Corporate Income Taxes

THE LIE
"I can't emphasize enough the importance of keeping our tax rates low and competitive. We have legislated in this country—in 2007, some years ago now—we legislated a series of lower business tax rates.

"We are now seeing the benefits of that, we’re seeing businesses move here, we’re seeing businesses locate their North American operations here, as compared with the United States, because of the situation.

"Now, the opposition has been critical of this, but the fact of the matter is that we are gaining more revenue from the business sector by having low rates than we were by having high rates. So this is in the interest of everybody. It's the direction we're going to continue to go in."

- January 7, 2011 in Welland, ON

THE TRUTH
Over the four years under Paul Martin's stewardship as finance minister then Prime Minister, and the two years prior to Harper enacting his corporate tax cuts, revenue from corporate income nearly doubled from $22.2b (2002-03) to $40.6b (2007-08). Tax revenue from corporate income as a share of total tax revenues peaked at 20.0%. Since the rates were cut from 22.12% to 18% among other measures, revenues have plummeted by $10 billion, to $29.5b in 2008-09 and $30.4b in 2009-10.

Some may blame the economic downturn for the experience of the last few years. Though individuals suffered through the downturn as well, they have contributed more and disproportionately to government revenues. From 2007-08 to 2008-09, the share of revenues contributed by personal income tax increased from 55.5% to 60.6%, while the share from corporate income tax fell from 20.0% to 15.4%.

Harper/Flaherty intend to shrink the share of corporate income tax even further even as the economy recovers. Flaherty's 2010 Budget projects that it will take until 2013-14 for corporate income tax revenues to rebound to 2005 levels ($31.7b) [Table 4.2.4, p.176]. By that time, Flaherty projects that corporate income tax will contribute just 13.9% to total tax revenues, while personal income tax will contribute 62.6%.

Though his own Department of Finance projects that the revenues from corporate income tax will fail to recover to their peak levels by 2015, Harper made the bald-faced lie that "we are gaining more revenue from the business sector by having low rates than we were by having high rates." Instead, his cuts to corporate taxes exacerbate our fiscal imbalance and force individuals to shoulder a greater share of the tax burden.

Prime Minister Stephen Harper takes questions in Welland, ON, January 7, 2011 (PMO)

[This material comes from a blog post by the same author on the Pharos Review]

Recession

THE LIE
"The only way there is going to be a recession is if [the Liberal Party is] elected, and that's why they're not going to be elected."
from the CBC, reporting on the campaign trail on September 28, 2008

THE TRUTH
Let the record show that Stephen Harper is an economist, so the inaccuracy of his rosy prediction reveals either incompetence or a lie.

"The most recent forecasts, and there has been a series of predictions, [are that] there is a suggestion that there might be a technical recession at the end of this year or the beginning of next [...] Indeed, the economic growth is just about zero, perhaps a little bit less, but it is a technical recession,"
Stephen Harper tap-dancing at the Asia-Pacific summit in Lima on November 23, 2008, about six weeks after his party was re-elected

"Economic projections are now much lower than at the time of our last budget [February 26, 2008]. Private sector forecasters expect real GDP growth of just 0.6 per cent this year and 0.3 per cent next. The same private sector forecasters are now widely expecting a technical recession, with negative growth in the fourth quarter of 2008 and the first quarter of 2009.
from Harper's Minister of Finance, Jim Flaherty, during his presentation of the Economic and Fiscal Statement on November 27, 2008

"The sharp contraction that began in the last quarter of 2008 intensified in the first quarter of 2009, led by collapsing exports, fixed investment and stockbuilding. The pace of contraction appears to be slowing, but recessionary conditions are expected to linger through the third quarter, with only a slow recovery thereafter. Unemployment is projected to keep rising until early 2010."
from the OECD's Country Report on Canada in its Economic Outlook no. 85, June 2009

Prime Minister Stephen Harper, centre, wearing a traditional Peruvian poncho at the Asia-Pacific Economic Cooperation summit in Lima. (Andrew Vaughan/Canadian Press)