NDP Minority Govt in Alberta
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ZRrrr
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The argument put forward by Jack Mintz, a University of Calgary economist and advisor to Alberta’s Progressive Conservative government, that 9,000 jobs will be lost for every one point increase in the corporate tax rate has been echoing since long before the election writ was dropped. Mintz's authority has been used to justify the March 26 provincial budget holding the line on corporate taxes (despite an increase being the second most popular source of revenue generation in the government's own pre-budget survey).
In response, the Alberta Federation of Labour (AFL) pointed out that in the two years following the April 2013 move in British Columbia to increase corporate income tax from 10% to 11%, the BC economy actually added 37,000 jobs.
Then, in an April 15th article in the Financial Post, Mintz criticized the AFL’s analysis.
Mintz’s critique of the AFL is based on a misrepresentation of the labour organization's claims. The AFL did not actually argue that raising the corporate income tax increased employment; what the AFL argued was that the BC government increased corporate income tax rates to deal with a deficit and the sky (and employment) didn’t fall. In fact, the economy added jobs after the corporate tax hike.
Mintz actually concedes that BC’s "private sector employment did rise by 37,000 jobs over two years," but he bemoans the fact that "B.C. now has the sixth-highest tax burden on capital investment" amongst Canadian provinces.
Mintz is hardly a non-partisan, neutral outside observer of Alberta’s politics. Rather, in addition to being an advisor to the Alberta PC government, Mintz has a self-interest to advocate for the interests of the oil industry, most notably Imperial Oil, a corporation which Mintz serves as a member of its Board of Directors, making a comfy six-figure salary and holding over $1.3 million in investments. This, of course, is on top of his faculty salary from the University of Calgary.
Mintz’s article acknowledges that the Prentice government did in fact ask him for an opinion on what effect a 1% corporate income tax increase would have on Alberta’s economy. Here he claims, "based on some earlier refereed work: It would cut corporate investment by $6 billion and private sector jobs by 8,900." This claim, dating back to 2010, has even been used in recent PC election mailouts – directly connecting Mintz to the political process.
Mintz’s advice is based on abstract economic modelling of hypothetical scenarios. Back in the real world, the government of British Columbia raised the rate of taxation on corporations’ profits and the sales tax on capital purchases and the BC economy still managed to create 37,000 jobs.
1. The suggestion of job losses resulting from a corporate tax increase is dependent on the belief that businesses will pack up and leave Alberta and/or that they will lay off workers to compensate for the higher taxes. But there are problems with those assumptions.
To pack up and leave they would need to go to a lower tax jurisdiction to make it worthwhile. If Alberta raised the corporate income tax rate by 1%, there would still be nowhere else in Canada with lower taxes. Raising corporate rates to 12% would put Alberta's corporate rate higher than just two provinces (Ontario and BC) and one territory (NWT).)
This moving scenario requires that the savings in corporate taxes would be greater than the cost and hassle of having to shut down one operation, move, and open another one from scratch. It could also mean buying new equipment and other supplies in a province with a sales tax, as Alberta remains the only province without a provincial sales tax.
2. For the many US companies operating in Alberta (the US provides two-thirds of foreign investment to Alberta), an increase in our provincial corporate income tax wouldn’t actually affect their bottom line at all because of what is called “the treasury transfer effect.”
The US government taxes the profits that US corporations make in foreign countries, such as Canada, at a rate of 35% (minus taxes paid in the country where the profits were made). Due to drastic cuts to corporate income taxes by the Canadian federal and Alberta governments over the last 15 years, the combined federal and provincial corporate income tax rate is now 25%. What this means is that US corporations exploiting Alberta's natural resources for a healthy profit are paying our provincial government 10% tax, the Canadian federal government 15% tax, and the US federal government 10% tax. These US corporations have to pay 35% tax on profits made outside of the US regardless of what the tax rates are in those countries and provinces. So if the Canadian federal and Alberta provincial tax rates added up to 35%, instead of 25%, then all of that money would stay in Canada and the bottom line of the US corporation wouldn’t be affected at all. A corporate income tax increase of 1% in Alberta for these US companies would just mean that they would begin paying that extra 1% to the Alberta government rather than the US government, but their total tax bill would not change at all.
