New Brunswick leads - Macleans.ca
 

New Brunswick leads


 

On a political landscape generally barren of ideas — or, these days, crowded with utterly mad ideas — an oasis of economic sanity has suddenly appeared. I speak, naturally, of New Brunswick:

The New Brunswick government will slash corporate income tax rates to the single digits, giving the province the lowest corporate tax levels in Canada, Finance Minister Victor Boudreau said on Wednesday.

Boudreau offered a broad outline of a tax reform agenda that will be fully announced in March. The finance minister said the cuts will start in 2009 and be fully phased in by 2012.

“The key elements of our tax reduction package include gradual, yet significant reductions in personal income tax, as well as a target of a single-digit general corporate income tax rate in New Brunswick,” Boudreau said.

“It will help us through the economic slowdown more quickly, and as importantly, position New Brunswick as one of the most attractive jurisdictions for economic investment in all of Canada.”

Although the Liberal government is not giving precise numbers on how deeply it will cut taxes, it will apparently be below the 10 per cent target federal Finance Minister Jim Flaherty has asked provinces to hit within the next four years.

Alberta currently has the lowest provincial corporate tax rate, 10 per cent. New Brunswick’s is 13 per cent.

The all-party Select Committee on Tax Reform released its final report on Dec. 12 and recommended a flat personal income tax rate of 10 per cent, corporate taxes of five per cent and child tax benefits similar to the federal plan.

To pay for the deep personal and corporate tax cuts, the select committee on tax reform is calling for the harmonized sales tax to be raised to 15 per cent from 13, following two reductions implemented by the federal Conservative government.

CP has more:

Mr. Boudreau said the government is also looking at simplifying its personal tax system by either bringing in a flat tax or cutting the number of brackets from the four that are in place.

Meanwhile, back in (sigh) Ontario…

McGuinty criticizes banks, says he can’t cut taxes

…Mr. McGuinty said he cannot afford to cut corporate taxes because that would result in a loss of $2.5-billion in revenues for his government. He said Ontario is already heading into its first deficit in five years as the economy weakens. The deficit is expected to balloon well beyond the projected figure of $500-million for fiscal 2009 once Ontario kicks in its share of a multi-billion-dollar bailout package for the auto sector and provides a stimulus package for other ailing industries, Mr. McGuinty said.

Just so we’re clear: he can’t cut taxes for all industries, because he’s ploughing billions into one industry. Or in other words, the cost of the auto bailout will be borne by every other industry — directly, in terms of the taxes they pay, let alone opportunity costs. There it is, McGuintonomics explained in one paragraph.

And just in case you were in any doubt about the real cost of the auto bailout:

Ontario Premier Dalton McGuinty says a proposed $3.4-billion rescue package for struggling automakers is just the first of what could be several payments.

McGuinty says the money promised jointly by Ottawa and Ontario to the Detroit Three is simply a lifeline to sustain the industry. He warns it’s too early to speculate on how high the aid could go because the province is still assessing documents and plans.

Too early to speculate? Well, maybe:

Auto bailout tab pegged at $25-billion

Ottawa and Ontario would face huge bill by committing to 20% of U.S. contribution

TORONTO AND OTTAWA — Canadian governments could be staring at an auto bailout bill of between $15-billion (U.S.) and $25-billion, based on one estimate of the cost of keeping the Detroit Three car makers out of bankruptcy protection in the United States.

As the White House said yesterday it was still looking at the options for a bailout, Moody’s Investors Service Inc. said that preventing a collapse of the major Detroit auto makers during the next two years could cost Washington between $75-billion and $125-billion.

Ottawa and Ontario said last week that their commitment to Canadian units of the Detroit Three will be approximately 20 per cent of what the U.S. government provides, a number that matches those subsidiaries’ shares of their parent companies’ annual North American vehicle production. So the cost to the two governments could soar dramatically if they adhere to that promise, first outlined on Friday by federal Industry Minister Tony Clement.

