Montreal, December 8, 2010 – The fact that governments have made considerable efforts in recent years to reduce the tax burdens of businesses is good news for workers. In fact, corporate income taxes mainly harm workers, in addition to scaring off foreign and local investors. "Taxing corporations instead of individuals can be a very seductive option politically. However, from an economic point of view, it becomes obvious that it is workers who actually take on the extra tax burden in the form of depressed wages and less generous social benefits," explains Vincent Geloso, economist with the Montreal Economic Institute (MEI).
The authors emphasize that in the long term, each $1 increase in effective corporate taxes led to a reduction in overall compensation of more than $1. "Maintaining a competitive corporate tax rate is not only in the interests of businesses, but also and especially in the interests of their employees. Raising taxes on corporations in order to achieve budgetary balance would have negative consequences for employment and investment. What the government needs to do instead is reduce public spending," concludes Jasmin Guénette, vice president of the MEI.
The Viewpoint entitled The negative effects of corporate taxes on investment and on workers, prepared by Vincent Geloso and Jasmin Guénette, respectively Economist and Vice President of the Montreal Economic Institute, can be consulted free on the Institute’s website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications, media appearances and conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms. It does not accept any government funding.
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