The Republicans often claim that we have to cut the corporate tax rate in order to create jobs and get the economy recovering.
Well, let’s test this theory out. Let’s put a conservative party in charge of a country that is similar to the US, and have them cut their corporate tax rate from 21% to 16.5%. If the economy doesn’t get better within a year, we’ll cut the corporate tax rate again to 15%. Their economy should be going gangbusters, right?
I have bad news for you. Canada has done just that — the conservative government cut corporate taxes first in January 2011, and then cut them again in January 2012. It is now two-thirds of a year later, and their economy is still plodding along in an anemic recovery, like ours. In fact, their unemployment rate is going down slower than ours is.
In the last three years, the Canadian economy has failed to produce new jobs faster than the US, even though their corporate taxes are now among the lowest of the G7 countries.
Want another experiment? How about one right here in the US. Let’s take a large corporation and reduce their taxes so much that according to the New York Times, instead of them paying corporate income taxes to the US government, the IRS writes them a check for $3.2 billion. So their taxes are negative. Well, we did that for General Electric, and what happened? They are laying off workers.
Note that GE claims that they did pay US taxes, but they will not release the actual numbers and they have often admitted that they are using very aggressive tax strategies to reduce their corporate tax burden. So it is safe to assume that their federal tax rate is very low, and yet they are still shedding jobs.
How many times will we have to learn that trickle down economics does not work?