Ted Mallett is VP & Chief Economist of the Canadian Federation of Independent Business.
Mr. Lanthier’s view, as with some other academics and commentators over the years, suggests that corporate income tax obligations need to be more proportional – i.e. the same tax rate – for all sizes of businesses. This view may sound reasonable on the surface, but it leaves out allowance for some legitimate real-world distortions that the lower small-business tax rate was explicitly designed to address.
The other chief rationale for the small-business rate is that small firms deal with disproportionately higher costs of government regulations. Obviously limiting regulations to what is necessary and keeping them efficiently structured are the most important steps, but tax measures are a useful approach as well.
The policy has also been called a disincentive to growth. If so, we should be seeing a mountain of businesses clustered at the $500,000 taxable income margin; in fact there is only a molehill. The clustering is instead at the low end of the income scale, which suggests that there are plenty of growth disincentives that have nothing to do with tax rates.
globebusiness Nice to see a rational fact based response. We hardly see these anymore.
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