Paul Krugman responds to the paper I linked to in
Types of Taxes and Economic Growth by stating:
Now, the thing you have to realize about corporate taxes is that the statutory rate — the rate you pay after allowed deductions and all that — means very little. That’s because corporations have lots of potential deductions — and can hire the very best accountants to find them, and lawyers to justify them. So any time you see a table that compares the nasty 35% US rate with other countries, you know you’re being snowed.
A much better indicator is the amount of taxes corporations actually pay. From OECD data (behind a paywall, I think, unfortunately), I get the following for percentage of GDP paid in corporate taxes in some major economies, in 2005:
Canada 3.5
US 3.1
Japan 4.3
France 2.8
Germany 1.7
UK 3.4
So, OK, German profits taxes look low, but basically the United States looks normal. This whole fuss is much ado about nothing...
The data Prof. Krugman posts is interesting, but I think you need to examine this kind of data over a 5-10 year period, since corporate income fluctuates a great deal with the business cycle.
I cannot agree with the conclusion that this data shows that this is "whole fuss is much ado about nothing". Here's why:
Read more...
Macleans magazine has a terrific article on accelerating inflation across the world. It picks up my worry that
2008 is starting to look a lot like the 1970s:
Does this herald a return to the 1970s, when inflation ran wild, and you were lucky to get a mortgage at 10 per cent? Most economists won't admit that's a possibility — but it's a scary thought. Back then, Led Zeppelin's Stairway to Heaven blared on eight-tracks, Bob Barker began hosting The Price is Right, new cars cost $4,000, and Canada entered its worst economic decade since the Depression. Years of rampant government spending followed by the expensive Vietnam War had weakened the American economy, and Canada's soon followed suit. As then-prime minister Pierre Trudeau twirled for the nation, our economy sank into one of the longest slumps in Canadian history, marked by soaring unemployment and, in 1974, the largest stock market crash of the last 50 years.
Now, as Canada gets ready to sail past the four per cent inflation mark, it's hard not to notice that our situation is eerily similar to the situation back then. As Donald Coxe, global portfolio strategist at BMO Financial Group, notes, the inflation crisis then was first kicked off by a sudden rise in food prices (partly due to Nixon's "Great Grain Robbery" of 1972, and partly due to the loss of the anchovy crop off Peru, which created a shortage in protein supplements for animal feed). That was followed by a hike in oil prices, which helped create an inflation crisis in developing countries. By 1972, inflation in Canada pushed past four per cent, just as it will by the end of this year. One year later, the inflation rate hit 14 per cent.
The article does a good job of describing
Cost-Push Inflation vs. Demand-Pull Inflation but I found this section puzzling:
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