02 January, 2011

Canada Cuts Its Corporate Tax Rate

That socialistic country up north just cut its corporate tax rate to 16.5%. That’s about half of the rate in the U.S.

Canada is poised to cut its corporate-tax rate to 16.5% on Jan. 1, part of a decade-long campaign that some experts say is making the country one of the most cost-effective places to do business in the developed world.

This is on the heels of Japan also lowering their own corporate tax rate, as I mentioned previously.

Here’s a hint for you. If it’s cost effective to do business in a location, businesses will move there. If it’s not, businesses will move away. Japan and Canada clearly get this. The American leadership (ahem, President Barack Obama [D-USA]) clearly don’t.

The United States is rapidly becoming the least cost effective place to do business in the developed world. As I keep saying, unless we turn this around, and soon, the high unemployment and general stagnation in the U.S. from the last few years will be the “new normal”.

Remember in 2004 when the media was harping about how awful unemployment was when it was around 5%? It’s going to be a long time before we see unemployment at 5% again. How long for significantly less than that? I think the appropriate word might be “never”.

I apologize for sounding like a broken record. I know I’ve mentioned this several times. But the U.S. must stop trying to hurt businesses. This means we have to lower the tax rate, we have to stop over-regulating, and we have to stop creating disincentives to hire (ObamaCare). Until then, the best we’re going to get is a “jobless” and “moribund” recovery (adjectives often improperly used to describe the economic recovery in the mid 2000s).

Yes, I know that you can’t just cut the corporate tax rate substantially without doing something with the personal tax rate. However, I’m willing to take the hike there.

For a couple reasons.

One, as I’ve said repeatedly, corporations don’t pay taxes anyway. They pass it on to customers, employees, and stockholders. Moving the corporate tax to a personal tax just eliminates part of the complexity of our taxes. That’s a good thing.

Two, if it’s easier for businesses to grow and prosper, they will hire more and raise salaries more. This creates economic growth which in turn increases tax revenue without raising taxes. So, a reduction in the corporate tax rate will not require an equal increase in the personal tax rate to compensate for lost revenue. Again, that’s a good thing.

Of course, we can always adopt the FairTax. I’ve mentioned that before. I’ve also mentioned that I believe that replacing the income tax with a consumption tax is not only necessary, but, in the long run, inevitable.

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