The Job Creator Myth

The Harper Government (c)(tm)(r) has spent months promoting the Liberal tax cuts it inherited as being job creators. Well reality of course is a smack in the face with a wet dishrag sometimes, and in the case of tax cuts to corporations=job creation well, that smack you hear is a hard dose of wet reality.

Canadian CEO's were surveyed by the Globe and Mail about how they will use the upcoming tax cuts they get from the Harpocrites and job creation was not a priority in fact doing the same old same old, that is by definition NOT adding productivity to their operations (something the Bank of Canada has complained about) but just pocketing the tax breaks.

While these CEO's in the same survey challenged the government to invest more in R&D, with their pending tax cut they put the same amount into R&D as they proposed to put into hiring, the very source of productivity. In other words 'please sir can I 'ave some more" say the real begging class; the government should invest in areas we are not willing too. Can you say corporate welfare. These are the so called job creators the Harpocrites are using to justify their Liberal tax cut.

What will you do differently as a result of the corporate tax cut?

No change: 31%

Re-invest in business: 26%
...
Don’t know: 11%

Other: 11%

Grow business: 10%

Research and development: 6%

Hire more people: 6%

Almost three in five executives said investing in education and training should have a high priority in the budget, while 52 per cent said investing in research and development is key. Transportation and infrastructure were a top priority for 42 per cent of those who responded, while attacking the deficit came in fourth place – a high priority for 39 per cent of executives.

Tax Breaks=Corporate Welfare

The Conservatives are out promoting the Liberal Tax breaks for corporations they inherited...claiming that our poor Canadian Capitalists need tax breaks so they will be encouraged to create jobs. While economic reality says that Canadian workers are paying taxes to their bosses who are rolling in money. And the reason for existing deficits Federally and provincially is because of corporate bail outs of Big Auto.

In keeping with the government’s vision of making Canada a low-tax jurisdiction, the Conservatives have been gradually cutting taxes on corporate profits since 2007.

By 2015 under this plan, the share of federal government programs paid for by corporate income taxes will have shrunk to 12.3 per cent from 20.8 per cent in 2000.

Do we really want to 'look more like Ireland?'

Shortly after rolling out the Harper government’s first budget in 2006, a boisterous Finance Minister Jim Flaherty was asked during a visit to New York what Canada would look like in five years under a Conservative majority regime.

“It will look more like Ireland — more dynamic, more attractive to investors, brighter, more positive, outward-looking,” Flaherty said in a published report of his comments.

Perhaps in part due to his Irish heritage, Flaherty has long been a fan of Ireland’s fundamental economic strategy — rock-bottom corporate income tax rates.

But with Ireland's low-tax Celtic Tiger now dead, the Harper government no longer cites the Irish example to promote corporate tax cuts in Canada. Nonetheless, despite the dire state of Ottawa's finances, the Conservatives are sticking to the low-tax policy pioneered in nearly bankrupt Ireland.

Billions in profits boost bank shares

Banks in the United States and Europe are getting hit by bonus taxes and a welter of new regulation but here in Canada, where policy makers see less need to penalize the sector, the Royal Bank of Canada and Toronto Dominion Bank thrashed earnings expectations with combined first quarter profit of $3.4 billion, driving their shares higher.

Royal Bank of Canada, the country's biggest lender by market capitalization, had net income for the first quarter of $1.84-billion, up 23 per cent from last year. TD, the country's second biggest bank, had a profit of $1.54 billion, up from $1.3 billion amid record performance from retail banking in both Canada and the United States.

Canadian corporate operating profits rose to $65.5 billion in the last three months of 2010, Statistics Canada reported Wednesday, a 7.9 per cent increase over the previous quarter.

StatsCan said the increases were widespread across the economy, with 19 of 22 industries reporting higher earnings.

The rise followed moderate declines in the previous two quarters. Operating revenues were up 2.8 per cent for the sixth straight quarter.

Operating earnings in the non-financial sector increased by 7.3 per cent, with the biggest gains in mining and oil and gas.

Financial institutions climbed by 9.5 per cent as insurance firms rebounded from a poor performance in the third quarter. Chartered banks rose 5.6 per cent.

Profits up 9% for the year

Compared with the same period a year earlier, operating profits for all industries were nine per cent.

