TORONTO, Jan. 26 /CNW/ - Cutting the corporate tax rate will cost the
country jobs, instead of creating them, says CAW President Ken Lewenza
in response to the claims by Federal Finance Minister Jim Flaherty that
low taxes will boost the Canadian economy and employment.
"All that cutting the corporate tax rate will do is drain money from
government coffers," said Lewenza. "This new tax cut will reduce
federal revenues by $3 billion, a whole lot of money that could be
better spent elsewhere. When corporate taxes are cut, it does not
guarantee that companies will spend the money on research and
development or on hiring more employees."
New research by CAW Economist Jim Stanford proves that cutting corporate
tax rates bear little relationship to increased staffing levels or a
boost in economic activity.
Corporate tax cuts have very little positive impact on employment, since
there is very little change in investment as a result of them. When
governments allocate large sums of revenue to corporate tax cuts, that
means the money is not available for other priorities - like extending
EI benefits for laid-off workers, investing in infrastructure, or
supporting public programs through transfer payments (like health care
or education), according to Stanford's findings. All of those programs
create far more jobs than corporate tax cuts. Therefore, shifting
money from EI benefits (or infrastructure or public services) into
corporate tax cuts destroys net jobs.
This is confirmed by the federal government's own data. The following
table estimates the final impact on GDP of various government spending
Extending EI benefits has the biggest impact ($1.7 billion in total GDP
from each $1 billion in benefits). Cutting corporate taxes has the
weakest (just $300 million in new GDP for each $1 billion in tax
cuts). By that measure, reducing corporate taxes by $3 billion will
generate less than $1 billion in new GDP (or just under 10,000 jobs,
based on the current average employment content of Canadian GDP).
If the same funds were spent on extending EI benefits, GDP would expand
by over $5 billion - generating 56,000 jobs. The net effect of the tax
cut is 46,000 fewer jobs for Canadians.
GDP Impact of Federal Fiscal Measures:
Final Growth of GDP from $1 billion Stimulus
Support to unemployed & low-income
Other spending measures
Personal income tax reductions
EI premium reductions
Corporate income tax reductions
Source: Dept. of Finance Canada, Canada's Economic Action Plan Report #6, Table A.1, p. 142, for 3Q 2010.
Over the last number of years, Canada's tax system has shifted
dramatically in favour of business, to the disadvantage of individual
Canadian tax payers.
Since 2000, corporate income taxes in Canada have been cut 10 times,
falling from 29.1 per cent in 2000 (including a 1.1 per cent surtax) to
15 per cent by 2012, a cut of almost half over that 12-year period.
Lewenza says it's particularly ironic that Flaherty chose to make his
statements at an auto parts plant, a sector which has seen its
employment levels plummet during the more than a decade of tax cuts.
In 2000 Canada employed 100,000 workers in auto parts. By 2010, the tax
rate fell to 16.5% - yet auto parts employment fell to barely 60,000 -
the deeper corporate taxes are cut, the smaller the auto parts industry
AGS (formerly A.G. Simpson), where Minister Flaherty visited this
morning, has endured large financial losses through the years of
dramatic tax cuts.
"Lower corporate tax rates mean nothing to a company that's losing
money," said Lewenza. "Corporate tax cuts will not turn our country's
economy in the right direction - our experience has shown the exact
SOURCE Canadian Auto Workers
For further information:
please contact CAW Communications Shannon Devine (cell) 416-302-1699, John McClyment (office) 416-495-3766 or CAW Economist Jim Stanford (cell) 416-230-2046