TWENTY-FIVE BILLION DOLLARS.


 

New Brunswick leads

  1. Yes, but why would anyone go to New Brunswick? What industry exactly could a province with 500,000 people support?

    Since NB is so well off, perhaps the rest of Canada could cut off transfer payments to that province now. Why should Alberta and BC support NB’s corporate welfare?

  2. Now tax relief to all businesses is labelled corporate welfare. How do you have a discussion on economic or political strategies for a country with people who can’t handle basic definitions of common words?

  3. “What industry exactly could a province with 500,000 people support?”

    I would like to nominate this question by “Anon” as the dumbest question of 2008.

  4. Lower income taxes = good
    Fewer income brackets = good
    Flat-rate income tax = great, as long as there’s a reasonably high personal exemption
    Lower corporate and small business tax rates = good

    Seems like New Brunswick is following Alberta’s lead, and, to a lesser extent, BC and Sask. Why even mention Ontario, it’s not like they’re ever gonna cut taxes, or spending under their premier. On the other hand, keep voting Liberal provincially, Ontarions, because that’ll mean you’ll vote Conservative federally, if history is any guide.

  5. I predict this will just as dismal a failure as it has been for the feds these last few years. And I predict people like Coyne will be just as silent when it is.

  6. Andrew,

    Why are you upset with Mcguinty not cutting taxes? The media said Flaherty was mean for pushing the ontario government to cut taxes back in April, Flaherty was sooooo wrong according to the MSM.

    Now I am just a small(well medium) buissness owner who employees 32 people that signs the front of the cheque not the back, who started to look at Sask and Alb. to relocate my buissness after Mcguinty said no to tax cuts, but according to all those media people I am wrong….

    Geez Andrew I think you have it all wrong it is PM Harpers fault, get with the narrative. Not giving tax cuts to buissness that turn a profit but giving my tax money to feeble company’s is the way to go…(sarcasim off)

    PS:Is this Macleans Andrew b/c I thought macleans was the Canadian Kos….

    PPS:Ontario is becoming one of the worst places to do buissness, there is no way around it. And frankly I do not want to move to Sask. but I like to turn a profit so I think I am screwed…..

  7. B-b-b-b-b-but what about STIMULUS????? What about the only thing that matters according to most economists right now – the reckless spending of ridiculous amounts of money to “get the economy going again.”???? This just won’t do.

  8. I am glad that New Brunswick has got the ball rolling. Now provinces are going to have to compete for new business and will probably feel pressured to match NB rate. Except Ontario of course.

    McGuinty leaves me gobsmacked. He could reduce government spending if he’s so worried about large deficits. Did that even cross his mind? He has increased Ont budget by $20 billion since he took over, I believe, surely there are some programs that he’s introduced that could be cut. They can’t all be ‘essential’.

    Too bad the prov. Tories are nowhere at the moment. They would be an attractive alternative to McGuinty but they don’t seem to care that they are basically leaderless and entirely off the radar of most people.

  9. Mcguintonomics: We can’t stop taking your money away because we need to give it back to you (not all of you, though, just those of you that have made poor decisions).

  10. The Irving family ( owners and proprietors ) will be ever so grateful.

    But they’ll probably stay in their Bermuda enclave.

  11. JWL: Yes, I find it truly hard to fathom how the Tories in Ontario did not turf John Tory after he singlehandedly botched the last election. How badly do you have to fare before getting the boot?

  12. “How badly do you have to fare before getting the boot?”

    sf

    Good question. I wonder how long it takes for a leader to recognize that he’s not wanted. It’s been 14 months since the Tories lost the winnable election and no one has offered Tory their seat, when will he get the hint?

  13. Tax simplification *and* a shift from income taxes to sales taxes? That makes more economic sense than most professional economists are making right now.

