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Guarantee Job Growth with Structured Corporate Tax Incentive


Canada’s about to go to the polls in a federal election, and while the Conservatives, Liberals and NDP talk jobs, they pull out the same old cliches.  It’s more of the same down south with Barack Obama vs. the Tea Party.

Nations facing high unemployment and steady job losses should consider the following bi-partisan solution to:

1. Stimulate Job Growth, particularly in the SME sector 2. Reduce taxes for those SME’s that create good jobs 3. Increase net tax revenues for the Government (more people employed) 4. Stimulate economic growth (increase GDP and sales tax income) 5. Increase overall competitiveness

The key is associating Corporate Income Tax for small and medium-sized enterprises with Payroll Tax Deductions (collected per employee; ergo: add employees, increase payroll tax deductions, be rewarded with a lower corporate tax rate).

For right-wingers who say “just cut taxes and the let the market decide,” well that’s great in theory; but how do we guarantee XYZ Company won’t use their tax break to buy some German-engineered, Chinese-built plant automation process and lay off 10 more people in the name of efficiency, competitiveness, and shareholder value?

After running some rudimentary numbers in Excel here’s just one scenario (based on U.S. tax figures):

A Company with 16 employees and just under $1m in after tax earnings could hire 7 new employees (4@$40K, 2@65K, 1@120K), reducing there corporate tax rate by 3% (approx. $63K), with a net gain of over $10K in tax revenue to the government. In this scenario, the Company would need to grow pre-payroll earnings by 11% to “break even;” however, if the reduced tax rate was extended for 3 years (1 year per percent decrease, up to 5 years), in years 2,3,4 they would enjoy a reduced tax rate. And, all new hires could be subject to the same incentive.

The finance and accounting wizards at top Universities can work out all the details and formulas for optimum fairness and efficacy of the program (put the best, brightest, freshest minds in the land to work: make it a contest for teams of graduate students…you don’t need to hire multi-million dollar consultants!)

Linking the corporate tax incentive directly to payroll tax deductions is a classic win-win-win: guarantee job growth; give businesses the corporate tax break they’re looking for; increase revenues for government; grow GDP.

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