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The Problem of Corporate Tax Rate Hikes

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Why it’s nearly impossible to avoid causing more harm than good

Are Canadian corporations paying their share? Well, what is their share? And before we go there, just how much are Canadian corporations paying?

According to Statistics Canada, in the second quarter of 2024 the federal government received $221 billion from all income tax revenues (excluding CPP and QPP). Provincial governments took in another $104 billion, and local (municipal) governments got $21 billion. Using those numbers, we can (loosely) estimate that all levels of government raise somewhere around $1.38 trillion annually.

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If you’re curious (and I know you are), that means taxes cost each man, woman, and child in Canada $33,782 each year. Trust me: I feel your pain.

Based on Statistics Canada data from 2022 (the latest comparable data available), we can also say that roughly ten percent of those total revenues come from corporate taxes at both the federal and provincial levels.

Keep that 10:90 corporate-to-personal tax revenue ratio in mind. Because what if raising the corporate tax rate by, say, five percent ends up driving businesses to lay off even one percent of workers? Sure, you’ll take in an extra $7 billion in corporate taxes, but you might well lose the $12 billion in personal income taxes those laid-off workers would have paid.

How Much Should Corporations Pay?

Ok. So how should we calculate a business’s fair share? Arguably, a single dollar’s worth of business activity is actually taxed over and over again:

  • When a corporation earns revenue, it’s taxed on its profits.
  • Any remaining profit may be distributed to shareholders in the form of dividends. Shareholders, of course, will pay income tax on those dividends.
  • Corporations pass on part of the tax burden to consumers through higher prices. When consumers pay those higher prices, a part of every dollar they spend is indirectly taxed through the corporation’s price adjustments.
  • Employee wages paid from after-tax corporate profits are taxed yet again.
  • Shareholders may eventually realize capital gains when they sell their shares. These gains are, naturally, also taxed.

I guess the ideal system would identify a corporate tax rate that takes all those layers into account to ensure that no single individual’s labor and contribution should carry an unreasonable burden. I’ll leave figuring out how to build such a system to smart people.

Does “Soaking Rich Corporations” Actually Work?

Do higher corporate taxes actually improve the lives of Canadians? Spoiler alert: it’s complicated.

Government policy choices generally come with consequences. From time to time, those will include actual solutions for serious problems. But they usually leave their mark in places of which lawmakers were initially barely aware existed.

Here’s where we get to explore some of those unintended consequences by comparing economic performance between provinces with varying corporate tax rates. Do higher rates discourage business investment leading to lower employment, economic activity, and incoming tax revenues? In other words, do tax rate increases always make financial sense?

To answer those questions, I compared each province’s large business tax rate with four economic measures:

Using four measures rather than just one or two gives us many more data points which reduces the likelihood that we’re looking at random statistical relationships. Here are the current provincial corporate tax rates for large businesses:

If we find a significant negative correlation between, say, higher tax rates and outcomes for all four of those measures, then we’d have evidence that higher rates are likely to have a negative impact on the economy (and on the human beings who live within that economy). If, on the other hand, there’s a positive correlation, then it’s possible higher taxes are not harmful.

When I ran the numbers, I found that the GDP per capita has a strong negative correlation with higher tax rates (meaning, the higher the tax rate, the lower the GDP). GFCF per capita and the private sector employment rate both had moderately negative correlations with higher taxes, and my own composite economic index had a weak negative correlation. Those results, taken together, strongly suggest that higher corporate tax rates are indeed harmful for a province’s overall economic health.

Here’s a scatter plot that illustrates the relationship between tax rates and the combined outcome scores:

Alberta, with the lowest tax rate also has the best outcomes. PEI, along with New Brunswick and Nova Scotia, share the high-tax-poor-outcome corner.

I guess the bottom line coming out of all this is that the “rich corporations aren’t paying their share” claim isn’t at all simple. To be taken seriously, you’d need to account for:

  • The true second-order costs that higher corporate taxes can impose on consumers, investors, and workers.
  • The strong possibility that higher corporate taxes might cause more harm to economies than they’re worth.
  • The strong possibility that extra revenues might just end up being dumped into the general pool of toxic government waste.

Or, in other words, smart policy choices require good data.

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DEA’s Most Wanted in U.S. Custody: Mexico Extradites Dozens Amid Trump Trade Standoff

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Sam Cooper

In a stunning move just days before the Trump administration is set to impose sweeping tariffs over Mexico’s role in America’s fentanyl crisis, Mexican President Claudia Sheinbaum engineered the largest single-day extradition of cartel leaders in history, delivering 29 top-level traffickers—including one of the most notorious figures in modern drug war history—into U.S. custody.