  14. TWENTY-FIVE BILLION DOLLARS.

    Well, if ever I want a Big-cough-Three car in the future, I figger I can walk in and just pick one and drive it off the lot, yelling back at the dealer “My broker – name’s Flaherty – prepaid for this baby. Send the paperwork to him, no need for a stamp. Bye!”

  15. myl: I take it you saw the bailout poster that was going around last week – but if not, click on my name.

  16. Just curious, how exactly does it help the economy to lower corporate taxes, when they aren’t making a PROFIT. Yes, yes, I’m sure corporate taxcuts will help the Big Three and all their suppliers, who are holding on by their fingernails. Can you possibly drop your ideological bent for just a second, and go outside? I favor more corporate taxcuts, but the timing now is almost cruel.

  17. JWL says…

    “I am glad that New Brunswick has got the ball rolling.”

    New Brunbswick has had some good Premier’s.. Frank McKenna,Bernard Lord and the new Liberal Premier Shawn Graham. Mckenna missed his shot at the throne, but Lord and Garham are future players…

  18. JK,

    Yeah, no kidding. Must be something in the water…

  19. Steve V: Maybe because by lowering the tax rate all those companies will suddenly become profitable? Or more of them anyway, and further it lowers the risk/cost for entrepreneurs to start new companies that are profitable.

  20. What I find particularly funny is that many of these so called Keynesian who support the make-work projects and bail-outs don’t support tax cuts, but Keynes suggested both capital injection and tax cuts. The capital injection side of things seems to have been mostly discredited in practice.

    Another thought, is why does everyone assume that these painful reorderings of the economy can be removed by government policy, or, even if achievable, that the goal is laudable.

  21. Liberals who support this bailout are evil people, disgusting socialists, pigs, and mutants. I’d advise them of what they should do with themselves, but offering such advice would be a crime.

    So I just say, hang your head in shame, thieving vultures.

  22. “Maybe because by lowering the tax rate all those companies will suddenly become profitable? ”

    Do you live in a cave?

  23. Is NB cutting spending and entitlements? If not then I don’t see how fooling around with their tax code is going to help anyone (except politicians) in the long run.

  24. Actually, when people pay for things through taxes, they pay for them INdirectly.

  25. Shifting taxes from income and corporations to general consumption seems like a logical move, much like shifting taxes from income to carbon consumption would be. Without raising consumption taxes New Brunswick will likely live to regret and reverse this decision.

    Admittedly, it’s hard to assess the merits without some background on New Brunswick’s fiscal situation and their government revenue and expenses per capita and as a percentage of GDP compared to other jurisdictions.

    At any rate, it certainly seems at odds with the 07-8 budget which read:

    “What is in the 2007-2008 Budget?

    The provincial general corporate income tax (CIT) rate will increase to 13 per cent
    effective Jan. 1, 2007, restoring the rate that was in effect for the 2006 taxation year.

    The provincial small business corporate income tax rate will be increased to five per
    cent effective Jan. 1, 2007, and the income threshold eligible for the small business CIT
    rate will be decreased from the current level of $475,000 to $400,000.

    Why it was done:

    The Grant Thornton review of the province’s financial situation confirmed that given
    historical trends, combined with previous program decisions, the government faces
    considerable fiscal challenges over the next three fiscal years, which will potentially lead
    to large, growing deficits.

    It is clear that steps needed to be taken to address the fiscal challenges. By not taking
    action, New Brunswickers would have ultimately faced higher debt that would burden
    future generations. The government is not willing to let this happen.

    The level of taxation was insufficient to ensure the continued provision of essential
    public services that New Brunswickers deserve and expect. This measure will ensure
    that businesses contribute their fair share to addressing the financial challenge.”

    Perhaps New Brunswick no longer plans to provide essential public services?

    Also, we really should scrap provincial corporate taxes and make corporate taxation strictly a federal matter. It might spare us a few decades of each province trying to lure away business from other provinces by undercutting their corporate tax rates.

