EVIDENCE-BASED
In my lifetime corporate taxes have been slashed in half, from 36% down to 15%. (And we can thank Prime Ministers Mulroney, Chretien, and Harper for that.) Of course these tax cuts were pitched to Canadians, as they've been pitched around the globe, as a key mechanism for creating jobs and stimulating the economy.
So what has become of all that freed-up cash? Jobs? Economic stimulation? Well, according to Stats Canada – instead of increased purchasing, new research and development, more investment in employees, increasing worker’s wages, creating new jobs, or even paying their investors – Canadian corporations have been hoarding much of that loot. (Is there anything more anti-capitalist than stockpiling money?) And, in case you were wondering, the situation here in Canada is the worst among all G7 countries, with corporate “dead money” sitting at 30% of GDP.
So what does this mean and how bad is the situation? Well, in 1990 corporate cash stockpiles sat at around $50 billion. Just a decade later that number had jumped to $171 billion. By 2010 Canadian corporations had socked away no less than $460 billion; and today, just five years later, the number sits at $680 billion. (Now, $680 billion may not seem like much, especially when compared to the holdings of large global companies like Google or Apple, however this is such a large number that it actually exceeds our federal deficit of $611 billion.)
During this same period, along with ever-lower taxes and ever-more cash hoarding, business investment in Canada has hovered at historic lows and GDP per capita has grown at rates similar to that during the Great Depression. Employment has seen both shockingly little and incredibly slow growth, along with an explosive epidemic of precarious labour and the evaporation of our unions. And is there any wonder?
So, the results are in, people! If anything, corporate tax cuts appear to coincide with economic stagnation. There is certainly no inverse relationship, despite what your government suggests, between corporate tax rates and economic growth. And certainly, if this cash hasn’t been activated and moved into the economy in the last twenty years, there is no reason to think that we’re about to see a massive investment boom any time soon. That’s just not the business model.
So, anyone up for some evidence-based economics?
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