3. Jack Mintz himself admits in his opinion piece that the corporate tax rate is just one factor influencing corporate behaviour, and that "various factors affect investment besides taxation." Other factors include, but are not limited to, labour force size, flexibility and potential; health and education infrastructure; transportation infrastructure; proximity to natural resources; and proximity to other related businesses (it makes no sense, for example, for an oilfield supply company to move its operations to BC).
4. The flip side of Mintz’s argument, which he chooses to ignore, is that government spending cuts and job cuts that come as a result of collecting $11 billion less in taxes compared with the next-lowest-taxed Canadian province also has negative spinoff effects, namely the permanent austerity Albertans live under, the chronic underfunding of our public services, and an economy that is overly dependent on resource revenue.
5. If the concern with public policy in the current economic climate in Alberta is truly on creating jobs (or, alternatively, on avoiding losing them), research suggests that there are more effective means than cutting corporate tax rates or maintaining low rates. As pointed out by the Canadian Centre for Policy Alternatives in a 2011 report, the Harper "government's own stimulus multipliers show that corporate income tax cuts are the least effective means at the government's disposal of creating economic growth and jobs in the short run. Instead, social housing and infrastructure investments top the list, creating 10 times as many jobs per public dollar spent."
Writing about federal corporate tax cuts in 2011, economist Jim Stanford argued that cutting corporate tax rates has at best a lukewarm impact on the economy, and can actually lead to fewer net jobs than other strategies: "According to the Dept. of Finance multiplier coefficients, the tax cuts would generate just under $1 billion in new GDP, and just under 10,000 jobs (equal to $3 billion times 3,310 per billion). In contrast, if the same funds had been spent on extending EI benefits, GDP would expand by over $5 billion ($3 billion times 1.7), generating 56,000 jobs ($3 billion times 18,755 jobs per billion). The net effect of the tax cut, compared to the allocation of equivalent funds to more powerful stimulative measures, is the elimination of 46,000 jobs. (In economic parlance, the foregone jobs that would have been created if the money had been allocated to other initiatives is the “opportunity cost” of the corporate tax cuts.) ... $3 billion in infrastructure investment would generate about 53,000 jobs, while $3 billion in housing investment would generate under 50,000 jobs." (Emphasis added)
Since the global financial meltdown of 2008/09, the Canadian economy has not done well in creating good jobs. Many of the jobs that have been created are either low-paying and/or part time. Public sector job creation has played an important role in helping the Canadian and Alberta economies weather the financial turmoil since the Great Recession. If the Alberta government chose to collect corporate and personal income taxes more in line with the other Canadian provinces, it could afford to provide Albertans with the level of public services they deserve, and this new government attitude toward taxes would result in more Albertans working good jobs, which would further increase our tax revenues and the amount of money circulating in our economy.
In response, the Alberta Federation of Labour (AFL) pointed out that in the two years following the April 2013 move in British Columbia to increase corporate income tax from 10% to 11%, the BC economy actually added 37,000 jobs.
Then, in an April 15th article in the Financial Post, Mintz criticized the AFL’s analysis.
Mintz’s critique of the AFL is based on a misrepresentation of the labour organization's claims. The AFL did not actually argue that raising the corporate income tax increased employment; what the AFL argued was that the BC government increased corporate income tax rates to deal with a deficit and the sky (and employment) didn’t fall. In fact, the economy added jobs after the corporate tax hike.
Mintz actually concedes that BC’s "private sector employment did rise by 37,000 jobs over two years," but he bemoans the fact that "B.C. now has the sixth-highest tax burden on capital investment" amongst Canadian provinces.
Mintz is hardly a non-partisan, neutral outside observer of Alberta’s politics. Rather, in addition to being an advisor to the Alberta PC government, Mintz has a self-interest to advocate for the interests of the oil industry, most notably Imperial Oil, a corporation which Mintz serves as a member of its Board of Directors, making a comfy six-figure salary and holding over $1.3 million in investments. This, of course, is on top of his faculty salary from the University of Calgary.
Mintz’s article acknowledges that the Prentice government did in fact ask him for an opinion on what effect a 1% corporate income tax increase would have on Alberta’s economy. Here he claims, "based on some earlier refereed work: It would cut corporate investment by $6 billion and private sector jobs by 8,900." This claim, dating back to 2010, has even been used in recent PC election mailouts – directly connecting Mintz to the political process.
Mintz’s advice is based on abstract economic modelling of hypothetical scenarios. Back in the real world, the government of British Columbia raised the rate of taxation on corporations’ profits and the sales tax on capital purchases and the BC economy still managed to create 37,000 jobs.