By the end of 2010, profits had grown by 5.5 per cent since the beginning of the recovery, regaining 56 per cent of the ground lost during the recession.

It's looking like a better year for dividend increases

Please sir, I want some more dividends.

Flush with cash and encouraged by a strengthening economy, companies are doling out dividend increases to the delight of yield-hungry investors.

And with corporate profits rebounding strongly, the trend is likely to gather momentum over the next couple of years, analysts predict.

This month alone, Canadian companies including Rogers Communications Inc., Shoppers Drug Mart Corp., TransCanada Corp. and Russel Metals Inc. have raised their quarterly payments, signalling their confidence in both the economy and the strength of their balance sheets.

Armine Yalnizyan: Five economic reasons to say no to more corporate tax cuts in Canada

Least effective job creation measure: According to the nation’s official number crunchers, if you want policy to encourage job creation, cutting corporate taxes is the weakest option (20 cents growth from every dollar of tax cut). Spending on infrastructure has the most impact ($1.50 on every dollar spent). The Department of Finance shows that spending on income supports for the unemployed and for low-income Canadians has an equally big pop, and housing initiatives are almost as good ($1.40 for every dollar spent).

Little impact on investments: Federal corporate tax rates have fallen from 28 percent in 2000 to 18 percent in 2010. Business investment (in non-residential structures and equipment) as a share of GDP was 12.4 percent in 2000. It was also 12.4 percent in 2009, and on track for the same in 2010. In the 1960s, the heyday of industrial expansion and economic development in Canada, the federal corporate tax rate was 40 percent. Statistics Canada’s data on business investment starts in 1981. That year the federal corporate tax rate was 36 percent, and business investment represented 11.5 percent of the economy. By 1990 the federal corporate tax had fallen to 28 percent. Business investment had fallen to 10.8 percent of the economy. There are many factors that drive business investment practices, and while taxes are a consideration, they are not the primary factor in investment decisions. The historic evidence shows that a commitment to this strategy is a costly faith-based proposition.

Pay more tax to cut taxes: Since fall 2010 the Harper team has been saying corporate tax cuts “pay for themselves”. But Budget 2009 figures show that reducing the general corporate tax rate from 22.12 percent in 2007 to 18 percent by January 2010 removed $6.7 billion annually from public coffers, right through the worst of the recession. Cutting the rate further this year to 16.5 percent meant another $2.8 billion in foregone revenues annually. The Harper team’s commitment to reducing the corporate tax rate to 15 percent will reduce the size of the public purse by $13.7 billion annually by 2012, according to Finance estimates, at which time the federal budgetary deficit will be between $21 and $26 billion (the range of Finance, PBO and IMF estimates). Financing this tax cut requires borrowing more money. The average Canadian taxpayer will pay interest on the borrowed money to provide a tax break for profitable corporations.

P3 The Unvarnished Truth

The overall lessons from the case studies suggest that the prognosis
for future P3s is somewhat pessimistic. Governments have generally
found it difficult to effectively reduce their financial and budgetary
exposure. Furthermore, in some cases, governments have faced
significant increased political risk rather than reduced risk as they had
hoped. At the same time, their for-profit private sector partners have had
difficulty making adequate rates of return, although this is a tentative
conclusion as they have usually had incentives to publicly emphasize
losses.
In some respects, the somewhat negative findings are not surprising.
The public and private partners in P3s inevitably have conflicting
interests (Teisman & Klijn, 2002; Trailer et al., 2004). Studies have
shown that in other contexts with similar conflicting interests, such as
mixed enterprises that are jointly owned by private shareholders and
government, the result can be “the worst of both worlds”, achieving
neither high profitability nor worthwhile social goals (Eckel & Vining,
1985; Boardman & Vining, 1989). In sum, while the allocation of
decision-making and risk-sharing in P3s can vary widely, if decisionmaking
authority and financial risk-bearing are not appropriately and
clearly matched, incentives will be misaligned and effective outcomes
are unlikely. This raises the question of whether governments can learn,
individually or collectively, to adequately specify contract conditions and
institutional conflict resolution mechanisms ex ante so that the past is not
a prologue for the future.

