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When it comes to helping the Canadian economy, returns from further corporate tax cuts have been diminishing for some time. This was the message of a recent report from TD Bank and a public statement from Canadian Auto Workers (CAW) economist Jim Stanford.
According to the TD Bank report, which was released on April 28, Canadian corporations are showing record profits, which they aren't reinvesting. The report attributed the lack of reinvestment to uncertainty due to a volatile global political situation, but warned that "corporations cannot simply build up savings in perpetuity," but need to invest to "maintain competitiveness."
Canadian Labour Congress economist Andrew Jackson said that the report shows that past corporate tax cuts are responsible for the profits that aren't being reinvested. "One is struck by the discrepancy between extremely solid corporate profitability... and the fact that real investment by corporate Canada... has not increased by anywhere near as much," Jackson was quoted as saying.
In a briefing published by the Canadian Centre for Policy Alternatives, Jim Stanford says that Canadian corporations have already received massive tax cuts. "The average effective corporate income tax rate paid to Ottawa by Canadian corporations fell by almost five percentage points between 2000 and 2004, more than five times as much as the effective personal income tax rate," wrotes Stanford. "Corporations have already received much more tax relief from the Liberal government than any other significant tax-paying constituency."
Stanford claims that the plan put forward by the Liberals and NDP compares favourably to the diminishing returns of additional corporate tax cuts. "Liberal-NDP budget will create new jobs - not destroy them... the $1.6 billion in new housing investment should create some 26,000 person years of employment."
The TD Bank report and Stanford's brief come amid loud protests from representatives of Canadian corporations over a Liberal-NDP agreement to cancel corporate tax cuts that were slated to take place in 2008. Instead, the money is being spent on the environmental, education and social programs.
The Dominion is a monthly paper published by an incipient network of independent journalists in Canada. It aims to provide accurate, critical coverage that is accountable to its readers and the subjects it tackles. Taking its name from Canada's official status as both a colony and a colonial force, the Dominion examines politics, culture and daily life with a view to understanding the exercise of power.