Corporate Taxes: Flaherty gets it right

Article: http://www.windsorstar.com/news/Corporate+taxes/4095206/story.html

Summary:

Since four years ago, federal Finance Minister, Jim Flaherty had suggested to lower the corporate income tax rates in Canada. His intention and idea was to increase investment, create jobs and ensure that Canadian companies could remain competitive. And right now, it seems as if this strategy is working very effectively. Originally, the tax rate was at 21 percent. It then decreased to 18 percent, and on January 1, 2010 it went down to 16.5 percent. By next year, it will go down to as low as 15 percent. "If we want more jobs, higher wages and an improved standard of living, Canada needs to be the most attractive place for job creators to do business and invest," Flaherty says. Lowering the corporate tax is not only improving our standard of living, but it is also benefiting our reputation.  Just last week, the Wall Street Journal published an editorial which pointed out that the U.S. should be looking closely at the competitive advantage that Canada has slowly shaped with corporate tax cuts. Currently, the U.S. federal rate is at 35 per cent, which is more than double Canada's. All in all, Canada's image has also received a boost in Washington Times where business author, James A. Bacon has stated that "Canada is quietly surpassing the U.S. as the land of opportunity."

Connection:

This article connects to Chapter 4 because this chapter mainly talks about the involvement of taxation in the government of Canada. This relates to one of the topics discussed in the textbook; Sources of Government Revenue. One of the main taxes that generate income for the government is the corporation income tax, which is a tax that is imposed on the net profits of companies. These tax rates vary depending on the type of business and the ownership. In this article, the main focus is on the corporation income taxes. They think that lowering these tax rates will in return allow us to receive benefits such as higher wages, more job opportunities, and higher standard of living. This seems quite true in some degree because if we were to lower the income taxes, we would have to pay less tax and it is less of a burden for us; therefore it allows us to enjoy a higher standard of living.

Reflection:

In my opinion, this seems to be good news because it seems to be a benefit to all companies and people who have lost their jobs from the recession. For myself, I do hope for and encourage the government to decrease this corporate income tax because from what I have read in the article, there seems to be more pros than cons in imposing this act. However, I feel that this seems to be almost too good to be true. It appears to me that the benefits that Flaherty has mentioned in the article can be achieved a little too easily. Lowering the tax rate might have an effect on our economy and creating a better image for us, but will it really create more jobs and give us higher wages in return is still unknown. I do not believe that solely lowering taxes will generate that many benefits for us. I feel that to achieve everything stated in the article, more things have to be done.