More Corporate Welfare

Big Business is never satisfied, it wants tax breaks and tax credits.....either way you and I pay.....So much for being job creators....the only way they can create jobs is not with their own money but yours and mine.....which shows that contrary to the rhetorical litany of the right wing government actually does create jobs.....

Auto executives also called on the federal and Ontario governments to continue offering manufacturing incentives in light of the impact the soaring loonie is having on their industry’s competitiveness.

Read more: http://www.windsorstar.com/business/Free+trade+loonie+worry+auto+leaders/4312489/story.html#ixzz1EXUPuRxA

Since auto workers are taxpayers, and they and we have bailed out big auto with tax breaks, investments, bail outs, pension forgiveness, and pension give backs, as well as wage concession by unions then frankly we own Big Auto we should simply take over the industry and put it under workers control. Especially now that it is profitable again......thanks to you and me and the autoworkers.....

UPDATE 1-Ford, Chrysler Canada sales rise in January

SEE

Big Auto Crisis is the Crisis of Capitalism

There Is An Alternative To Capitalism

Auto Solution II

Canadian Business Not Productive

Despite the tax cuts given to corporations by both the Liberals and Conservative governments, it has not translated into increased productivity, that is both technological innovation and job growth. So the Harpocrites latest national tour promoting Job Creation Through Corporate Tax Cuts, is all a dog and pony show, the facts don't meet the rhetoric. For five years tax cuts have not resulted in increased RD investment by corporations nor investment in technology upgrades, and of course few new jobs.

But hey if you don't believe me how about these guys:

Canada has made major public investments in research, primarily through universities, but private-sector innovation has remained relatively weak. The OECD ranks Canada as 16th in business spending on R&D as a share of the economy, despite having the second-highest level of government support for such investment. The overall policy and economic environment has become much more encouraging over the past decade. The marginal tax rate on new business investment has dropped sharply, making Canada more attractive internationally and opening a significant tax advantage over the United States.

Thomas d’Aquino and David Stewart-Patterson are the former chief executive and president and executive vice-president of the Canadian Council of Chief Executives and co-authors of the book Northern Edge: How Canadians Can Triumph in the Global Economy. Read more: http://opinion.financialpost.com/2011/01/25/unleashing-innovation/#ixzz1DCwwrEmV

And of course Bank of Canada boss Mark Carney regularly reminds us that corporate failure to invest results in lack of productivity. So why give them tax cuts, clearly it doesn't increase productivity or create jobs.

In fact continued tax breaks federally and provincially to Big Oil has had a negative impact on jobs in Canada.

A 2009 Industry Canada report found that 54 per cent of Canada's loss of hundreds of thousands of manufacturing jobs since 2002 is due to the oil sands boom replacing good, stable employment with short-term construction work in the tar sands and low-wage service sector jobs elsewhere in the economy. Canada has lost one-third of its post-war gains in value-added (manufactured) exports since 1999/2000, Canadian Auto Workers senior economist Jim Stanford told the Institute for Competiveness and Productivity in 2008.

The problem is not worker productivity, since workers in Canada are highly productive, its investment in actual technology.

The Canadian manufacturing sector employed more than 2.3 million people in 2002. By last September, manufacturers had shed some 580,000 jobs - more than one in four – and most of these losses occurred before the recession. There are few signs that this trend will reverse itself soon.

the fall in manufacturing employment was largely due to attrition, not layoffs. And one of the surprises of the recession is that manufacturing unemployment is now lower than it was before the recession – although this result was largely achieved by workers leaving the sector altogether.

But it’s a puzzle nonetheless: output per worker in the manufacturing sector has been increasing more than three times as fast as the economy as a whole. If productivity growth is the key to sustained prosperity, then shouldn’t manufacturing be increasing in importance?

Tax cuts have not created jobs, since corporations have used the break to accumulate capital which if invested at all is invested in the stock market and in mergers and acquisitions, not in workers wages, technology or pensions.

Corporations in this country are flush with cash and ready to grow.

"In some ways, corporate Canada has never been stronger than it is right now," Tal said.

"Better-than-expected profitability and a reluctance to spend in recent years has left Canadian businesses sitting on a record amount of cash and confident about the future.”

Swift and strategic downsizing during the recent recession paid off, Tal said. It allowed companies to withstand the downturn and ramp up hiring at a much faster clip than in the U.S.

