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The Impact Of Tax Cuts On Economic Growth: Evidence From The Canadian Provinces

  • Ferede, Ergete
  • Dahlby, Bev

We examine the impact of the Canadian provincial governments’ tax rates on economic growth using panel data covering the period 1977–2006. We find that a higher provincial statutory corporate income tax rate is associated with lower private investment and slower economic growth. Our empirical estimates suggest that a 1 percentage point cut in the corporate tax rate is related to a 0.1–0.2 percentage point increase in the annual growth rate. Our results also indicate that switching from a retail sales tax to a sales tax that is harmonized with the federal value-added sales tax boosts provincial investment and growth.

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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 65 (2012)
Issue (Month): 3 (September)
Pages: 563-94

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Handle: RePEc:ntj:journl:v:65:y:2012:i:3:p:563-94
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