Among those flown north on Mexican military aircraft Thursday was Rafael Caro Quintero, the infamous cartel boss accused of ordering the brutal 1985 torture and murder of DEA agent Enrique ‘Kiki’ Camarena, a crime dramatized in the Netflix series Narcos: Mexico. Other high-profile extraditees include Antonio Oseguera Cervantes, alleged brother of Jalisco New Generation Cartel (CJNG) leader “El Mencho,” as well as key leaders from the Zetas, the Gulf Cartel, and La Nueva Familia Michoacana.

In Washington, U.S. Attorney General Pamela Bondi hailed the mass extradition as a turning point in the war on cartel violence. “As President Trump has made clear, cartels are terrorist groups, and this Department of Justice is devoted to destroying cartels and transnational gangs,” Bondi said in a press release. “We will prosecute these criminals to the fullest extent of the law in honor of the brave law enforcement agents who have dedicated their careers—and in some cases, given their lives—to protect innocent people from the scourge of violent cartels.”

DEA Acting Administrator Derek S. Maltz declared, “Today, 29 fugitive cartel members have arrived in the United States from Mexico, including one name that stands above the rest for the men and women of the DEA—Rafael Caro Quintero. This moment is extremely personal for the men and women of DEA who believe Caro Quintero is responsible for the brutal torture and murder of DEA Special Agent Enrique ‘Kiki’ Camarena.”

The defendants are collectively accused of importing massive amounts of cocaine, methamphetamine, fentanyl, and heroin into the United States, along with a litany of violent crimes including murder, money laundering, and illegal weapons trafficking. The Justice Department noted that many of these cartel leaders had long-standing U.S. extradition requests that were not honored during prior administrations but were accelerated following direct White House pressure.

As the Mexican delegation, including Foreign Secretary Juan Ramón de la Fuente and security chief Omar García Harfuch, met with Secretary of State Marco Rubio in Washington, the mass extradition signaled Sheinbaum’s readiness to make dramatic concessions to avert Trump’s threatened tariffs. The unprecedented handover also coincided with the State Department formally designating six cartels as foreign terrorist organizations.

Award-winning Mexican journalist Ioan Grillo, reporting on Sheinbaum’s transformative move, cited comments from Mike Vigil, former head of the DEA’s international operations, saying, “This is the highest number of extraditions [in one day] in the history of Mexico, without question. This is historic. … These guys unleashed a river of blood… Everybody is elated with the extraditions.”

However, the decision has ignited controversy within Mexico’s legal community, Grillo reported, noting longstanding criminal defense stances were “bulldozed.”

Juan Manuel Delgado, lawyer for Miguel Ángel Treviño, one of the most feared Zetas leaders, called the move an assault on Mexican sovereignty. “My client’s extradition tramples on due process and demonstrates that Mexico is bending entirely to U.S. will,” Delgado reportedly told CrashOut magazine.

Notably, while Mexico typically secures agreements that extradited criminals will not face the death penalty, the U.S. statement made no such assurances, raising the possibility that figures like Caro Quintero could face capital punishment.

While Mexico is in the crosshairs of Trump’s fentanyl crackdown, attention is also turning to Canada’s underreported role in the continent’s cartel problem. Organized crime experts say that over the past 15 years, cartel networks have deeply infiltrated Ontario, British Columbia, and Quebec, using Canada as both a fentanyl production hub and a gateway to launder cartel proceeds. It’s a little-known fact that the cartels started to gain presence in Canadian narco-trafficking cells almost 50 years ago, one expert told The Bureau.

However, it remains unclear whether Canada’s newly appointed Fentanyl Commissioner, Kevin Brosseau, has made any significant progress in responding to Trump’s demands for tougher action. An expert who could not be named due to the sensitivities of investigations and political discussions said cartels have thrived under Canada’s lax enforcement and weak financial crime controls. The question now is whether Brosseau will have any real impact on the concerns or simply be part of “performative” meetings run out of Ottawa, they said.

With Trump’s administration signaling that Canada will be hit next week with economic penalties if fentanyl production and money laundering continue unchecked, the Trudeau government faces growing pressure to show concrete results in combating cartel expansion within its borders.

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‘Dark Truth’ Of USAID: House Lawmakers Spotlight Biden’s Foreign Aid Abuses In Fiery Oversight Hearing

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From the Daily Caller News Foundation

By Adam Pack

House Republicans zeroed in on the Biden administration’s use of foreign aid to bankroll left-wing causes that undermine American interests across the world in a heated oversight hearing Wednesday.

House Republicans, led by Delivering on Government Efficiency (DOGE) Subcommittee chairwoman Marjorie Taylor Greene, sought testimony from experts to outline how the United States Agency for International Development (USAID) advanced a left-wing policy agenda during the Biden administration that in turn alienated U.S. allies and made the world less safe for Americans. Democratic lawmakers struggled to defend the worst abuses of USAID funding, such as pushing far-left ideologies on countries with conservative cultures and indirectly financing terrorist groups.

