Update: see our January 5, 2016 article New research: ‘competing’ aggressively on tax reduces growth, a guest blog by Nikolay Anguelov of the University of Massachusetts, Dartmouth.
Recently Prof. Matthew Watson wrote an article for us entitled The Anti-Growth Dynamics of the Competitiveness Agenda, in which he outlined generic reasons, both from a supply side and a demand side, where supposedly ‘competitive’ policies on wages and in other areas are likely to depress economic growth.
Now a new study from the Canadian Center for Policy Alternatives (CCPA) complements this and notes something more specific that we’ve remarked on previously: that ‘competitive’ corporate tax cuts are likely to be equivalent to pushing on a string. They will tend to feed corporate cash hoarding (what Mark Carney has called ‘dead money’) instead of business investment – while sucking revenue and investment and spending power out of the government sector, depressing demand and investment. The likely result is slower growth.
How does this stack up, from an empirical perspective? Well a new blog from the Tax Justice Network constitutes good supporting evidence for the proposition that ‘competitive’ corporate tax cuts depress growth.