1. The suggestion of job losses resulting from a corporate tax increase is dependent on the belief that businesses will pack up and leave Alberta and/or that they will lay off workers to compensate for the higher taxes. But there are problems with those assumptions.
To pack up and leave they would need to go to a lower tax jurisdiction to make it worthwhile. If Alberta raised the corporate income tax rate by 1%, there would still be nowhere else in Canada with lower taxes. Raising corporate rates to 12% would put Alberta's corporate rate higher than just two provinces (Ontario and BC) and one territory (NWT).)
This moving scenario requires that the savings in corporate taxes would be greater than the cost and hassle of having to shut down one operation, move, and open another one from scratch. It could also mean buying new equipment and other supplies in a province with a sales tax, as Alberta remains the only province without a provincial sales tax.
2. For the many US companies operating in Alberta (the US provides two-thirds of foreign investment to Alberta), an increase in our provincial corporate income tax wouldn’t actually affect their bottom line at all because of what is called “the treasury transfer effect.”
The US government taxes the profits that US corporations make in foreign countries, such as Canada, at a rate of 35% (minus taxes paid in the country where the profits were made). Due to drastic cuts to corporate income taxes by the Canadian federal and Alberta governments over the last 15 years, the combined federal and provincial corporate income tax rate is now 25%. What this means is that US corporations exploiting Alberta's natural resources for a healthy profit are paying our provincial government 10% tax, the Canadian federal government 15% tax, and the US federal government 10% tax. These US corporations have to pay 35% tax on profits made outside of the US regardless of what the tax rates are in those countries and provinces. So if the Canadian federal and Alberta provincial tax rates added up to 35%, instead of 25%, then all of that money would stay in Canada and the bottom line of the US corporation wouldn’t be affected at all. A corporate income tax increase of 1% in Alberta for these US companies would just mean that they would begin paying that extra 1% to the Alberta government rather than the US government, but their total tax bill would not change at all.
3. Jack Mintz himself admits in his opinion piece that the corporate tax rate is just one factor influencing corporate behaviour, and that "various factors affect investment besides taxation." Other factors include, but are not limited to, labour force size, flexibility and potential; health and education infrastructure; transportation infrastructure; proximity to natural resources; and proximity to other related businesses (it makes no sense, for example, for an oilfield supply company to move its operations to BC).
4. The flip side of Mintz’s argument, which he chooses to ignore, is that government spending cuts and job cuts that come as a result of collecting $11 billion less in taxes compared with the next-lowest-taxed Canadian province also has negative spinoff effects, namely the permanent austerity Albertans live under, the chronic underfunding of our public services, and an economy that is overly dependent on resource revenue.
5. If the concern with public policy in the current economic climate in Alberta is truly on creating jobs (or, alternatively, on avoiding losing them), research suggests that there are more effective means than cutting corporate tax rates or maintaining low rates. As pointed out by the Canadian Centre for Policy Alternatives in a 2011 report, the Harper "government's own stimulus multipliers show that corporate income tax cuts are the least effective means at the government's disposal of creating economic growth and jobs in the short run. Instead, social housing and infrastructure investments top the list, creating 10 times as many jobs per public dollar spent."
Writing about federal corporate tax cuts in 2011, economist Jim Stanford argued that cutting corporate tax rates has at best a lukewarm impact on the economy, and can actually lead to fewer net jobs than other strategies: "According to the Dept. of Finance multiplier coefficients, the tax cuts would generate just under $1 billion in new GDP, and just under 10,000 jobs (equal to $3 billion times 3,310 per billion). In contrast, if the same funds had been spent on extending EI benefits, GDP would expand by over $5 billion ($3 billion times 1.7), generating 56,000 jobs ($3 billion times 18,755 jobs per billion). The net effect of the tax cut, compared to the allocation of equivalent funds to more powerful stimulative measures, is the elimination of 46,000 jobs. (In economic parlance, the foregone jobs that would have been created if the money had been allocated to other initiatives is the “opportunity cost” of the corporate tax cuts.) ... $3 billion in infrastructure investment would generate about 53,000 jobs, while $3 billion in housing investment would generate under 50,000 jobs." (Emphasis added)
Since the global financial meltdown of 2008/09, the Canadian economy has not done well in creating good jobs. Many of the jobs that have been created are either low-paying and/or part time. Public sector job creation has played an important role in helping the Canadian and Alberta economies weather the financial turmoil since the Great Recession. If the Alberta government chose to collect corporate and personal income taxes more in line with the other Canadian provinces, it could afford to provide Albertans with the level of public services they deserve, and this new government attitude toward taxes would result in more Albertans working good jobs, which would further increase our tax revenues and the amount of money circulating in our economy.