    Finally, one wonders if the people who devoutly believe that lower taxation is always and everywhere a good thing ever stop to consider the mountain of conflicting evidence such as UN quality of life tables dominated by countries with high tax rates or our own greater prosperity during the 50’s and 60’s – an era of higher, more progressive taxation.

  26. Christoph and Steve M,
    Taxes are paid on profit, not on revenue. So lowering taxes won’t move a company from the red to the black.

  27. Declan – Stop making sense, please.

  28. Steve V, it doesn’t help the companies who are losing money. It helps the ones that are still making money. As well as providing a more favourable investment climate for future startups. And that’s the idea. Instead of bailing out losers, provide an environment for the winners to thrive. I guess you could call that ideological, but so what?

  29. It will reduce their incentive to make profit, you ignorant fool, Jack. And… businessmen and investors have options. I.e., they either curtail their productivity and enjoy more relaxation (a frequent outcome) or simply move all or part of their business to more business friendly jurisdictions.

    PLUS it reduces their after-tax profits, and the money they’d reinvest in their businesses, others, or simply buying things they want. This also reduces economic activity, which was my whole point (other than to call socialists “evil scum”).

    Reducing business profits isn’t a good thing, Jack. I’m not saying every single policy has to be optimized for business profits nor am I saying there shouldn’t be any taxes ever; however, we (should) want Canadian businesses to be profitable.

    Let the market reward well-run economic businesses, not government PUNISH those businesses to reward those that can’t make money! Let those businesses have an incentive to get their act together. That positive incentive is FAILURE.

  30. It’s not as if no companies are making profits, you know. Many are – corporate profits over the whole economy are always positive, so corporate tax cuts will help many businesses and, as other commenters have pointed out, encourage business formation and investment. A big advantage of corporate tax cuts as Keynesian stimulus is that they do not benefit businesses which are money-losing turkeys. Now sure, some businesses are only temporarily unprofitable, but does anyone really expect governments to be able to separate businesses with temporary problems from the hopeless cases? I don’t think so.

    A big corporate tax cut, coupled with a deferred increase in sales taxes, would be a very sensible tax policy, combining temporary stimulus with long term efficiency. Certainly a lot better than specifically handing out money to hopeless cases, like the Detroit 3.

  31. Thing is, RR, people have trouble with “creative destruction” of capitalism. Sure, it’s the best gift possible for an efficient market, but it sounds mean. So we can’t have that. Sorry. C’mon, give it a try. That hammer-and-sickle actually looks cool, if you give it a chance…

  32. madeyoulook, yes, that’s the problem isn’t it? We always think that things must stay exactly the same as they are or the economy will collapse. Anywhere in the world, when you look at where subsidies flow, they go to supporting the weakest, least productive industries in existence. Every penny spent subsidizing inefficient producers is a penny that could have been invested in something worthwhile.

  33. “We always think that things must stay exactly the same as they are or the economy will collapse”. Almost right. In fact, people like Steve V just want things to stay exactly the same as they are, period, even _if_ that causes the economy to collapse. That is why the oilsands are so unpopular – they change the balance of economic power within Canada.

  34. I offer a friendly amendment, RR: in light of our current fiscal situation (haven’t yet gone to the Trudeau statue to pay my respects today, phew, it was getting close to midnight), every penny spent subsidizing inefficient producers of stuff the market doesn’t want is a penny the next generation has stolen from it. Oh, uh, with interest.

  35. Andrew – Just curious, are you as excited about the government if New Brunswick running a $285 million deficit this year. This after projecting a modest $15 million surplus. In other words, over spending by $300 million in a single fiscal year. True, during an economic downturn, but still…that’s a lot. Seriously. Look it up.

    How about the other folks cheerleading the brilliant Graham government’s fiscal genius?

  36. To all the liberals and socialists I’ve insulted: I meant worse than I said.

    To all the conservatives who read my insults toward the leftists: I apologize for not being able to write what I meant. I softpedalled it.

