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
Edit/ we need to strive for an agreement on minimum tax rates - and acknowledge there can be good reason to go above them but set the floor across jurisdictions.
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You're also leaving out that the primary reasons for investment are almost never "the tax rate". Sometimes, those investment decisions include Operating costs, which would include yearly corporate tax, property tax, utilities, etc, but much more of the balance in these costs is actually labor. Labor availability and Talent are also generally much higher priorities. Finally, resource availability and construction costs.
Corporate taxes matter most to advanced companies and fresh startups. Growing companies in the mid growth stage probably aren't considering tax rates too much. Fresh startups deserve incentives- it's hard to start a business and we shouldn't punish risk takers who are trying to create additional jobs, products, and future tax revenues in the jurisdiction. But advanced corporations? Those tax breaks are going to stock buy backs and executive bonuses.