President Donald Trump speaks during a bill passage event on the South Lawn of the White House in Washington, Wednesday, Dec. 20, 2017, to acknowledge the final passage of tax overhaul legislation by Congress. While they have slightly differing views on the landmark tax cuts just adopted in the U.S., and their potential effect on Canada, some of the country’s leading fiscal-policy experts agree on one thing. THE CANADIAN PRESS/AP, Evan Vucci

President Donald Trump speaks during a bill passage event on the South Lawn of the White House in Washington, Wednesday, Dec. 20, 2017, to acknowledge the final passage of tax overhaul legislation by Congress. While they have slightly differing views on the landmark tax cuts just adopted in the U.S., and their potential effect on Canada, some of the country’s leading fiscal-policy experts agree on one thing. THE CANADIAN PRESS/AP, Evan Vucci

U.S. tax cuts: Fiscal pros weigh in on how Canada should respond

In short: Don’t expect Canada to engage in a corporate-tax-cut-war with the U.S.

While they have slightly differing views on the landmark tax cuts just adopted in the U.S., and their potential effect on Canada, some of the country’s leading fiscal-policy experts agree on one thing.

In short: Don’t expect Canada to engage in a corporate-tax-cut-war with the U.S. That’s according to three prominent fiscal experts contacted by The Canadian Press as the U.S. passed a bill that will make it cheaper to do business down south.

Kevin Page, Jack Mintz, and Kevin Milligan all agreed Canada has different policy tools to respond. And they expressed doubt the likeliest tool involves taking a chainsaw to corporate tax rates.

The University of Calgary’s Mintz believes Canada should worry about its neighbour’s tax reform; he’s expressed it in National Post pieces with titles like, “Trump’s tax tsunami is about to wallop Canadian jobs and investment.”

His view is that for several decades Canada had two business advantages: lower corporate taxes, and free trade. Now the taxes are about equal, and free trade is in jeopardy. He said Canadian businesses also face new challenges, like carbon taxes; while the U.S. eliminates regulations.

But he said Canadian policy-makers can respond with a variety of solutions. One is tax rates. Others include simplifying regulation, or designing tax policy to benefit investment, say, by steering the proceeds of carbon taxes back to businesses.

“There are a gamut of different policies,” he said in an interview.

“It’s wrong to think that a single nugget is going to solve, deal, with the issue.”

He suggests Canadians seek some clues in an annual World Bank document. In the bank’s annual Doing Business report, Canada scores high in several places — it’s No. 2 in the world for ease of starting a business.

But it points to sore spots.

Overall, Canada ranks as the 22nd-best country to run a business, sandwiched between Lithuania and Malaysia — 13 spots behind its neighbour, the U.S. It’s 57th in dealing with construction permits, and 108th in getting electricity.

Page, Canada’s first parliamentary budget officer, also doubts copycat tax cuts are coming.

“I think it is unlikely Canada will try to match U.S. tax cuts,” Page said in an email.

“Tax reform pressures will likely build in Canada over the next few years leading up to the 2019 elections but it is more likely to have a broader agenda than tax reductions , including fairness, sustainability, growth, (the) environment.”

He said corporate income taxes are one important cost of doing business — but that companies look at a variety of things: dividend, capital and payroll taxes; regulations; and production costs like wages.

He said Canada might even draw some early benefit from the U.S. tax bill. That’s because economic growth in the U.S. tends to spill into Canada. Scotiabank’s models estimate that for every percentage point of growth in the U.S., there’s a half-point growth in Canada.

Page said he expects a short-term positive impact for Canada. But he said that dissipates as the bill’s less-desirable aspects kick in — like the $1.5 trillion added to the debt, Republicans’ talk of offsetting that through social-spending cuts, growing inequality, and the diminished fiscal manoeuvring room whenever another recession hits.

He offers a term to describe the temporary boost for Canada: ”A sugar high.”

Kevin Milligan, a UBC economist who has advised the Trudeau Liberals on tax reform, said he’s not nearly as concerned about this bill as he would be if it gave U.S. businesses a permanent tax advantage of, say, five percentage points, rather than simply putting the countries at similar rates.

“Then we’d be in a world where we’d be really, perhaps, in trouble — where you’d see firms wanting … to shift profits out of Canada. The fact that we’re tied, at about the same rate, means there’s no incentive to move profit,” he said.

“That’s why I don’t have apocalyptic concerns that some others might have expressed.”

