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The 1/10th of 1 Percent Solution: Corprorate Tax Cuts, Investment and Jobs

Yesterday I was consumed by the demand side (Krugman and Rowe are late to the party) today I am consumed by the headline grabbing supply siders supply sider Jack the rain-maker Mintz. The FP quotes Jack Mintz quoting Jack Mintz. In his latest research paper he says that he estimated that 100,000 new jobs will be created by an increase of 30 billion in investment over 7 years owing the decrease in CITs from 16.5 to 15%.

On its own, the final cut to corporate income tax rates, from 16.5% to 15%, would result in $30-billion in additional business investment and 102,500 new jobs over a seven-year period, the paper estimates.

For the sake of argument lets just agree with Jack (how could I disagree I can’t find his paper). What he is saying is that we need an additional 30 billion in investment to create 100,000 new jobs which means that each new job created by the private sector needs 300,000 in new investment.

Notice it will take 7 years for this to happen and that it works out to roughly 14,300 jobs per year. This pretty paltry. Sure I guess every little bit helps but 14,300 jobs is less than 1 tenth of 1 % of total employment in Canada. The price tag for these cuts according to the Department of Finance over the next 7 years is wait for it…31.8 21 billion.

In effect Mintz is arguing that all of the CIT cut will go directly to new investment and generate another 10 billion which is a fairly dubious assumption to make to say the least.

Nonetheless, the best face that can be put on CIT cuts is 1/10th of 1 percent of total employment at a cost of 21 billion over 7 years. You have to ask yourself this: if the government proposed a jobs creation scheme that would not make a dent in unemployment and would cost 3 billion a year would you not be right to point out that government was extremely inefficient or generous? That is, for the price tag, the government could create 14,300 jobs a year with a funding envelope per job at over 400000 200,000$. Read that again.

The bigger point is that right now we probably could do with some heavier lifting in terms of labour market policy. Whether this should be through direct job creation (surely we can find someone in the private or public sector that can create a job for less than 200,000$ a year) or an increase in the pool of eligible workers for EI is an open question. And a much more interesting election topic than the 1/10 th of 1 percent solution currently on offer.

PS. You might also want ask yourself which service cuts or tax increases you want to pay for a worlds most costly job creation scheme.

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2 thoughts on “The 1/10th of 1 Percent Solution: Corprorate Tax Cuts, Investment and Jobs

  1. Agreed but even accepting the argument it is a pretty lame jobs plan and this is what the Conservatives think is a PR coup.

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