The Obama administration continues to scratch its collective head over what to do about creating jobs. After the disastrous failure of the numerous mega-billion-buck bailouts intended to lower the unemployment rate, even the now happily departed lame-duck Congress refused to pass another massive pork bomb. The Obamanistas, devoted Keynesians all, have pushed through more spending more quickly than any other administration in history. The national debt, which stood at $13 trillion on June 2, 2010, closed the year at $14 trillion. So we have spent beyond the dreams of Keynes’ avarice, and the unemployment rate still hovers near 10%.
Meanwhile, up in the Great White North, our Canadian friends have shown the way. For the fourth year in a row, they are lowering their federal corporate tax rate. It has just been dropped to 16.5%. This is less than half the American federal rate of 35%. Amazing, considering that Canada is sometimes supposed to be the pure welfare state, while we are the pure capitalist one.
And it won’t stop there. In 2012, the Canadian federal rate will drop to 15%, bringing the combined federal and provincial rate on businesses to about 25%. Back in 2000, the combined Canadian corporate income tax rate was 42.6%, so the decline has been dramatic.
Besides cutting the corporate tax rate, the Canadian government has eliminated corporate surtaxes as well as levies on capital.
All these incentives, combined with Canada’s healthy financial sector — Canada never created crazy government agencies to encourage and then purchase bad mortgages (it apparently grasps the concept of moral hazard!) — are enticing increased business investment. Spectra Energy of Houston, for example, has decided to invest $2 billion in Canadian energy and infrastructure projects. The Citco Group, a financial firm, has decided to open its only North American bank in Canada. And the big accounting firm KMPG has moved many of its operations to Canada.
American corporate taxes remain the second highest in the industrialized world. Our competitors to the north have grasped the idea that to tax an activity is to deter it. The Canadians obviously want more business, not less. And the reason they want more is that they grasp the fact that business creates jobs.