He said businesses will continue making choices based on numerous factors, like the cost of providing health insurance to employees, a significant issue in the U.S.; good transit links; pleasant communities; workforce training; and the ability to attract talented immigrants — an area where Canada has gained some advantage, he said, given the current U.S. political climate.

“So that’s the question,” Milligan said.

“Are we best off getting into a tax-rate competition with the U.S., or competing on other grounds?”

Alexander Panetta, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Hundreds gathered for a candlelight vigil Friday evening (May 7) to remember 29-year-old corrections officer Bikramdeep Randhawa, who was killed in last weekend’s brazen daylight shooting outside North Delta’s Scottsdale Centre mall. (James Smith photo)
Hundreds gather to remember victim of North Delta shooting

Corrections officer Bikramdeep Randhawa, 29, was killed in what police say was a targeted incident

Surrey-White Rock MLA Trevor Halford and Surrey South MLA Stephanie Cadieux. (Contributed photos)
BC NDP ‘chose to create a system of chaos’ by holding back COVID-19 data: Cadieux

South Surrey MLAs criticize provincial government after BCCDC documents leak

Flags flown at half mast out front of Fraser Regional Correctional Centre for slain corrections officer Bikramdeep Randhawa. (Neil Corbett/ The News)
Public vigil and flying flags at half mast done to honour slain prison guard

Maple Ridge corrections officer Bikramdeep Randhawa, 29, is being remembered in a number of ways

TEASER PHOTO ONLY
Surrey woman a face of World Ovarian Cancer Day campaign in London, New York

‘It’s so important we find better treatments,’ Catherine Eiswerth says

The map shows the number of COVID-19 cases for the week of April 25 to May 1. The darkest areas indicate communities with a daily average of more than 20 cases per 100,000 population. (BC Centre of Disease Control)
Surrey and Abbotsford battle for top COVID hotspot in Fraser Health

Two communities are among areas across province showing highest transmission

(The Canadian Press)
Trudeau won’t say whether Canada supports patent waiver for COVID-19 vaccines

‘Canada is at the table to help find a solution’

A sign indicating face coverings are required by the establishment is pictured on the front door of a business in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
A sign indicating face coverings are required by the establishment is pictured on the front door of a business in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
B.C. to start releasing neighbourhood-specific COVID numbers after data leak

Documents obtained by the Vancouver Sun show cases broken down by neighbourhoods

Provincial health officer Dr. Bonnie Henry and Health Minister Adrian Dix update B.C.’s COVID-19 situation at the B.C. legislature, April 29, 2021. (B.C. government)
B.C.’s COVID-19 case count creeps up, seven more deaths

445 people in hospital, 157 in intensive care

Summerland’s positive test rate is much higher than surrounding local health areas, according to internal BC CDC documents. (BC CDC)
Summerland 3rd behind Surrey, Abbotsford in daily per capita COVID-19 cases

Interior Health is rolling out additional vaccine availability to the community

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Mandeep Grewal was gunned down outside an Abbotsford bank in October 2018. Police said a violent gang war to control drug-line territory was going on at that time. Drug charges have now been announced against seven people. (FILE PHOTO: John Morrow/Abbotsford News)
7 people face 38 charges related to gang drug activity in Abbotsford and Mission

Police say investigation began in 2018 into expansion of Brothers Keepers’ drug line

Amazon is pausing its Prime Day marketing event in Canada this year amid ongoing COVID-19 outbreaks at its facilities in Ontario. THE CANADIAN PRESS/Nathan Denette
Amazon Prime Day halted in Canada due to COVID-19 outbreaks in warehouses

The event was postponed to protect the health and safety of employees and customers, the company says

Ally Thomas, 12, seen in an undated family handout photo, died on April 14 from a suspected overdose. Her family says they are frustrated more public supports weren't available when they tried to get her help. THE CANADIAN PRESS
Minister says suspected overdose death of 12-year-old pushing B.C. to ‘do better’

Minister Sheila Malcolmson of Mental Health and Addictions says the government is working ‘as hard as we can’ to build a system of care for youths

At this Highway 3 check point, police officers will be asking for identification from drivers, documentation regarding the driver’s name and address, and the purpose for the driver’s travel. (RCMP)
No fines handed out at 1st COVID-19 roadblock as checks move across B.C.

Cpl. Chris Manseau says a total of 127 vehicles were stopped at a roadblock in the Manning Park area

Most Read