Saturday, September 20, 2014

The CCPA CRA Audit Explained, As it Were

So, the Canada Revenue Agency is auditing the Canadian Centre for Policy Alternatives for potential violations of the Income Tax Act related to charitable or non-profit organizations. The operating suspicion is that the CCPA has engaged primarily in political activities, as opposed to educational activities.

That's ridiculous, right?

Well... maybe not so much.

Writing in the Huffington Post, CCPA "economist" Toby Sanger sets out to challenge Prime Minister Stephen Harper's assertion that corporate tax cuts have not harmed Canada's overall corporate tax haul.

As it turns out, Sanger's argument hinges on the following graph:
Comically, the graph actually directly contradicts Sanger's claim. Pay close attention to how corporate income tax revenues interacted with CIT rate cuts between 2008 and 2014. Notice anything? Such as, say... modest yearly growth?

Certainly, Sanger can demonstrate an absolute decline in CIT haul between 2006 and 2014. Apparently the reader is supposed to simply presume that this is attributable to CIT rate cuts. Yet Sanger seems to have left out one crucial event that undoubtedly, undeniably affected Canada's CIT haul: the 2008 recession.

Go ahead: search Sanger's screed for the word "recession." You won't find it. It's not there.

How can an allegedly-seasoned economist like Sanger simply not mention the recession?

I think the answer is remarkably simple: mentioning the 2008 recession would remind readers that there is more to the absolute decline in CIT haul than simply CIT rates. Once the drastic drop between CIT hauls in 2006 and 2008 is revealed to be attributable to factors other than CIT rate cuts, the very premise of Sanger's article evaporates. And my bet is that Sanger knows this.

According to the Income Tax Act, charitable and non-profit organizations are tax-exempt if they engage in educational activities. But in deliberately excluding not only pertinent information -- but in fact the most pertinent information -- from his article, Sanger has crafted a piece that is not educational or even informational, but is in fact disinformational.

As such, it is inherently political.

And while neither Toby Sanger nor the Huffington Post saw fit to disclose his involvement with the CCPA, the question is still begged: does the nature of Sanger's work in the Huffington Post reflect the nature of his work for the CCPA?

If it does, the Canada Revenue Agency's audit of the Canadian Centre for Policy Alternatives is in fact well-justified... and it will likely not end well for the CCPA.


  1. You're wrong.

    GDP and corp profits are now higher than they were in 2007, as the PM keeps on emphasizing (~20% & 18% higher in nominal terms), but federal CIT revenues are still 17% lower. In fact, as a share of corporate profits, federal CIT revenues are down by an almost identical degree as CIT rates were cut.

    PM Harper said despite rate cuts, CIT revenues hadn't declined. That is very clearly wrong, if you look at the numbers. For more detail, see

  2. Toby, this is why real scientists working in any discipline isolate their variables as a matter of course.

    All we have to do is look at your graph and isolate the pre-recession period from the post-recession period to see how the data that you have presented shows us that you're wrong. Perhaps you cannot recognize an incline in graphed data, but let me assure you that, contrary to what you seem to have presumed, most people who have read your tripe very much can -- even those whose ideological vanity will not permit them to admit it.

    It's there clear as day: all other things being equal, the CIT rate and CIT receipts to the government have moved in opposite directions. All other things being equal (this is why we isolate variables, Toby) CIT receipts have grown (albeit modestly) while the CIT rate has been cut. It's your data, Toby. Own it.

    In conclusion, Toby, I'm very familiar with the "Progressive Economics Forum" and let me tell you this: if you and your colleagues practiced economics like actual grown-up economists, you wouldn't need a "Progressive Economics Forum" to publish in because you could publish in the same forums in which conservative economists publish -- otherwise known as "Economics Forums."

    Tell your colleagues at the CCPA I said: have a good one, enjoy your CRA audit.