Tuesday, January 18, 2011

On representative samples

We may have to send up a Weir Signal for a more thorough debunking of Jack Mintz' latest call for handouts to the corporate sector. But to see what we're dealing with, let's take a closer look at just one paragraph:
Again, the recent economic literature has provided a new perspective on corporate tax revenue and rate reductions, suggesting that revenue losses are minimal, especially when a country has a high corporate income tax rate by international standards.
Of course, this comes only paragraphs after Mintz notes that Canada's current rates are at or below the levels of countries like Japan, Australia and New Zealand which are cited as "international standards" for comparison. So if there is a point where rates might be reduced without too much fiscal pain, that point would have long since passed.

Moreover, Mintz' statement suggests that trying to lead the race to the bottom produces diminishing returns. Yet somehow Mintz considers that reason to hurry up our pace.
Multinationals easily shift their profits to low-tax jurisdictions with financial transactions and transfer pricing.
Or in the case of a substantial number of multinationals in Canada based on our location, the result of tax breaks in Canada is that they simply pay more tax in the U.S. instead.

But if one were concerned about financial shenanigans and transfer pricing, there are ideas around to deal with such problems. Who wants to bet that Mintz will lead the charge in rejecting them?
Prime Minister Stephen Harper made the correct observation that Canada collects as much corporate income tax revenue today as it did earlier when rates were much higher.
If by "correct", one means "patently false". But then, accuracy never seems to be much of a concern when it comes to handing money to the corporate sector.

So take the rest of Mintz' column with the appropriate mine's worth of salt.

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