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Monday, April 2, 2012

What Policymakers Can Learn from Canada's Corporate Tax Cuts

Canada, who has a stronger economy than the US, started reducing its corporate tax rate in 1980 from 38% to the present tax 15%. The results were amazing.
Most agree that the U.S. corporate tax rate should be cut. The sticking point on slashing the corporate tax rate has been the fear that the federal government might lose revenues under such a reform...Canada's federal corporate tax rate plunged from 38 percent in 1980 to just 15 percent by 2012. There has been no obvious drop in tax revenues over the period...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 gross domestic product (GDP) have been roughly as high in recent years as they were during the 1980s, when there was a much higher rate, says Edwards. In 2012, Canada will collect about 1.9 percent of GDP in federal corporate income tax revenues with a 15 percent tax rate. The United States will collect about 1.6 percent of GDP with a 35 percent tax rate. Do we need any more evidence that our high corporate tax rate makes no sense?
Read the rest here
National Center for Policy Analysis 

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