  37. Heartwarming when folks just huddle around and rub each others’ backs all cooing about the market.

  38. Nothing to coo about, Sis. It’s more of a somber mourning. The “market” has been so distorted by (let’s be charitable) well-meaning imbeciles as to become that lifeless body in the casket at the front of the room. Go ahead, go on up and pay your respects. We’ll give you some time alone.

  39. Don’t fret too much about the Grant Thornton report Declan, it projected that NB would plunge into deficit before the books were closed on FY2006. The actual result was a $196 million (give or take) surplus for the year. The GT report was just a bit of obfuscation for the Graham gov’t to hike income taxes in order to pay for a few of its election promises, particularly a one-third cut in the gasoline tax (a consumption tax if I recall). It also provided cover for Mr. Boudreau to jetison another election promise, eliminating the PST on heating oil and domestic electric power. As strange as it may seem, NB and Newfoundland, two relatively poor provinces, tax their citizens for the luxury of heating their homes. Its a legacy of the HST, the deal negotiated between the Chretien gov’t with the three Atlantic provinces then governed by Liberals. (Nova Scotia has since lifted the 8% portion of the HST on heating oil and domestic electricity). Of course Quebec does this too, so that must make it OK.

    As for Andrew’s salutatious tenor, it would probably be a good idea to check into corporate ownership in NB before going all gaga over Mr. Boudreau’s announcement. This is certainly good news if your name is Irving or McCain (or if you hold stock in the Home Depot, Walmart or Costco) but not so much for the bulk of provncial residents. NB is known as a province of entrepreneurs, that is owners of small and medium sized businesses. The current gov’t deliberately raised taxes on small business in the 2007 budget (it also reduced the threshold for what qualifies as a small business). From the sound of Boudreau’s announcement, those taxes are likely to go up again to the new general corporate tax level (my guess, 8%). Great idea in a recession, hike the taxes on entrepreneurs; you know, the folks who will be doing the bulk of the new hiring over the next three or four years. Of course, there’s also the issue of replacing the lost revenue; which likely means hiking the PST back up to 10% (its current 8%). Again, another sterling idea in an economy that’s crying out for greater consumer spending, not less.

    The back story here is that the Irving and McCain business empires are the largest contributors to the NB Liberals and that Mr. Graham seems to chafe at the concept of not spending more than he can raise through taxes, levies, service fees and equalisation. His response seems to be a mixture of higher consumption taxes (which fall heaviest on low-income earners, there being no off-setting credits), deficit-spending, off-book borrowing (something McKenna excelled at too), and service cuts. It seems that we’re just waiting to see what mix the Graham gov’t chooses. Of course if all this sounds familiar, don’t fret; its that same policy mix that GW Bush opted for. And we all know how well that turned out.

    • herringchoker has it right. The 2007 budget, Liberal Premier Graham’s first budget, they hiked personal taxes, small business taxes, jacked up the price of liquor, electricity waved around an external report smoke screen to justify their actions.

  40. One other thing (I must have blacked out for a moment there). One of the cornerstones of the Graham gov’ts “self-sufficiency” plan is to raise more revenue from taxpayers through income and consumption taxes. The flip-side of the policy is to entice new investment through lower corporate taxes (I don’t actually oppose this on priciple, just in the current practice) and “incentives to business”. Is GM listening?

  41. MYL: “every penny spent subsidizing inefficient producers of stuff the market doesn’t want is a penny the next generation has stolen from it. Oh, uh, with interest.”

    Just for the record, MYL, my years as a taxpayer have all featured debt reduction, so if you reckon the year we began debt repayment as zero, future generations owe me money.

  42. Nope, Jack. Those years were cleaning up an earlier mess. Your beef is with the last generation, not the next one.

  43. MYL — I’m just saying that future generations ain’t got nothin’ to complain about from my generation, and even if we now start spending like drunken sailors we’ll still have less debt than when I jumped over the boards. Besides, I’m concerned that future generations won’t face enough challenges in their lives, and borrowing a few trillion now should give them something to heroically overcome.

