Who is AIMS speaking for?

The TJ is running an article today quoting AIMS calling for New Brunswick to scrap the corporate income tax rate altogether.

Brian Lee Crowley, president of the Atlantic Institute for Market Studies, told an all-party provincial committee that toured New Brunswick to gauge public reaction to proposed tax reforms that not only should the government adopt the recommendation in a tax discussion paper to slash corporate income taxes to five per cent from 13 per cent, it should scrap the tax altogether.

AIMS’ Cirtwill pointed out that cutting corporate income taxes doesn’t mean businesses won’t pay taxes as they will still be on the hook for property taxes, consumption taxes as well as mandatory labour taxes. He noted that studies have shown that corporation’s don’t pay corporate income taxes – that is the cost of those taxes are passed on to consumers in the form of higher prices or to shareholders in the form of lower dividends or even to workers, who end up with lower wages. Cutting corporate tax rates encourages businesses to invest in growth, said Cirtwill.

I don’t even know who AIMS represents – other than a few long dead economists. I have talked with several high – very high – business leaders in New Brunswick in recent weeks and they are not calling for major cuts in the corporate income tax rate. Maybe AIMS and the CFIB have morphed into one entity. Who knows?

What’s sad about this is that I actually agree with AIMS on much of the underlying philosophy – personal responsibility, choice, competition, market forces, government limited to the provision of public goods, etc. but they are so blinded by ideology that reasonable has just left their vocabulary and now anyone who has some agreement with them is tarred and feathered as a right wing fanatic.

New Brunswick needs more tax – not less. Even if you restrained government spending significantly, if we are to reduce dependency on Equalization, we will need more tax revenue. I prefer to generate this revenue from economic growth and wage inflation tied to productivity gains and innovation rather than to try and squeeze more taxes our of the current situation but I think calling for the elimination of the corporate income tax is just silly.

This idea that corporations just pass on the cost of taxation to the individual is also a weird logic. You could say that about everything. Why should corporations give to charity? They are just going to pass the cost on to the customer. Why should corporations pay fair wages and benefits? They are just going to pass that cost on to the customer. Why should corporations take the environment seriously? They are just going to pass those costs on to the customer.

I have talked extensively with many business leaders over the years and they want to be treated fairly. They don’t want to be put at a competitive disadvantage relative to other jurisdictions as the result of bad public policy. But there are very few places in the world that do not charge a corporate income tax so having one here (a competitive one) is not placing anyone at a competitive disadvantage.

What is placing many of our companies at a competitive disadvantage is increasing energy costs. And how about government policy that for years incentivized the creation of jobs rather than productivity improvement? Or how about the underinvestment in R&D? There are far more things that are contributing to challenges in New Brunswick than corporate income tax rates.

And AIMS should – like most rational people – use their ideology as a framework on which to build a worldview but not as a blunt instrument.