President Elect's Taxes Threaten Canadian Competitiveness Article Review by Mathieu Bedard
Mathieu Bedard in his article has described the main effects that the implementation the Trump's tax plan might have on the Canadian economy. The journalist claims that the tax plan of the new president threatens Canadian competitiveness. The major threat is connected with Trump's plan to reduce the tax burden on corporations, without increasing the individual taxes, as it was planned by Barack Obama. Trump also promised to implement a retroactive taxation system, which imposes higher tax rates for wealthy citizens (Bedard, 2016). The author of the article believes that this may lead to the growth of capital repatriation activities, including those from Canada, as well as it this would motivate highly skilled labor force to return to the US tax jurisdiction.
The tax reforms proposed by Trump may sound really disturbing for Canada but on closer examination, these measures do not look so threatening. The Daily Dot has provided a thorough examination of the Trump’s tax plan. At a closer look, it appears that the tax plan has a lot of moving parts many of which are populist in nature. The president plans to impose a one-time high tax on the wealthy taxpayers, which would create a 30-45% boost in economic activity, however, it could have the opposite effect (Sankin, 2016). Chris Edwards, Director of Tax Policy Studies at the Cato Institute claims that the retroactive tax system would deter investors and make them move their wealth to Britain, Canada, or Caiman Islands (Sankin, 2016).
Also, the president did not specify whether the corporate tax of 15% would apply to all businesses or just some. Another source (Rubin, 2016) claims that the president has underestimated by $1trillion how deep would be a tax cut he is proposing. According to the same article, Donald Trump announced a 15% tax rate for all businesses in his first plan released in September 2015. However, in his August speech he said the top tax rate on individuals would be 33%, not the 25% he earlier proposed. That gap between the 33% rate on individuals and the 15% rate on business income would create huge opportunities for tax avoidance, giving people incentives to report their wages as business profit (Rubin, 2016). This would create inequities and loopholes for the wealthy taxpayers. Canadian Business Journal also supports this statement. According to the research of the above-mentioned journal, the tax plan would cost even more - $1.5 trillion instead of $1 trillion as it was estimated by The Wall Street Journal (Riccardi, 2016). The Tax Foundation of the United States estimates that the tax cuts proposed by the new president would trigger growth that would reduce its actual to $2.6 trillion or $3.9 trillion with the pass-through provision (Riccardi, 2016). Basically, the new tax plan would create up to 2 million more jobs but also disproportionately benefit the wealthy. According to the economist Paul Crugman, United States is already on the list of the …