  44. You really going with that “you’ll thank me later for this” nonsense?

  45. Well, not really. Actually the thought of future generations is all that keeps me going, and it would be nice not to screw them. Which is the bigger danger, do you think — that short-term deficits will become structural, or that the precedent for short-term deficits has been set?

  46. Boys, boys, boys. No need to fight about debt and deficits. May I offer a suggestion for getting by all this.

    We simply impose a surtax on all Canadians eligible to vote in the 1980 federal election. It was, after all, fought on the issue of increasing consumption taxes (a 19 cent per gallon excise tax) to eliminate the deficit. Canadians voted NO WAY and, so, should be prepared to pay the piper. (Trudeau gave them the tax anyway, but kept on with the deficit financing, which led to all this debt).

    Canadians who were too young to vote shouldn’t be punished for the folly of their elders, nor should immigrants who have arrived since. Therefore a surtax, probably a hefty one, only seems fair. And best yet, anyone who falls into this category is at least 48 so should have some revenue to send back in the name of intergenerational equity.

  47. The precedent has been set a long time ago. We need to shake off this nonsense. And we were doing reasonably well for a time. What’s going on now in the capitalist mecca, the USA, is bewildering: steal from the kids to keep the market tumors alive to continue to feed off the host. And not by just a wee bit. Bush is bankrupting the future, and Obama seems willing to bankrupt the future even further.

    WE have earned this recession. Companies NOW deserve to go belly-up. We’ll thank OURSELVES for that later, if only we would have that wisdom. Sadly, we do not.

  48. That should draw another call centre to the province and away from high tax jurisdictions like Pakistan.

  49. Finally, one wonders if the people who devoutly believe that lower taxation is always and everywhere a good thing ever stop to consider the mountain of conflicting evidence such as UN quality of life tables dominated by countries with high tax rates or our own greater prosperity during the 50’s and 60’s – an era of higher, more progressive taxation.

    Might I add to that the notion of inter connectivity. Action — reaction. Christoph seems to have flunked physics. He is in for a surprise when I activate the detonation device connected to his explosive rectum with my cell phone. He does, after all, sound like flatulence from an a**hole.

  50. To all the liberals and socialists I’ve insulted: I meant worse than I said.

    To all the conservatives who read my insults toward the leftists: I apologize for not being able to write what I meant. I softpedalled it.

    You’re a douchebag, we get it.

  51. Rather than engage in the vituperative style of Christoph, I will share some thoughtful commentary from the past:

    “Conservatives are not necessarily stupid, but most stupid people are conservatives.”

    “He who lets the world or his portion of it, choose his plan of life for him, has no need of any other faculty than the ape-like one of imitation. He who chooses his plan form himself, employs his faculties”

    — John Stuart Mill

    So stop being stupid and think for yourself — instead of aping the professed “wisdom” of a lot of empty suits.

    You have no idea what you are talking about and neither do they.

  52. Remember the coalition was saying we needed 30 billion…..and remember that our current tax base is about 220 billion and of that we pay about 33 billion on our existing debt in interest. These are just to give people some scale as to what these numbers mean.

    A 20% rate cut in effective wage of the apprentice worker, repeat apprentice worker, at the car companies yields between 4 and 6 billion dollars annually for the industry. This isnt all about labour but labour sure has a significant part to play here.

    Per this story, GM is expanding its Mexican plant where wages are at least 1/8th that of those north of the border….and lookey lookey at who else this transfer of functionality is helping…Bombardier! remember them, the ones who continue to pay a dividend equal to just about equal to the amount of government subsidy from the feds.

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aImmc_hK.uGE&refer=home

    Maybe we had better recognize that wages in some sectors arent going up, especially where restrictive work rules raise effective wages not actual ones. The CAW needs to justify why its members labour deserves a premium, if only to the non unionized assembly shops of Toyota and Honda, is it productivity, quality, flexibility? Didnt think so.

