LETTER – Workers, not fat cats, pay the price of business tax hikes – Canadian Taxpayers Federation

Canadian Taxpayers Federation
News release

If you want to help workers, raising business taxes just doesn’t make sense.

It’s one topic over which you will find a good amount of consensus among economists here in Alberta.

This topic is particularly critical in Calgary, which was recently found to be the most expensive city in Canada to do business. Business tax hikes stifle investment and growth, preventing new jobs from being created.

But oh, how tempting to believe that business taxes are the silver bullet to generate mountains of revenue without having any actual people pay one penny. Businesses aren’t people, right? And any people who would be affected can easily afford it, right?

Ultimately, people do pay the price for business tax hikes – but not who we might think.

University of Calgary economist Jack Mintz found that for every dollar of corporate tax levied, the Alberta economy loses $82. Raising the provincial corporate tax rate by one per cent reduces business investment by $6 billion and cuts 8,900 jobs.

Yet, business tax hikes can be a popular idea. A government poll commissioned prior to the last Alberta election showed that 69 per cent of Albertans favoured raising business taxes. Recall at the time, the government introduced the notion that some taxes had to be raised, ignoring the gigantic government spending elephant in the room.
Following the election, Alberta’s NDP government raised business taxes by 20 per cent.

If the premise is that a tax must be raised, business taxes poll well because the general notion is that someone else is paying for it. It helps to think that the ‘someone else’ in question is a wealthy CEO flicking cigar ashes onto the downtrodden from his penthouse office.

The caricature has allure, but profit is simply a reward for risk. Calgary’s job creators come in many forms – from Carhartt coveralls to suits to converse sneakers. But the larger problem is that those who are impacted the most by business taxes hikes are everyday workers.

Former Statistics Canada chief economic analyst Philip Cross pointed out that “most serious economists find that corporations don’t pay income taxes … In fact, most studies show the brunt of corporate income taxes are paid through lower wages.”

That’s bad news for workers, but it also means less revenue from personal income taxes. Higher business taxes also “make Canada a less attractive location to invest,” as noted by the Canadian Manufacturers and Exporters, and “would increase Canada’s unemployment rate, thereby eroding job growth.”

Fraser Institute economist Charles Lammam points out that “corporate taxes are ultimately paid for by people either as workers through lower wages, consumers through higher prices, or shareholders through lower returns on investments including RRSPs.” A study by the Institute found that a one percentage point increase in Canada’s 2012 combined federal-provincial business tax rate would lead to a reduction of $254 to $390 in a worker’s annual wage.

Over the last 15 years, Canadian federal and provincial governments of all stripes recognized the harmful impacts of raising business taxes and worked instead to decrease them. Unfortunately, here in Alberta that tide has turned.
To truly help workers, our government would be better off to look at the facts rather than dreaming up fat cats.
Paige MacPherson,
Alberta Director,
Canadian Taxpayers Federation

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