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The Trickle-Down Pickle

Corporate tax cuts are just failed trickle-down economics

Apr 10, 2019

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The provincial election is only days away, and Alberta’s political parties are ramping up their economic rhetoric to woo the public and earn as many votes as they can.

The United Conservative Party has pledged to give profitable corporations a 4-per-cent tax break – which would make Alberta’s corporate tax rate the lowest in Canada. The Alberta Party has also promised a tax giveaway of 2-per-cent.

This talk of tax breaks for corporations has invited heated commentary from all sides.

Trickle-Down Pickle #1: Corporations don’t have to pitch in a fair share

UCP leader Jason Kenney called his approach a job creation tax cut. But calling it a job creation tax cut doesn’t hide what it really is: trickle-down economics.

The UCP’s pro-employer approach means corporations would pay lower taxes than everyday working people, for whom personal income taxes are 10-per-cent or higher. In Canada, the rich have already been winning, and getting richer, for a while. In fact, taxes for wealthy Canadians are the lowest they’ve ever been since the 1920s.

Trickle-Down Pickle #2: It doesn’t add jobs

Trickle-down economics is the theory that the wealthier rich people get the more their fortunes will trickle-down and help the rest of us.

But there’s nothing that compels a CEO to hire more people after being rewarded with a tax break. Economists from across Canada have repeatedly found that there’s isn’t a clear link between corporate tax breaks and economic growth or job creation.

The reality is, workers aren’t seeing the benefits. According to Statistics Canada, the median income for lower-class workers fell by $4, 000 between 1980 and 2006, but the median income for the upper-class grew by $12, 000 during that same period. Wages for the rich went up and wages for everyone else went down.

When big corporations pay a reduced tax rate it means less revenues goes into the public purse. Sure, this benefits those at the at the top, not ordinary workers.

Trickle-Down Pickle #3: It makes the deficit worse

In reality, the only thing that trickles down is blame and the only thing a reduced tax rate does is balloon deficits. Lowering Alberta’s corporate tax rate to 8-per-cent over four years means we would lose well over three hundred million dollars in just the first year, something the UCP leader himself admitted to reporters:

“When asked what would happen in the first year of the tax cut, before any theoretical investment stimulus could take place, Kenney said it's anticipated the government would lose $348 million in revenue that year.”

So why do some politicians keep trying trickle down economics like it’s the next best thing?

Some probably think it works. Maybe it’s all they’ve ever heard about, considering it’s what many governments have been doing for nearly half a century.

On the other hand, it could be that some politicians know trickle down economics doesn’t work but want to do it anyway. They know it doesn’t work for ordinary workers, but do it to because it makes more and more money for the upper class, and that’s exactly what they want.

Trickle down economics may work for the few at the top, but it puts the rest of us, and our provinces’ economy in quite the pickle. The only way out is to resist any such calls for short-sighted cuts and corporate tax giveaways.

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