Time for Redford to Keep Her Promise on Section 3

My latest Calgary Herald column looks at last week's ruling (PDF) from the Alberta Court of Appeal in the Stephen Boissoin case, and why it should compel the Redford government to action:

As the Alberta legislature commences its fall sitting today, there will be much focus on how the actions of the government are to be reconciled with the promises made by Premier Alison Redford.
Ideally, there would be no conflict. As we’ve seen in practice, unfortunately, that’s not always the case.
Let’s not forget that Redford has been premier for over a year now, and the campaign of 2012 was not her first foray into the realm of promise making. Albertans may recall, for example, broken or compromised promises on such matters as fixed election dates and an inquiry into the intimidation of Alberta physicians.
There is another promise made by Redford that has not been kept and which deserves the government’s attention, as an authority no less than the Alberta Court of Appeal made clear last week.
While seeking the PC leadership, Redford was unequivocal about the need to protect freedom of expression by repealing Section 3 of Alberta’s human rights legislation.  Upon assuming office, however, the justice minister was merely ordered to “assess the appropriateness of amending or repealing Section 3 of the Alberta Human Rights Act.”   If Redford had questions about the “appropriateness” of repealing Section 3, one wonders why she would have made such a clear promise.
However, it is safe to say that the inappropriateness that exists in this area applies to the law itself, not those who believe it needs to be changed.
Section 3 of the act reads: “No person shall publish, issue or display or cause to be published, issued or displayed before the public any statement, publication, notice, sign, symbol, emblem or other representation that . . . is likely to expose a person or a class of persons to hatred or contempt.”   Subsection 2 then informs us that “nothing in this section shall be deemed to interfere with the free expression of opinion on any subject.”
In lieu of any concrete government action, the courts have had a chance to weigh in on the matter following an appeal and counter appeal of an atrocious decision from a panel of the Alberta Human Rights Commission. In 2002, the Red Deer Advocate ran a letter to the editor from a pastor named Stephen Boissoin, in which he rants about the “militant homosexual agenda” that is pushing “damaging pro-homosexual literature and guidance in the public school system.”
University of Calgary professor Darren Lund filed a complaint with the Human Rights Commission, and in 2007, a panel found that Boissoin’s letter was in violation of Section 3. He was fined $5,000 and was eternally barred from making “disparaging remarks” about homosexuals.
A Court of Queen’s Bench judge overturned that decision in 2009, leading to an appeal. Last week, the ruling came down from the Alberta Court of Appeal. The three justices unanimously upheld Boissoin’s freedom of expression, and raised concerns about the legislation and the way it was used to convict him.
The justices state that “Boissoin and others have the freedom to think . . . that homosexuality is sinful and morally wrong . . . (and) they have the right to express that thought to others.” As to the legislation itself, the ruling examines the paradoxes presented by subsection 2, and notes “the words ‘nothing in this section’ cannot be interpreted reasonably as sometimes permitting interference with the free expression of opinion.”
In other words, we need to differentiate between expression of opinion and publication of words that would amount to discrimination, such as a sign reading “whites only.”   The court warns that this “lack of clarity” will “cast a chill” on freedom of expression, and as such, Albertans are “entitled to certainty when it comes to exercise of their fundamental rights.”
Had Redford kept her promise, we might now have that certainty. Despite the damage done by the status quo, it’s not too late to make it right.

Previous writings on this matter here, here, here, here, here, and here.

Corportate Taxes and Yummy Cake

Further to my column this week on corporate tax cuts, David Campanella from the Parkland Institute responds in the letters pages of the Calgary Herald to argue for higher corporate tax rates:

