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]

Child Care Benefits

THE LIE
“We promised to take money that was going to lobbyists, researchers and bureaucrats and to give it instead to families, parents, and children. And we have done so. Now every parent of every pre-school child is receiving $100 a month from our government!”
from a speech delivered in Quebec, July 2008

THE TRUTH
The Universal Child Care Benefit (UCCB) program issues a taxable $100 monthly payment to families for each child under the age of six to help cover the cost of child care. After applying a marginal tax rate of 40%, each family—not each parent—gets to keep $720 a year for child care. On average, that amount won't be enough to pay for your child's care beyond February. You're on the hook for the rest of the year.

Oh yeah, and about taking money from greedy "researchers" to put it in the hands of "families, parents, and children": science and technology "spending has increased every year since 2006" and Canada's Economic Action Plan "announced $5.1 billion in new spending in the areas of S&T infrastructure, research, people and commercialization." This is, of course, the right thing to do, but that doesn't prevent Harper from lying about these government grants when it suits his audience.

Details on the benefit program
KPMG survey of tax rates in Canada
Median daycare costs in Canada, 2005
Spending on science and tech

Stephen Harper dares you to take his crayons. (www.conservative.ca)