Quote:
Originally Posted by Mull
But they aren’t.
We have discussed two types of positive impacts of lowering corporate taxes.
1. Increased local investment
-our corporate tax rates are so low they have diminishing returns on investment
-studies have shown that we are rates are low enough the investment increased by them does not offset the cost of reduced taxes
2. Stealing business
-when one jurisdiction set artificial low rates (ie Alberta ) it creates a prisoner dilemma because other jurisdictions feel the need to match or loose business
-yet - the amount of business that actually moves is highly debated but - the kicker is you’re not creating investment just leeching it.
- do you create a race to the bottom to push taxes lower - all the while getting less and less positive investment due to diminishing returns? This hurts all of society
- this is similar to price waring with corporations -avoid at all cost. The increased demand doesn’t outpace the losses from the reduced cost unless you eliminate your competitors- we can’t eliminate Saskatchewan
We need to strive for minimum business taxes that allow for efficient reinvestment- setting rates below that creates a race to the bottom gaining society very little
|
The fallacy you are describing is that the pie of "investment" is fixed. Economic activity can grow the pie.
When you talk about reducing tax rates, and the cost of that - how would you describe those costs? The public sector as it stands has ballooned to a far larger scale than is useful for enabling economic activity and the creation of wealth. So I consider any cost to reducing taxes as dubious.