Rob Breakenridge would like to have his cake and eat it, too - corporate tax  cuts and higher revenues. Conservatives love promoting corporate tax cuts  because it enriches their corporate friends and means less money to support a  generous welfare state. The latter isn't popular, so is generally left out of  the talking points. Fantastically, Breakenridge attempts to sever this connection by suggesting that corporate tax reductions have led to an increase in corporate income tax payments. If only life were so grand!
Breakenridge's argument rests on a grand misrepresentation of the  evidence.
In absolute terms, corporate income tax in Alberta did increase between 2001  (when the rate was reduced) and 2008. What else happened during that period,  which Breaken-ridge neglects to mention? A massive oil boom. Is it any wonder  revenue from corporate taxes increased when you consider that corporate profits  were skyrocketing?
The same dynamic played out at the federal level. During a period of solid  GDP growth, corporate profits more than doubled between 2001 and 2007, yet  revenue from corporate income tax increased by less than a third. The real  question is how much revenue have we forgone over the last decade as a result of  the declining corporate tax rate?
While Breakenridge would like to claim corporate tax cuts have been a major  success story, this political decision has undoubtedly cost Canadians billions  of dollars in lost revenue. Breakenridge can keep his cake.

Well, first of all, as I stated in my column: "It would be simplistic to claim that revenues will automatically rise with a reduction in the corporate tax rate".
Secondly, Campanella seems to be guilty of the "anthropomorphizing" that I spoke of in my column. Corporations are not people; they are certainly not "friends" with anyone. Whatever "corporate friends" conservatives might have, those people pay income taxes. If Campanella wishes for them to pay more, then he should look to other forms of taxation. In any event, those "corporate friends" won't be the ones paying for higher corporate tax rates.
Campanella also overlooks the costs of raising corporate taxes, and the overall benefits dervived from lower rates, beyond the revenue equation. Higher wages, productivity, and employment are all associated with lower rates. Those benefit not the "corporate friends" of conservatives, but all workers. As economics Ben Dahlby and Ergete Federe note (PDF):

Our results imply that there would have been significant welfare gains in 2011 from reductions in provincial corporate income tax rates with a revenue neutral increase in personal income tax or the introduction of a provincial sales tax. The implication of our results is that the cost of raising revenue is the highest when provincial governments use corporate income tax and the lowest when they use sales taxes.

Campanella is therefore assuming a connection between rates and revenues that simply does not exist. Higher rates might lead to an increase in revenues, but people like Campanella are guilty of "static analysis" - assuming that higher rates can be implemented without any broader effect.
Economists Jack Mintz and Duanjie Chen expand on this point in their 2012 Global Tax Competitiveness study (PDF):

...what is typically ignored is the impact of rate changes on the incentive for corporations to shift profits into and out of jurisdictions. Profit-shifting is much more responsive in the short-term, since financial and transfer pricing practices are fairly easy to change without making costly alterations to production or investment decisions.
(...)
Three Canadian studies suggest substantial corporate tax-base sensitivity to statutory corporate tax rate changes. Jog and Tang find quite large reductions in debt financing for Canadian multinationals when corporate income tax rates decline. Mintz and Smart estimate that a point reduction in the provincial statutory tax rate increases the corporate tax base by 4.9 percent for large corporations that do not allocate income across provinces, and 2.3 percent for those that allocate corporate income. Dahlby and Ferede estimate that a one-point increase in the federal-combined corporate tax rate reduces the tax base by 2.3 percent in the short run.16 Federal and provincial governments have been reducing corporate income tax rates since 2000 (when the combined federal-provincial corporate rate was over 42 percent) to a combined federal-provincial corporate rate of 26.1 percent in 2012. From 2000 to 2010, the period for which complete financial and taxation statistics for enterprises are available, the statutory tax rate has fallen from 42.4 percent to 29.4 percent (i.e., by over 25 percent).
Yet, given the severity of the 2009 recession on corporate profits, as well as the effect of ongoing rate reductions, we have not seen a significant reduction in corporate taxes as a share of GDP, which is consistent with the implications of profit-shifting studies. A counter argument was that corporate profit as a share of GDP has been up over the past decade, mainly owing to advances in technology and globalization that raised the return to capital, compared to the compensation for labour, around the world. Our analysis shows that, while net profit as a share of GDP in Canada fluctuated along with the economic cycle, taxable income, as a share of GDP, has been steadily trending upward even in recent recessionary years.

So while Campanella speaks of the "boom years" in the energy sector (an oversimplification of the first decade of this century), he neglects to mention the more recent recessionary years, which, as Mintz & Chen explain, offer compelling evidence as to the negative effects of higher corportate tax rates.
Campanella's belief that the provinces (those that reduced their rates) and the federal government are forsaking corporate tax revenue that is harmlessly there for the taken is premised on a counterfactual not supported by the evidence.
To quote me, Canada’s corporate tax reductions have been a major success story.