House Oversight Republicans’ hearing on foreign aid comes after President Donald Trump’s Department of Government Efficiency has effectively dismantled USAID and left its future in limbo. Secretary of State Marco Rubio announced Wednesday the Trump administration cut roughly $60 billion in USAID and State Department grants and multi-year awards that it determined did not align with American interests.

Greene also said the DOGE Subcommittee will consider recommending investigations and criminal referrals to those it believes have abused foreign aid. The subcommittee is expected to release a post-hearing review on USAID’s foreign aid abuses next week.

“USAID has been transformed into an America-last foreign aid slush fund to prop up extremist groups, implement censorship campaigns and interfere  in foreign elections to force regime change around the world,” Greene said in her opening remarks. “That is the dark truth about USAID.”

“Taxpayer funds have literally been used to undermine U.S. interests and counter American foreign policy goals under the guise of foreign aid,” Greene continued. “This is unacceptable, and the American people agree.”

More than 60% of Americans believe that U.S. foreign aid is being “wasted on corruption or administration fees,” according to a survey published by the Financial Times on Feb. 17.

Democrats appeared unable to confront the worst USAID abuses that occurred under Biden, and at times, sought to deflect attention to unrelated topics.

After Greene outlined how USAID funding had been funneled to terrorist groups, Democratic New Mexico Rep. Melanie Stansbury, the top Democratic lawmaker on the subcommittee, began her opening remarks with the statement, “Welcome to the Elon Musk chainsaw massacre.”

Stansbury then proceeded to rail against Musk for weighing into Germany’s recent parliamentary elections, Vice President J.D. Vance scolding European elites for abandoning core civil liberties and the president’s recent comments on the Russia-Ukraine War.

Democratic lawmakers’ witness Noam Unger, director of the Sustainable Development and Resilience Initiative at the Center for Strategic and International Studies, struggled to answer a question posed by Texas Republican Rep. Brandon Gill if spending more than $3 million “for being LGBTQ” in the Caribbean aligned with American values.

Stansbury and other Democratic lawmakers on the panel appeared to have learned few lessons about USAID’s abuses. Stansbury notably defended former USAID director Samantha Power’s push to turn the department into a de-facto “climate agency” and attempted to get the experts testifying to agree that USAID should continue to push LGBTQ rights on the rest of the world.

“If we want to do counter China, there’s nothing more that has alienated billions of people than pushing an ideology that they resent,” Max Primorac, who served as USAID’s acting chief operating officer, senior agency vetting official and regulatory reform officer in the first Trump administration, told Stansbury in response. “None of this is counter China. This is counter America.”

“A resounding ‘yes’ that foreign aid can be a powerful tool of diplomacy to promote freedom, prosperity and peace in accordance with our national interest and our values, but not as an instrument of progressive imperialism,” Primorac continued. “Aid officials must ensure that every single foreign aid program can pass the Middle America smell test on waste, fraud and abuse.”

Primorac previously told the Daily Caller that USAID’s left-wing agenda under former President Joe Biden weakened the United States’ influence abroad.

Experts also tore into the Biden administration’s use of foreign aid for damaging the United States’ standing in the world. Biden notably left office with an increasingly unstable world stage, with ongoing wars in Europe and the Middle East.

“It [USAID] has been doing harm while spending more on aid,” Primorac told lawmakers.

There is more world poverty and hunger today, more political instability, and developing countries are more beholden to our adversaries.”

“The fiduciary duty of our aid officials over the past four years has done tremendous damage to foreign aid’s credibility and America’s standing in the world,” Primorac continued.

Despite Trump moving to cut the vast majority of USAID contracts and shut down the agency, most lawmakers on the panel — Republican and Democrat —  still believe the U.S. government should be doling out some foreign aid to counter China’s influence in developing countries and provide relief in humanitarian crises. But foreign aid practices must align with American interests as outlined in the president’s executive order on foreign aid, according to Republican lawmakers.

“That’s just hyperbolic nonsense that we do not recognize that there’s a role to play for the United States in the federal aid space,” Republican Texas Rep. Pat Fallon said Wednesday. “But what we want to expose is $164 million going to radical organizations — $122 million of it to organizations that have aligned, or at least tied to terrorism.”

A DCNF analysis found that more than $1.3 billion taxpayer dollars doled out by the Biden administration ended up in terrorist groups’ coffers.

The hearing was disrupted on two occasions by left-wing protestors in the crowd. An elderly woman was removed after making an “obscene gesture” to an unnamed lawmaker while South Carolina Republican Rep. William Timmons spoke. Another person attending the hearing was promptly removed by police after shouting at lawmakers to stop DOGE.

Greene told the crowd that private individuals, including those in the crowd, were free to fund far-left causes around the world, but no longer would the government be bankrolling left-wing activism on the taxpayer’s dime.

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