Our neighbours to the south have elected a new president, Donald Trump. During the campaign he promised many changes that will impact businesses in the U.S. But what does the new regime mean for Calgary’s business community?
For starters, Trump promised to negotiate the North American Free Trade Agreement – an agreement that’s been great for Canada. Renegotiating it could have negative or positive outcomes for Canada. The devil will be in the details.
This, too, could be bad for American businesses. However, they can take solace in the fact that Trump promised to lower the business tax rate from 35 per cent to 15 per cent – a dramatic decline.
That could be a very good-news story for American tax revenues. We know that at least a segment of the business tax base is mobile, especially at the high end.
For Americans who had chosen to take their businesses out of the country, the U.S. may now look like a much rosier place to file their taxes. Lowered income taxes because of Trump’s promise to collapse the seven income tax brackets into three may have similar effects, attracting the well-off to file their taxes at home.
Canada could benefit from economic growth sparked in the U.S. But by the same token, these tax changes could have a magnetic effect, drawing Canadian businesses and would-be investors down south. Certainly, a dramatically reduced business tax rate makes Canada less competitive, as was noted in an RBC report.
Perhaps we should politely twist the meaning of an oft-used phrase in the U.S. election: “When they go low, we go high.” When it comes to tax rates, when they go low, we should go lower.
At the very least, we shouldn’t be raising taxes.
At the federal level, Prime Minister Trudeau lowered income taxes in the middle bracket, but increased income taxes at the top. Provincially, Premier Notley also increased income taxes to those making over $125,000.
Premier Notley raised general business taxes by 20 per cent almost immediately upon entering office. Her small business tax cut was welcome, but was easily offset by other tax and wage hikes. All of these tax hikes should be reconsidered if these governments are serious about “creating jobs.”
Both the federal and provincial governments must take a more critical look at their multibillion-dollar carbon taxes, which Mayor Nenshi has noted will also drive up property taxes. The U.S. – the world’s second largest contributor to greenhouse gas emissions and Canada’s nearest competitor for investment – isn’t imposing a carbon tax and has vowed to scrap the Paris climate commitments. Canada’s incoming $50/tonne carbon tax will impact our competitiveness.
In Calgary this past year, city council increased non-residential property taxes by 3.8 per cent, and utility bills are rising. A welcome tax freeze is coming, but a cut was possible. A 2016 poll by the Canadian Federation of Independent Business showed Calgary ranked 112th on a list of the best places in Canada to start and grow a business, and Calgarians are grappling with a double-digit unemployment rate.
Canadian and Albertan policies, as well as those crafted right here in Calgary, do not exist within a vacuum. With many incoming U.S. policies opening the door to business, policy-makers should prioritize how they are going to attract and retain job-creators here at home.
Paige MacPherson is Alberta director of the Canadian Taxpayers Federation.