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Canada’s tax revenues steady as they lowered corporate tax rates

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Canada: Corporate tax cuts, not stimulus spending
Canada: Corporate tax cuts, not stimulus spending

From the Daily Caller.

Excerpt:

The chart shows Canada’s federal corporate tax revenues as a share of gross domestic product (GDP) and the federal corporate tax rate. The tax rate plunged from 38 percent in 1980 to just 15 percent by 2012. Amazingly, there has been no obvious drop in tax revenues over the period.

Canadian corporate tax revenues have fluctuated, but the changes are correlated with economic growth, not the tax rate. In the late 1980s, a tax rate cut was followed by three years of stable revenues. In the early 1990s, a plunge in revenues was caused by a recession, and then in the late 1990s revenues soared as the economy grew.

In 2000, Canadian policymakers enacted another round of corporate tax rate cuts, which were phased in gradually. Corporate tax revenues initially dipped, but then they rebounded strongly in the late 2000s.

The rate cuts enacted in 2000 were projected to cause substantial revenue losses to the Canadian government. That projection indicates that the reform didn’t have much in the way of legislated loophole closing. But the chart shows that the positive taxpayer response to the rate cut was apparently so large that the government did not lose much, if any, revenue at all.

In 2009, Canada was dragged into a recession by the elephant economy next door, and that knocked the wind out of corporate tax revenues. However, it is remarkable that even with a recession and a tax rate under 20 percent, tax revenues as a share of GDP have been roughly as high in recent years as they were during the 1980s, when there was a much higher rate. Jason Clemens of the Macdonald-Laurier Institute notes that Canadian corporate tax revenues have been correlated with corporate profits, not the tax rate.

If a corporate tax rate is high, there is a “Laffer effect” when the rate is cut, meaning that the tax base expands so much that the government doesn’t lose any money. Estimates from Jack Mintz and other tax experts show that cutting corporate tax rates when they are above about 25 percent won’t lose governments any revenues over the long run.

This data is no surprise to supply siders – we expect this because of past experience with tax cuts.

Tax cuts: do they work?

Consider this article by the Cato Institute discusses how the Reagan tax cuts affected the unemployment rate.

Excerpt:

In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?

Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.

[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).

What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.

The federal revenues as a % of GDP were steady.

The conservative Heritage Foundation describes the effects of the Bush tax cuts.

Excerpt:

President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.

At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.

It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.

In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.

The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.

Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:

  • GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
  • The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.

Tax revenues increased after the Bush tax cuts – due economic growth.

Those are the facts. That’s not what you hear in the media, but they are the facts.

News

New study finds that Obama’s regulations cost $46 billion per year

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From the Washington Examiner.

Excerpt:

Some 10,215 new federal regulations from the Obama administration are costing consumers, businesses and the economy overall $46 billion annually, more than five times the regulatory price tag of former President Bush in his first three years in office. Worse: just implementing those regulations had a one-time additional cost of $11 billion, according to a Heritage Foundation analysis provided to Washington Secrets.

Ironically, Bush instituted more regulations, 10,674, but they cost just $8.1 billion annually, said the Heritage report, titled “Red Tape Rising: Obama and Regulation at the Three Year Mark.” It will be released Tuesday.

The analysis backs up complaints from the U.S. Chamber of Commerce and other business groups that the president’s regulations are stalling the economy and employment growth. It also calls into question Obama’s promise to put the brakes on new regulations and his State of the Union bragging about issuing less red tape than Bush.

The fact is, said Heritage’s review, hundreds more costly regulations are coming, especially those targeting energy companies and Wall Street. They threaten “to further weaken an anemic economy and job creation,” said Heritage’s James Gattuso and Diane Katz.

[…]The $46 billion price tag calculated by Heritage is staggering, as are those hitting the economy the hardest. Just consider the regulations tagged as “major” for costing $100 million or more. Obama’s team issued 106 on private industry since taking office, compared to 28 by Bush. Last year alone, Obama’s administration issued 32 major regulations impacting everything from clothes dryers, to toy labels.

Heritage said that most expensive regulation of 2011 was from the Environmental Protection Agency, which added five major rules costing $4 billion. Among them, stricter limits on industrial and commercial boilers and incinerators, for a cost of $2.6 billion annually for compliance.

The regulations are also hitting workers through higher fees on items such as checking accounts.

The link to the Heritage Foundation study is here. The title of the report makes me think of “Red Storm Rising“, an excellent novel written by conservative author Tom Clancy.

News

New study finds that female teachers give male students lower marks

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From the liberal UK Independent.

Excerpt:

A key reason why boys lag behind in the classroom is revealed for the first time today – female teachers.

Ground-breaking research shows that boys lower their sights if they think their work is going to be marked by a woman because they believe their results will be worse.

It also shows their suspicions are correct – female teachers did, on average, award lower marks to boys than unidentified external examiners. Male teachers, by contrast, awarded them higher marks than external examiners.