In fact both private corporations and ironically our public pension fund the CPP have led the way in taking that capital and investing it abroad.

Foreign investment is a two-way street.

The Canada Pension Plan Investment Board and Onex took top honours for the biggest global private equity acquisition of the year with their $4.4-billion purchase of U.K. manufacturing giant Tomkins.

PricewaterhouseCoopers suspects Canadian companies will continue look past North America to emerging markets for better deals.

Last year, Canadians made major “buys” in nearly every continent with deals in the fourth quarter alone stretching to the Middle East, Asia and Africa.

“These transformational deals are beacons for what will become the norm for Canadian deal making going forward,” Knibutat said.

Joint ventures and minority purchases will also become more popular, it said. These deals allow companies to test drive sectors while minimizing financial and political risk, PricewaterhouseCoopers said.

“Organic growth prospects within North America remain limited, so for many well capitalized corporates and funds, M&A may be the best and only tool for growth,” Knibutat said.

A “perfect storm” of companies flush with cash, improved access to financing and lacklustre organic growth prospects means the M&A outlook is even brighter for Canada in 2011.

Global public companies have an estimated $3 trillion in cash reserves. Private equity firms hold another $500 billion.

Competitive tensions stemming from strong takeover demands are likely to entice sellers back in the market and that should create a more balanced number of buyers and sellers, PricewaterhouseCoopers said.

All this means Canada will likely continue to outpace the globe when it comes to M&A activity, buoyed by a well-capitalized financial system, strong dollar and leadership in hot deal sectors.

So rather than calling corporate tax cuts job creators, we should call a spade a spade; all that tax cuts do is reduce government revenue, social capital, while giving corporations more capital. Tax cuts are public funding of private profits, without having shareholder benefits. Tax cuts are corporate welfare.

A broad look at how corporate tax rates have changed Canada in the past suggests the impact of the small cuts planned for this year and next is marginal for most companies.

The larger impact is on the government's bottom line, not the corporate bottom line — even though corporate taxes have now become key in determining whether there will be a spring election.

Indeed, federal Finance Department documents show that the reduction of corporate income tax — from 18 per cent in 2010 to 16.5 per cent in 2011 and then to 15 per cent in 2012 — will be expensive for any government battling a deficit. The cost is about $1.6 billion in foregone revenue in the 2011-2012 fiscal year, $3.9 billion the year after, and a total of more than $10 billion over three years.

Pension Rip Off

Canada's corporations are crying the blues again about the fact that they have underfunded liabilities regarding their pension obligations to their workers. While they may have a point that the government discourages them from putting extra into their pension funds, the fact is that they use this excuse to not max out their share of their pension responsibilites. Much like the government itself with its public sector plans, which are paid for by employers and employees, but the government never puts in its share, instead it uses its general funds to account for its future liablities, which of course gets it into trouble during periods of economic downturn and when the state runs up deficits and gets into debt as it did in the ninties.
That being said while corporations could benefit from legislative changes to the tax code, the fact remains that they would still prefer to invest in stocks and to pay their CEO's lucrative salaries and pay generous dividends to their shareholders before they invest in their own workers. Surprise, surprise. Now that market has melted down they cry the blues about not having paid their share into their future obligations to those who produce their wealth; their workers.

See
The Importance of Savings
Your Pension Dollars At Work
P3= Public Pension Partnerships
Chinese Social Security Scandal
Social Insecurity The Phony Pension Crisis
Pension Plunder
Labour Is Capital
Pension Free China
Kids Are Commodities
Workers vs Worker
Air Canada Profits From Bankruptcy
Are Income Trusts A Ponzi Scheme

Vencap
AIM High
P3 Myth Busting
Infrastructure Collapse
Fire Sale
Dumb and Dumber
Public Pensions Fund Private Partnerships
Golden Parachutes
Your Pension Dollars At Work

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2008 Year Of Corporate Welfare

The corporate tax holiday that begins today and will only continue on a downward trend promises the Harper. So you have to ask who pays to make up for this? Why you and I off course. In 1960 the 41% tax rate made up over 60% of all government revenues. As it declined that need to make up the difference shifted to Joe and Jane Canuck.

