Friday 30 December 2011

In regards to corporate tax cuts;

To the Editor (February 04, 2010)

In regards to corporate tax cuts;

As we face a federal debt of some $557,633,000,000 that is $557 billion and an annual deficit of about $56 billion, we are allowing corporations to pay less income tax, depriving ourselves of some $6 billion in revenue. Why?

Because we trust economic experts who tell us this move will stimulate growth. We hope that those corporations will expand and employ more people. Those happy workers will then pay sales tax on stuff they buy and income tax on the money they earn. That’s a nice dream, but I’m sure the growth will not actually cover the missing revenue. It is quite possible said corporations will expand by hiring thousands in South Asia and only a few new workers for their Canadian locations.

Improvements will happen jobs will be created; the government and corporations will smile about it and call it a success. But when we look good and hard at the numbers down the road we will find that the revenue generated fell short of the revenue lost. Thus some of the unpleasant cutbacks in public service made to reduce the deficit, in fact go to offset the missing corporate revenue.

For example; Tax cuts result in $6 billion less income, new jobs and growth result in $4 billion new revenue, but we still have a $2 billion short fall. So we must cut $2 billion in spending just to maintain that above mentioned deficit level of $56 billion.

Why are we doing this? Corporations benefit directly from getting to keep more money in their pockets and indirectly by looking like good guys as they create new jobs. Politicians also benefit as they claim to have generated new jobs and new revenue. They ignore the inconvenient question of short fall.

The real point I want to make is; corporate tax cuts, personal tax increases, new fees and service downsizing are not enough. They are a band aid on the Titanic. We must cut spending by over 50 billion and generate some 50 billion in new revenue, over the next 10 years if we really want to solve our debt problem. This is an impossible task given traditional thinking. We need brave new ideas or we need to shrug our shoulders and accept the idea that the debt will never go away.

Thanks for your attention

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