The findings, published by the Centre for Economic Performance today, could have immense repercussions for boys because of the dearth of male teachers in the profession. Only 15 per cent of primary school staff are men.

The findings were yesterday described as “fascinating” by one of the country’s leading academic researchers, Professor Alan Smithers, of the Centre for Education and Employment at the University of Buckingham.

He said the research, carried out among 1,200 children in 29 schools across the country, had shown a possible reason for the glaring gap in performance between girls and boys right through schooling.

I wonder if feminism and misandry (antagonism towards men) has anything to do with the results of this study?

Where are the male teachers?

Another contributing  factor causing men to underperform in school is that there are almost no male teachers and also that boys don’t learn well in co-ed classrooms – they get distracted by girls. The curriculum is not suitable for boys, who learn better with different materials that focus more on things that boys like, like wars, guns and adventures. Boys learn better with male teachers and all-male classrooms because they need male role models in order to succeed.

Consider this article on male/female teachers.

Excerpt:

The organization MenTeach, a Minnesota organization dedicated to increasing the number of males working with young children, posted a survey on its Web site showing that males constitute less than 20 percent of America’s 2.9 million elementary and middle school teachers. The 2008 survey, based on source data from the Bureau of Labor Statistics, showed even more drastic differences among different grade levels:

  • 44 percent of America’s 1.2 million secondary school teachers.
  • 18.8 percent of America’s 2.9 million elementary and middle school teachers.
  • 2.4 percent of America’s 685,000 pre-kindergarten and kindergarten teachers.

No wonder women are earning 60% of college undergraduate degrees and men are struggling to find jobs.  Most women want men to be strong husbands and fathers, so they’ll need to make sure that men have jobs. In order for men to have jobs, they’ll want to oppose feminists who discriminate against men in the education system.

The War Against Boys

An excellent book on this topic is Christina Hoff Sommers’ “The War Against Boys“. You can read a summary of her argument here.

Excerpt: (links removed)

By the late 1990s the myth of the downtrodden girl was showing some signs of unraveling, and concern over boys was growing. In 1997 the Public Education Network (PEN) announced at its annual conference the results of a new teacher-student survey titled The American Teacher 1997: Examining Gender Issues in Public Schools. The survey was funded by the Metropolitan Life Insurance Company and conducted by Louis Harris and Associates.

During a three-month period in 1997 various questions about gender equity were asked of 1,306 students and 1,035 teachers in grades seven through twelve. The MetLife study had no doctrinal ax to grind. What it found contradicted most of the findings of the AAUW, the Sadkers, and the Wellesley College Center for Research on Women: “Contrary to the commonly held view that boys are at an advantage over girls in school, girls appear to have an advantage over boys in terms of their future plans, teachers’ expectations, everyday experiences at school and interactions in the classroom.”

Some other conclusions from the MetLife study: Girls are more likely than boys to see themselves as college-bound and more likely to want a good education. Furthermore, more boys (31 percent) than girls (19 percent) feel that teachers do not listen to what they have to say.

At the PEN conference, Nancy Leffert, a child psychologist then at the Search Institute, in Minneapolis, reported the results of a survey that she and colleagues had recently completed of more than 99,000 children in grades six through twelve. The children were asked about what the researchers call “developmental assets.” The Search Institute has identified forty critical assets—”building blocks for healthy development.” Half of these are external, such as a supportive family and adult role models, and half are internal, such as motivation to achieve, a sense of purpose in life, and interpersonal confidence. Leffert explained, somewhat apologetically, that girls were ahead of boys with respect to thirty-seven out of forty assets. By almost every significant measure of well-being girls had the better of boys: they felt closer to their families; they had higher aspirations, stronger connections to school, and even superior assertiveness skills. Leffert concluded her talk by saying that in the past she had referred to girls as fragile or vulnerable, but that the survey “tells me that girls have very powerful assets.”

The Horatio Alger Association, a fifty-year-old organization devoted to promoting and affirming individual initiative and “the American dream,” releases annual back-to-school surveys. Its survey for 1998 contrasted two groups of students: the “highly successful” (approximately 18 percent of American students) and the “disillusioned” (approximately 15 percent). The successful students work hard, choose challenging classes, make schoolwork a top priority, get good grades, participate in extracurricular activities, and feel that teachers and administrators care about them and listen to them. According to the association, the successful group in the 1998 survey is 63 percent female and 37 percent male. The disillusioned students are pessimistic about their future, get low grades, and have little contact with teachers. The disillusioned group could accurately be characterized as demoralized. According to the Alger Association, “Nearly seven out of ten are male.”

That was all written in 2000 – the problem is much worse now.

Sommers’ book is must reading for any parent of a boy. It would also be a good book for pastors to read, so that they have an accurate understanding of the problems facing men, and can mentor them so that they can succeed.