101110101101
Member
I have to say I think this is a bit of a stretch to think anything nefarious is happening, combined with a bit of FUD. Their website, pre-election, was a resume of sorts......... they've been hired, what do they need the resume for at this point?
From an outsiders point of view -- this election was won by the party that made the least number of mistakes.
1) Daniel Smith - was a sheep taken to slaughter. I thought she was A LOT smarter than she obviously is. All she had to do was sit back, stfu and she's be premier today.
2) Jim Prentice - miss-read the public so badly, he got the thrashing he probably deserved. His budget stung ever person with a pulse in Alberta in such a way that they'd be reminded of it every time they'd buy beer, see their health statement or get a speeding ticket --- AND THEN they'd also remember -- oh yeah, the company that just reported billions in revenue didn't get affected AT ALL. This along with some of the comments he made along the way show he doesn't have a clue how politicians get elected.
Props to Ms. Notley for being the smartest of the three -- BY FAR.
1) Daniel Smith - was a sheep taken to slaughter. I thought she was A LOT smarter than she obviously is. All she had to do was sit back, stfu and she's be premier today.
2) Jim Prentice - miss-read the public so badly, he got the thrashing he probably deserved. His budget stung ever person with a pulse in Alberta in such a way that they'd be reminded of it every time they'd buy beer, see their health statement or get a speeding ticket --- AND THEN they'd also remember -- oh yeah, the company that just reported billions in revenue didn't get affected AT ALL. This along with some of the comments he made along the way show he doesn't have a clue how politicians get elected.
Props to Ms. Notley for being the smartest of the three -- BY FAR.
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and so it begins.... I know this would come out, doesn't matter who won, but too bad votes were for the party or for the party leader and not for the canidates....
this just out on facebook:
If this girl can get elected in the Calgary-Bow riding, I should run for Prime Minister.
Hell in a hand basket, folks. Run while you can...
teeroy
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OMG....she's the scourge of society! we're all doomed
Bnorth
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So I took a moment and fired up the wayback machine to look at some of the NDP candidate's profiles. I admittedly only focused on the young ones but what a useless lot. I was shocked as most were in school or just out of school for useless liberal arts degrees and from reading their profiles seem to embody that mindset. If one of these got in in your riding I am sincerely sorry for you. Frankly from the under 30 crowd the best they presented was a labour relations lawyer, a social worker, and a secretary at an accounting firm. LOL what a friggin joke!
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but each of them ran a solid campaign and that is what everyone voted for.... the candidate in their area..... what a frickin' joke
- Staff
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there were some very good ndp candidates I must say... the doctor that knocked out mandel, has great credentials
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101110101101
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Kindly step away from the crack pipe, your ramblings are becoming less and less coherent.
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oh no... Is the ndp already rubbing off on me? Don't even know who my constituent is..... Gonna have to look that up
imdoo'n
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Free beer for those who voted for him, Every tues at whitespot
101110101101
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Hahahaha nice. What a classless d-bag he is!
doorfx
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Wow spelling is not at the top of the skill set lol
Keith Brown
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I could care less who says what and what happen where. i have been in business for over 32 years in Alberta and our cuts start tomorrow. I have a several friends in small business and they are in the same boat. If NDP stay true to there colours which is the most likely scenario we have rough sailing ahead unless your in a large union like alberta teachers. They are sure to have higher wages and better pension under NDP. Independent small business will pay for that and a whole lot more. Nothead said no to Northern Gateway what the fu*k do you think that alone has done to future invesment in the oil sands as of today. Dream on and go hug a tree you will have lots of time for your statistics over the next 4 years.
Scrambled
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Well I'm from BC and not a NDP loyalist but I think we need more just regular people in government, I'm tired of our representatives being rich business men or lawyers,maybe Joe average will think about the average folk instead of how they can make them and there rich friends more money,
101110101101
Member
You're making cuts tomorrow based on what exactly? As it stands zero has changed since yesterday. I've been running my own small business since '98, and I am not changing anything. *shrug* Anyway, off to hug a tree... I find them more reasonable than most people
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