Canada’s businesses are getting an easy ride from the federal government. But despite low tax rates, many companies aren’t keeping their end of the bargain and are failing to put profits back into the economy where they can keep things ticking over.
According to a report published this week by the Canadian Labour Congress, this country’s businesses can already celebrate Corporate Tax Freedom Day; the day when their profits will cover all their tax obligations for the year.
In contrast, the average Canadian may see half their wages eaten up by taxes.
No one likes paying taxes but they help make Canada a civil society. Violent crime and abject poverty are kept at bay thanks to our communal investment in social programs designed to catch people before they end up in the most desperate circumstances.
A social democracy and a just society demand everyone pay their share according to ability. So why would we want businesses to avoid paying their fair share?
If our economy was in tatters and businesses needed help, cutting the corporate tax rates would make some sense. Reduced business taxes could spark some added investment and create new jobs, although there’s no guarantee that the taxes the government would forego would be completely repaid in economic development.
The CLC’s report shows that Canadian businesses have taken much of their tax windfall and tucked it away in safe bank accounts, or maybe bumped up the pay of executives. Taxpayers have not seen a reasonable return on the funds we’ve left with the business owners.
And the numbers keep getting worse. As tax rates on businesses have dropped, the stacks of cash they hoard keeps growing. Cash reserves for non-financial private companies grew by $72 billion between 2010 and 2011.
It’s obviously been too tempting for owners of profitable businesses to put the gift of lower taxes in their pockets rather than spend it on job creation, training or new equipment: the exact things that could drive the economy out of its doldrums.
Clearly the government should tie business investment to the lower tax rates. That would ensure the tax break gets invested where it helps Canadians who need a bus pass instead of Canadians who need a second Porsche.
The lowering of business taxes is just another example of trickle-down economics: a failed system that the right wing still wants to play with. They’d like nothing more than to give rich people more money so we can all hope and pray that they spend it and make us all richer. And then we’ll all go live in a land full of fairies and elves and eat candy all day.
Trickle-down policies have no more than a minuscule effect, and Canada’s corporate tax cuts show why: it’s just too tempting to put easy money in the bank, where it helps no one.
And while Joe Business pads his retirement account, Joe Canadian’s own government has less tax revenue to build a new bridge or pay down our debt. If we stay on the road with low business taxes, we’ll eventually end up like the United States, where you are either rich or poor, with no middle class.