Hooray for Corporate Tax Cuts

My latest Calgary Herald column looks at recent evidence vindicating the corporate tax cuts at the federal and provincial levels:

From Wall Street shenanigans to the more recent accounts of mistakes and  shortcomings at XL Foods in Brooks, those looking to demonize corporations have  no shortage of ammunition at their disposal.
As such, calls for higher corporate taxes seem to resonate with a great many  Canadians.
In our recent provincial election, the Liberals and New Democrats proposed  raising Alberta’s corporate income tax rate.
In last year’s federal election, both the federal Liberals and New Democrats  campaigned against the Conservatives’ planned corporate tax reductions.
We’re even to the point, it seems, of anthropomorphizing these entities with  constant referrals to “rich” and “wealthy” corporations, as though these  corporations are living in large houses and driving fancy cars.
Certainly “rich” and “wealthy” people exist, but such individuals pay  personal income taxes, not corporate income taxes. If you wish the “rich” and “wealthy” to pay more, your focus should be on the former, not the latter.
In bemoaning Alberta’s tax structure, advocacy groups claim that the  reduction in Alberta’s rate from 15.5 per cent in 2001 to 10 per cent today is  costing us revenue. However, a look at the numbers suggests that the reality is much more  complicated than these advocates of higher rates would have us believe.
For example, for the fiscal year 2001-02, Alberta’s corporate income tax  revenues were $2.2 billion. But the lower rate did not lead to reductions in  corporate tax revenues; quite the opposite, in fact.
By 2005-06, corporate income tax revenues were $2.9 billion. That number rose  to $3.6 billion the following year, and was up to $4.75 billion by 2009-10.
We’ve seen much the same at the federal level. Beginning in 2001, the federal  Liberals initiated a series of reductions in Canada’s corporate tax rates. The  rate fell from 28 per cent in 2001 to 21 per cent in 2004. The rate fell again  under the Conservatives, going to 19.5 per cent in 2008 to 15 per cent in  2012.
Corporate tax revenues followed a different trajectory. Revenues increased  sharply in 2002, levelled off from 2003 to 2005, and then rose again before  dropping off in the 2008 recession.
New data released this week, however, show another increase in corporate  income revenues despite the much lower rate. In 2010-11, Ottawa took in $30  billion from corporate taxes — last year, that number was up to $31.7  billion.
So instead of saying revenue was up “despite” the lower rate, could you argue  that the revenue was up “because” of the lower rate?
It would be simplistic to claim that revenues will automatically rise with a  reduction in the corporate tax rate, but it’s even more simplistic — and  incorrect — to argue that revenues will automatically increase with higher  corporate tax rates.
Virtually no one is arguing the former point, but there is no shortage of  those arguing the latter.
Late last month, the U of C’s School of Public Policy released the 2012 annual global tax competitiveness ranking, which notes how successful Canada has  been in reducing its corporate tax rates and broadening the tax base. As a  result, we are now the most tax-competitive jurisdiction in the G7.
As for the effect on government revenues, authors Jack Mintz and Duanjie Chen  shed some light on the behaviour of corporations, which can help us understand  the relationship between rates and revenues.
For example, large, multinational corporations have shifted profits to Canada  to take advantage of the lower rates. To call for higher tax rates then is to  ignore “the impact of rate changes on the incentive for corporations to shift  profits into and out of jurisdictions.”
Meanwhile, a study released last year (PDF) by Edmonton economists Bev Dahlby and  Ergete Ferede found that raising corporate taxes is the most harmful form of tax  increase.
That study also contains two other important points: on a per-capita basis,  Alberta has the largest corporate tax base; and that three provinces — Ontario,  Nova Scotia and Newfoundland-Labrador — likely would see an increase in revenues  resulting from cutting corporate tax rates.
We need to get past our tendency to vilify corporations. We need to ignore  the simplistic calls for higher corporate tax rates. Canada’s corporate tax  reductions have been a major success story.