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Matthew Lau: Productivity Mega Deduction another case of Carney having the right idea, wrong policy

Bad policies that are slightly less harmful than Trudeau’s bad policies are not good enough

To give credit where it’s due: finally, after 18 months in office, Prime Minister Mark Carney has announced a substantial economic policy change to improve Canada’s business environment. His “Productivity Mega Deduction,” which permanently allows businesses to immediately deduct the cost of new investments on a wide range of machinery, equipment and technology is a meaningful change. The government estimates that the new policy halves Canada’s marginal effective tax rate on new business investments from approximately 13 to 6.4 per cent.

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On the other hand, to also assign blame where it’s due, the benefits of cutting taxes on business investment will be limited because Carney chose the wrong policy. As economist Jack Mintz explained in the Financial Post, Carney’s tax change “fails the three criteria for a good tax structure: efficiency, fairness and simplicity. A far better choice would be to reduce corporate income tax rates so as to spur investment in all business activities, not just those chosen by........

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