Race to the bottom
Published on 2019-08-24 in Blog
If it weren’t dead important, I would say it is funny that in 1960 white Canadian males got family wages, which they used to maintain a wife at home looking after, let’s say, two kids, paying for their home, having a car, etc., while the corporate tax rate was at 41%. Today, both parents have to work to get by and they do barely and they are indebted to their teeth and the corporate tax rate is 15%.
So, the official narrative in Canada today is that we celebrate this “trickle down economics” of the past 60 years. And it says that if we lower the corporate tax rate, companies will have more money at hand to invest in jobs. Well, they haven’t, have they? The level of unemployment did not go down from the 1960s compared to 2019. Once a company has more money due to lower taxes, they can do whatever they want with that money. No one is holding a gun to their heads to invest in jobs. Some do, but most don’t. They rather pay it out to shareholders as dividends, pay lavish salaries to executives, park their stupendous profits in offshore heavens or anything.
As a result, the local and federal governments income shrinks relatively speaking. They can not finance their public services, they rather borrow money to make up for the difference but not raise corporate taxes. And today’s jobs are more precarious then they were in the 60s, less benefits, less secure, real wages, at best, are stagnant. And Alberta joins the world club in the race to the bottom: who offers less taxes to attract investors. So in 1960 companies were suffering because of the higher tax rate? They couldn’t grow? They did not offer good paying jobs?
I am not saying, let’s go back to 1960. Conservatives think the “old was great”. I am just pointing out that this trickle down economics does not make sense. I have to correct myself. It does for the shareholders and ceos of corporations but not for you and me.
I would have liked to go back to the 1930s with the corporate tax rate, but StatCan does not have it. You can find the numbers from 1960 to 2017 here.