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http://zoonpolitikon.ca/blog/2011/04/election-2011-tory-tax-lie/
Election 2011: Tory Tax Lie
Conservatives place a lot of emphasis in this election on keeping taxes low. They argue that corporate taxes must be kept down if we are to continue our economic recovery (there estimation of our current economic state, not mine) and that Canadians should keep more of their hard earned money in their own pockets rather than give it to governments to spend for them. It sounds so good. If one is to believe the banter on radio call-in shows Canadians are lapping it up. But is it true?
If assessed lower taxes do corporations create more jobs or just accumulate more wealth? The first rule of corporate economics is that you do not use your own money for investment, you always borrow. Profits are passed to corporate executives and shareholders. Plant expansion, R & D, etc. (i.e. the stuff that creates jobs) is always financed with borrowed money. Therefore the quick answer to whether the Tory corporate tax cuts will create jobs is no.
Will corporations flee to countries with lower tax rates? If a corporation relocates to Mexico or to some other developing country is the tax rate the difference? If it were then all corporations would flock to whichever country has the lowest taxes today. Corporations would need to be constantly relocating until finally all states offered them full tax exclusion. Our current corporate tax rate is half that of our southern neighbour. Shouldn’t corporations should be flocking across the border as we speak. And if corporate taxes existed nowhere, what then would tilt the scale to country A or country B? The scenario is of course absurd. Tax rates are a part of the equation but they are not the whole story. Labour exploitation and increasingly weak or nonexistent environmental protection are more powerful incentives for at least manufacturing operations.
Okay, corporations are huge nasty bloodsuckers and no they probably don’t deserve a tax break but you and I do. Right? Why shouldn’t we be able to keep more of our paychecks. Sometimes it seems that Ottawa and the provinces have their hands so deep in our pockets it may soon cross the line into something obscene. If the government cut taxes I would have more money to spend. Right? Wrong! If the government continues to cut taxes for you and I and the corporations you will have far less money to spend.
We pay taxes to the government for goods and services in return. The Conservative plan is that we should pay less to the government for fewer services. We cannot have it all. The goods and services provided by the government cost money. If government revenue declines then something has to go. Health care? Education? Pensions? What will it be? The Conservative’s know this but say we can then purchase these services ourselves with the money we are no longer paying in taxes. What they don’t tell you is that you will be paying more. It is obvious if you just stop and think about it, which explains the Conservative gutting of education at both the provincial and federal level. Wouldn’t want anybody out there with the capacity to think now would we. I should maybe mention here that the Liberals are really Tories in red ties and have contributed almost equally to this overall misconception. They may have less disdain for your intelligence than the Conservative party but they still work for corporate Canada, not you or I.
Let’s look at a practical metaphor. I have to purchase a new toilet for my downstairs bathroom this year. When I go to a plumbing supply store to buy one toilet I am going to pay full retail price. I might get a small discount from one or another seller to entice me to purchase at his establishment rather than the one down the street. But because I am only purchasing one unit the seller is limited in how much he can discount and still make a profit. Profit is absolutely necessary for the seller to earn a living. However, if one hundred of us got together because we all need a new toilet for our homes the seller’s latitude on price increases. For a purchase of 100 units at the same time the discount can be much larger and the seller can still earn a living. Everybody is happy. As the number of purchasers increases, the price per unit can decrease. This is basic economics.
Conservative policy wants us to each purchase what we need individually rather than collectively. They say this is a saving. In the case of policies like child care they actually tell us that this will lead to economic efficiencies. What non sense. Are the Conservatives just too simple to understand this basic principle of economics, the principle of economies of scale. The Conservative party markets itself as the party of good business sense, the party of fiscal responsibility. Either they are lying about this and they really are the party of business ineptitude or they are lying to the Canadian people that they are trying to save them money or as they put it keep more of your money in your pocket. The opposite is the real truth. Tory tax cuts will cut a deep swathe through not just your pockets but your savings and equity.
Political parties do not do things without reason and contrary to some popular opinion seldom do things out of sheer stupidity. The Conservative party is not the party that will keep more of your hard earned money in your pocket. Rather it is the party that will put more of your hard earned money into the pockets of their corporate friends. Not only will corporations contribute less to the society and infrastructure upon which their profits depend but will receive a windfall in the extra profit from each of us lonely independent actors paying more for those services necessary to sustain our quality of life. It is a win-win for corporations and a lose-lose for you. Actually in recent years it has been a win-win-win for corporations — lower taxes, higher profits and a great big present of much of the money you gave to the government to buy services which they then never fully supplied because they diverted that money to their buddies on Bay Street.