    Sadly the government money gets poured down a hole to overpriced labour, stupid investors (bondholders) and less non-present management.

    SOmeone needs to answer the question, what is the penalty that will be suffered by GM and Chrysler for getting the money but Ford, which is fixing itself quite nicely, seems to require little if any, let alone the transplants. Or what is the benefit Ford will get.

    If the crisis is this bad, GM and Chrysler should give up the ghost to the governemtn for $1. The government uses sovereign power to crack the union, enforce a contract, cram down the bondholders and then spin the car company assets back into the market debt free to get recapitalized debt free and with a union free shop and new management. If it isnt that serious then stop asking for these incredible sums of money to do incremenetal change.

  53. Herringchoker, I’ll see your 1980 election if you signed my crime minister petition in 1990.

    (Am thinking we’re losing grasp of the concept of responsible government rapidly, but enjoying the voter blame game anyway)

  54. “I predict this will just as dismal a failure as it has been for the feds these last few years.”

    ********************************************

    Did I miss the federal government imposing a flat tax and raising the GST as NB is proposing to do?

  55. Steve V. nailed it.

    Corporations pay income tax in the jurisdiction where they earn the money. If you sell in Ontario, you pay Ontario provincial tax. You can’t reduce your tax load by moving your head office. If you do business in all provinces, you have to do corporate returns for all provinces.

    If you aren’t making money, tax cuts don’t help you. The more money a corporation earns, the more tax cuts help it.

    Everything that a corporation does that helps the economy is a tax deduction. Hiring employees, building new facilities, engaging in research & development. Corporate taxes don’t stop you from doing any of these. They stop you from paying higher dividends. Logically, then, lower taxes should increase dividends paid and decrease re-investing in the company for future growth. There is some logic to this, because in a recession, we need more current spending, but dividends are paid to too narrow a segment of the population for them to be effective economic stimulators.

    There is a rate at which companies would eventually stop doing business in a country, but we are nowhere close to it. Canada already has the lowest corporate tax rates of all developed nations. Lowering it further won’t create any more incentive for foreign investment. I recall from my international business class that political stability is more important than tax rates, anyway.

    Corporations fall into a number of different sizes & categories. The “general corporate rate” is the rate the media generally talks about because it is the highest rate, but doesn’t apply to a lot of companies. Call it the “WalMart Tax”. The “Canadian-Controlled Private Corporation under [income threshold this year]” rate effects the most companies, and is generally the lowest. If your corporation has income of under half a million dollars [most Canadian businesses], your tax rate is considerably lower.

    Corporate income tax is pretty complicated, but as a general rule, if a company wants to do business in Ontario, they have to pay Ontario rates on any money they earn there. Since it’s the largest province and companies aren’t going to stop selling there because they pay slightly more tax than in New Brunswick. If a company that’s large enough to pay the general corporate rate wants to make money in Canada, they have to do business in Ontario, no matter what their tax rate is. The “business & investment incentives” Flaherty used to talk about(when he was allowed to speak) don’t exist.

    If you disagree with me on any of this, please read The Income Tax Act from beginning to end (I have — it’s my job) & point out which parts of are imaginary and aren’t actually the law of the land.

    When you get to smaller jurisdictions like N.B., lowering the general tax rate becomes really stupid. There aren’t a lot of local businesses who can get big enough to pay the general rate, so a big difference between the general & small business rates protect local businesses from being obliterated by larger, outside ones. The market is big enough that big players still can come in and make money, but not big enough for local businesses to become strong enough to compete with them on their own. I do realize that this is “government interference” in the markets, and may slightly increase prices in the short term, but it protects local jobs, keeps money in the province and increases competition. It’s up to your political beliefs whether this is a good or a bad thing.

    Wow, is that my 2nd big rant this week? I’m on a roll. [Until the national narrative on finance starts to get less moronic, expect more.]