Policy Forum: Business Tax Reform in the United States and Canada

The authors examine some of the key features of the US Tax Cuts and Jobs Act (TCJA) and discuss the implications for Canadian corporations and government revenues. They show that the tax advantage that Canada enjoyed prior to the TCJA has declined significantly, in terms of both statutory and effective (marginal and average) tax rates. They discuss the economic effects of possible responses to the TCJA by Canadian governments, including cutting statutory rates and accelerating tax depreciation deductions. Looking ahead, the authors argue that it would be preferable to focus on a more fundamental tax reform based on the taxation of economic rents.