Tax the Corporations

During every election in either Canada or the USA the inevitable battle cry of the Liberals and Socialists is, “tax the greedy Corporations”. The truth however is that no matter who is in power it is a rare thing to see huge tax increases levied on Corporations. The reason for this is simple economics “101”. In a free and democratic society these Corporations are in business to make a profit for their shareholders so if their costs (higher taxes) go up and they have to maintain their profit level what do you think happens? Costs have to be cut or prices have to be raised, there are no other options. To cut costs the business has to look at the two areas where they have the most control, labour and material. Cutting labour means a loss of jobs which is not what anyone wants, including the government. Cheaper material usually means off-shore purchasing and given the state of our manufacturing industry this has pretty much happened already. The other option is to raise prices (inflation) and then of course do you realize what has just happened? The consumer is paying for the tax increase of course. The other ironic thing about this ridiculous philosophy is that many of the shareholders of these Corporations are regular folks like you and I with our RRSP’s and retirement funds invested in their (mutual funds) stocks. If these Companies are not profitable then the share value drops and we know what happens then. When large Corporations have to make decisions on where to invest money you can bet that States, Provinces, Cities etc that have high corporate taxation are not going to be viewed positively. In the early 90’s I was involved in attempting to secure investment funds from our parent Company in the USA for new equipment. The CEO in New York city asked why he should even think about investing $50M in a city where property taxes on business was so high, Provincial Corporate taxes were the highest in Canada and we had a socialist government (NDP Bob Rae) that was passing anti-business labour laws. It is very tough to argue these points. The way to attract business is to offer just the opposite ......tax breaks. I’m not saying a tax holiday but an incentive to do business in our Country. At the end of the day when Company’s like GM begin to fail, because the negative impact would be so great the Government usually bellies up to the bar with our tax money anyway.