In the nineties the Liberals discovered that in order to balance their deficit budget they could dig into payroll taxes, and re-jigged Unemployment Insurance renaming it Employment Insurance and restricting workers access to it. The resulting savings they made off the backs of Canadian workers created the federal surpluses. Which the Conservatives have inherited and continue to use to offset the corporate tax breaks they give to their Bay Street pals.

Profits have risen for corporations thanks to these tax breaks but instead of plowing them into productivity they have continued to rely on cutting production costs; that is laying off workers, to create more with less, while investing their cash in the stock market.

Tax breaks for corporations is welfare for the less needy, or as my pal Larry Gambone calls it Socialism for the Rich.




Graph courtesy of My Blahg.


SEE:

Flaherty's Tax Deception

Flaherty's Smoke and Mirrors

Tax Cuts For All

Tax Cuts For The Rich Burden You and Me

Tax Fairness For The Rich

Who Pays


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Flaherty's Smoke and Mirrors

More evidence of the Harpocrites Tax Unfairness. Business got the biggest tax cut while you and I got crumbs.

And even though many in booming Alberta are better off now than they were a decade ago, the taxation on working families earning median incomes; $40-$60,000, are paying for the tax cuts to business.

Simply put it is our taxes paying for Flaherty's corporate welfare while the Conservatives fail to invest the remainder of our money in much needed social programs.

Economists say the personal income tax relief in the Harper government's Tuesday mini-budget is paltry and does little to improve incentives to work, save and invest in a country already suffering from weak productivity growth.

The overall tax breaks that Finance Minister Jim Flaherty doled out this week will ramp up to $14.7-billion annually within five years, but less than 11 per cent of that went toward personal income tax rate cuts. Only about $1.5-billion is directed at lowering personal income tax rates, in this case cutting the lowest bracket rate to 15 per cent from 15.5 per cent.

Global Insight (Canada) chief economist Dale Orr calculates that the personal tax burden on Canadians keeps rising despite the Conservatives' fall mini-budget.

"This puts the small magnitude of that [mini-budget] relief into perspective," he says.

As a result of the relief Mr. Flaherty offered, personal income taxes collected by Ottawa as a share of all personal income fall to 9.8 per cent this fiscal year from 10.11 per cent. But then they rise to 10.12 per cent and soar to 10.94 per cent by 2012-13, only slightly less than where they would have been without the mini-budget.

The marginal effective tax rate on personal income - the tax paid on the next dollar of income someone earns - remains extremely high for most earners in Canada.

Typical marginal effective tax rates for families with children climb above 50 per cent for incomes in the $20,000 to $30,000 range and exceed 60 per cent for those earning $30,000 to $40,000, according to calculations by C.D. Howe Institute research director Finn Poschmann.

For most families, the rate doesn't drop below 50 per cent until incomes hit $45,000.

Edmonton's economic boom is making the rich richer, but most households are barely better off than in 1981, says the Edmonton Social Planning Council.

In making the comparison today, the council reached back to the peak year of the last big oil boom, rather than to the leaner intervening years.

It makes sense to compare "apples-to-apples" boom years, council researcher John Kolkman said as the non-profit agency called for more than $1 billion in tax breaks and increased spending for low-income Albertans.

Using Statistics Canada figures, Kolkman said the median earnings level - the point where half of income earners make more and half earn less - stood at slightly more than $32,000 in 1981, and only $300 above that in 2005. He adjusted 1981 earnings to equate them to the dollar's 2005 buying power.

Even so, in inflation-adjusted terms an increasing proportion of Edmonton-area families are making $100,000 or more, the Statistics Canada numbers show. Back in 1981, about 27 per cent of families were making at least that amount, in 2005 dollars. As of 2005, more than 30 per cent were in that earnings range.

About 55 per cent of families in 1981 were earning between $40,000 and $100,000 in inflation-adjusted 2005 dollars. The middle-income range accounted for just 43 per cent of families by 2005.

About 18 per cent of families earned less than $40,000 in 1981, using the same inflation-adjusted dollars. Families in that lower-income range peaked at about 38 per cent in 1995. As of 2005, they accounted for 27 per cent.

"A greater percentage of families are doing better," Kolkman said. Even so, he said some families that were once middle income have since lost ground.

SEE:

Tax Cuts For All

Tax Cuts For The Rich Burden You and Me

Tax Fairness For The Rich

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