Kenney tax cuts are a giveaway to corporations and a new report on Trump’s tax bill proves it
Alberta Premier Jason Kenney just announced his plan to lower the province’s corporate tax rate to 11% on July 1st. Andrew Scheer and Doug Ford want to do the same thing.
Conservatives justify revenue loss from tax cuts by arguing increased business spending will offset these losses. Alberta’s revenue is expected to fall by $348 million but the government argues losses would be offset by $1.2 billion in revenue increases by 2023 due to the “stimulative effect of the tax cut in the years two, three and four of its implementation.”
But a new report on Trump’s massive tax cuts — essentially the same policy as Kenney’s — issued by the non-partisan Congressional Research Services shows these projections are wildly optimistic, if not downright incorrect.
The report explains that Trump’s tax cuts “are unlikely to provide enough growth to significantly offset revenue losses in 2018.” Corporate revenues were projected to be $243 billion, but in reality, the report notes that revenues were $38 billion lower at $205 billion. That’s 16% lower than projected.
In fact, the entire tax bill generated 5% of the expected revenue increase, leaving a 95% shortfall.
The expected increase in economic growth needed to offset revenue loses did not materialize.
But it gets worse, especially for workers.
The Trump tax cut was supposed to generate higher wages as businesses passed off profits to workers through wage increases and bonuses.
The report notes that some groups estimated wage growth would increase by $4,000 per household. But the Congressional Research Services study shows wage growth was not noticeably higher and was in line with previous years:
“There is no indication of a surge in wages in 2018 either compared to history or relative to GDP growth.”
In fact, wage growth after the GOP tax cut was smaller than in previous years:
“This growth is smaller than overall growth in labor compensation and indicates that ordinary workers had very little growth in wage rates.”
Proponents also argued businesses would issue bonuses to workers as profits grew. But that just didn’t happen.
The report notes that with US employment of 157 million, bonuses amount to $28 per worker, a measly 2% to 3% of the total corporate tax cut.
How did corporations spend the money? Through record-breaking stock buy-backs – which serve only to profit business owners and not workers – worth over $1 trillion in 2018.
It’s clear that Kenney’s plan will do nothing to increase government revenues or grow worker’s wages. These tax breaks are nothing more than a massive handout to big corporations paid for by Alberta taxpayers. We can expect the same to happen if Scheer wins the next election.