With our economy already struggling, the erosion of our tax advantage could make things even worse.
The United States Senate has approved a budget, bringing that country over a key hurdle on the road to big tax cuts.
This could have big implications for Canada.
While much of the economic discussion lately has focused on the ongoing NAFTA negotiations, tax cuts in the United States could have a big impact on Canada’s economic competitiveness.
With our economy already struggling due to massive household debt, weak exports, a rising trade deficit, the cancellation of tens of billions worth of energy projects, and government policies that increase the cost of living, the last thing we can afford is to see our competitive eroded further.
And yet, that’s exactly what will happen if the US passes a large tax cut and the Trudeau government refuses to adapt. Under current proposals, the corporate tax rate in the US will be brought down from 35% to either 25% or 20%, while much of their middle class could be getting a tax cut as well.
While the US corporate rate will still be above ours, Canada’s provinces often apply corporate taxes that bring our rate up considerably. This means that a 10% or 15% point cut in the US rate will significantly erode Canada’s tax advantage.
Additionally, the US has been dramatically reducing red tape and regulations, while Canada has been adding to the job-killing bureaucracy. This has resulted in the cancellation of numerous energy projects in our country, destroying tens of thousands of jobs.
The combination of a lower US tax rate and fewer regulations means jobs, wealth, and companies could flee across the border, severely hurting our economy.
Of course, this could easily be fixed if the Trudeau government brought in a large tax cut for consumers to increase domestic demand, eliminated the carbon tax, and reduced regulations. But, Trudeau is too obsessed with his global image – which necessitates crippling Canada’s economy while spouting off the right globalist slogans. As a result, Canada’s competitive advantage will continue to erode, and if the US passes big tax cuts, our nation will pay a serious economic price.