Does Cutting Corporate Taxes Really Translate Into More Jobs?

In the last number of years the Conservative government has been touting that them reducing the taxes paid by corporations is good for Canada. The argument they make is that if corporations are paying less money on their income that they will surely reinvest these funds into making more jobs for Canadians. And if more Canadians have jobs then THEY can pay more income tax themselves, not to mention more personal spending, thus resulting in no net loss to the federal coffers, more employed individuals, and a stimulated economy. It is the age old Top to Bottom Trickle Down Effect. Only problem is that you are relying on corporations to do their part and create more jobs. Corporations are, by the nature of capitalism, concerned about their bottom lines. They have investors to answer to. If the corporation doesn't boost per share dividends for investors their share value can erode. If there is less demand for their shares than the company loses its market value which is instrumental in their ability to issue bonds to have debts and major spending ventures secured against. So why should a company suddenly given an extra 2% of income reinvest this into jobs? Surely some companies who are expanding will do so. But they likely would have done so regardless.

Well, just in time for the federal election the Conservatives have released attack ads aimed at the Liberal party stating that the Cons have increased jobs whereas the Libs would increase taxes. Truth be told, the Libs WOULD increase taxes. But on corporations, not the public. The Lib argument is that our original levels of 18% are very competitive with the world market place. Their is no need to have the lowest corporate tax rates in the world. In fact, not many, if any, major international head offices have relocated to Canada to take advantage of our lower rates. And now the Canadian Centre for Policy Alternatives released a study which shows that despite a 50% increase in profits and a 20% decrease in corporate taxes paid 198 of Canada's leading companies were BELOW the national average of 6 per cent employment growth between 2005 and 2010! So, even though their profits increased during this time, and they were allowed to keep more of these profits, they reinvested LESS into the labour market, growing by only 5%. Throw in that the job market took a stutter step this month by shedding 1500 jobs instead of gaining the 30 000 economists had expected and you get the feeling that corporations aren't playing the way the Harper regime suggest they should be. Perhaps it is time that we stop molly coddling big business and instead provide support to the people who need it most during these economic down turns, the individual consumer.

Addendum

Did you know that one of the world's largest corporations GE made $150 billion in revenue with $12 billion in net profit in 2010 and yet paid NO taxes? Not only were they able to avoid paying a single penny to the US government but they did so while shedding thousands of labour positions in the United States. They were able to do this by successfully lobbying the US government for tax breaks and by writing their profits as off shore income. Maybe it is time for us to clamp down on these big businesses and keep them from having too much clout in their roles in government and defining acceptable accounting practices.