The Fraser Institute released a study this morning which should be of interest to politicians who don’t understand The Effect of Corporate Income and Payroll Taxes on the Wages of Canadian Workers. Here’s what their new study has to say today about corporate taxes in Canada:
“…we find that a 1% increase in the statutory corporate income-tax rate reduces the (inflation-adjusted) hourly wage rate by between 0.15% and 0.24%, depending on the model specification (these results are for workers employed in the private sector). Based on these results, if the 2012 unweighted average combined corporate income-tax rate for the ten provinces (27.34%) increased by just one percentage point to 28.34%, the national hourly wage rate in the following year would decrease by between $0.13 and $0.20, which translates into annual wages that are lower by between $254 and $390.”
Interestingly, the study goes on to say:
“For a 1% increase in the employer portion of the payroll tax rate, we also find a negative effect on the hourly wage rate ranging from 0.03% to 0.14%. In dollar terms, this suggests that a one-percentage-point increase in the 2012 unweighted average combined employer-portion payroll tax rate (10.52%) would decrease the national average hourly wage rate in the following year by between $0.07 and $0.31, which translates into annual wages that are lower by between $137 and $605.”
Kevin O’Leary (an outspoken Canadian businessman and Mr. Wonderful of the Dragon’s Den TV show) has been vocal in the media against raising corporate taxes in Canada. He feels that considering our financial state, corporate taxes should be decreased to help mobilize our economy. There are rumours that he might run as an MP (Member of Parliament) in our next Federal Election. Newspapers have been reporting that if he ran his support would come from conservative voters. Based on this study, he should also garner at least some support from informed Canadian workers.
Although our national unemployment rate is currently reasonable, corporately Canada seems to be entering economic doldrums. And since corporate taxes represent a small proportion of all taxes collected in this country, why not go all the way and get rid of all federal corporate taxes? Young Justin (Trudeau, Canada’s current Prime Minister) could do that with a stroke of his pen as the basis for encouraging our existing businesses, supporting new startups, and enticing foreign corporations to relocate to Canada. It might also motivate provinces to lower their corporate tax rates. Not a bad boost to a recovery. It beats anything Justin has done for Canadians so far. Then he could get going with another of Kevin’s suggestions and start dealing with the building of Canadian pipelines — something that our last Prime Minister, Stephen Harper, failed to do. Harper did, however, exercise prudence spending our money and that Trudeau will not be doing.