sands is that you can point to them. The visuals are appropriately disturbing. You can see the gaping holes in the earth, you can measure the water flows, […]
Read moreThe CCPA released today a study by Osgoode Hall tax professor Neil Brooks and York’s Thaddeus Hwong called The Social Benefits and Economic Costs of Taxation: A Comparison of High and Low-tax Countries. The study compares 50 indicators of social and economic performance. The full study is available here and a condensed summary follows: Tax levels in Canada have always […]
Read morehttp://www.caledoninst.org/Publications/PDF/609ENG%2Epdf Tax Fairness According to Canada’s New Government Ed Tamagno and Ken Battle, November 2006 Federal Finance Minister Jim Flaherty’s surprise announcement on October 31, 2006, shutting down income trusts was front page news across Canada. Little media attention, however, was given to other changes to the income tax system announced at the same time. These include two of particular […]
Read moreOn October 31, Finance Minister Flaherty announced that pension income could be divided between spouses for tax purposes. More recently, he mused about allowing spouses to divide all income for tax purposes. This latter proposal would benefit an affluent minority at the expense of important public programs and create a disincentive for women to engage in paid employment. Income splitting […]
Read moreOnce again the Tories opportunistically use for their own gain what should be an honest update to the public about the country’s finances. OK, the Liberals did that too, but that does not make it right. Along with the Economic and Fiscal Update 2006 comes Advantage Canada, the Tories’ blueprint for prosperity. If the metaphor is tennis, this document makes […]
Read moreThere is a crisis of poverty and homelessness in Canada. A poll released by the CCPA yesterday found that Canadians across all regions and demographic categories feel that the gap between rich and poor is growing. There are major challenges that require attention, such as fighting climate change. A poll in the Vancouver Sun the other day found that almost […]
Read moreThe dust has now settled on the Tories’ decision to tax income trusts. The government deserves credit for dealing with this issue even though they had promised to do otherwise. While there is some fury on Bay Street and among some retirees, the reality is that the government and corporate Canada were playing a game of chicken, and at some […]
Read moreMonday’s release by the UK government of the Stern Review on The Economics of Climate Change could come to be seen as one of those pivotal events in shaping public policy. I hope so, anyway. This report takes the accumulation of scientific knowledge about the present and potential future impacts of global warming and translates them into the language of […]
Read moreThe Conservatives are at it again. As reported in the Globe and Mail on October 31, federal Finance Minister Flaherty is reviving and polishing-up the Conservative Party’s ill-conceived election proposal to end taxation of individual capital gains if the proceeds are re-invested. Light taxation of capital gains compared to wages is undoubtedly a gift to the rich. In the 2003 […]
Read morehttp://www.cra-arc.gc.ca/agency/stats/final-e.html Here’s the link to the historical income tax data which some people asked for. The most recent year for which full data seem to be available is 2003 (or the links don’t work for 2004 tax year.) In an earlier post, I suggested that the “puzzling” excess of personal income tax revenue growth over personal income growth likely reflected […]
Read moreAs noted in today’s Globe and Mail, income tax revenue growth is significantly exceding GDP growth, surprising Don Drummond of TD Bank. My guess is that current income growth is highly tilted to the very high end of the income distribution, where it is taxed at well above average rates. A quick glance at the revenue stats for the past […]
Read moreIncome Trust Conversions: Estimated Federal and Provincial Revenue Effects By Jack M. Mintz (1) The recent announcements by TELUS and BCE have given rise to the question as to how much federal and provincial taxes have been reduced by corporations converting into income trusts. Since the time of my last estimate of about $500 million in the fall of 2004 […]
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