Corporate Tax Cuts: Big Costs but No Job Creation

April 6, 2011

1-minute read

Today the CCPA released a study that I authored which examines and debunks one of the biggest contentions of this campaign, that corporate tax cuts create jobs.  One of the key reasons cited by the Conservatives for continued corporate tax cuts is that they are needed to encourage job growth.

To examine this contention, I took Canada’s biggest public companies, those on the S&P/TSX Composite and tracked them over the past decade to see how their taxes and profits changed.  At the same time, I also tracked how many employees they had and therefore the number of jobs they created.  These are the companies that benefit the most from corporate tax cuts because they declare the largest profits.

There were 198 companies that had data from 2000 through 2009.  What readers should find shocking is just how dramatic the transformation in corporate taxation has been in the past decade.  The effective tax rate for these successful companies has been cut in half.  Imagine if, as an individual, your personal income taxes had been cut in half over the past decade. Well, that’s what happened in corporate Canada.

With such a dramatic change, it should be no surprise that, compared to 2000, profits are up 50% while taxes paid are down 20%.  The tab for corporate tax cuts for just these 200 companies is $12 billion a year in lost provincial and federal revenues.  To give readers a sense of scale, that much money could buy us a national $10/day childcare program and wipe out poverty among seniors with money left over.

Canadian governments have given our most profitable corporations dramatic tax cuts and promised job creation in return. We’ve cut the cheque, worth $12 billion a year in 2009, but did we get the jobs?

The Canadian economy as a whole has increased the number of jobs by 6% since 2005.  However, the 200 companies that are receiving the $12 billion a year tax break have only increased their job numbers by 5%. In effect they are pulling down the average.

Instead of creating jobs with those billions, they have merely increased their profits or are sitting on the cash.  Canadians should expect vastly more for $12 billion a year.

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