Taxing smarter for prosperity

The Institute for Competitiveness & Prosperity The mandate of the Task Force, announced is funded by the Government of Ontario in the April 2001 Speech from the Throne, is through the Ministry of Economic to measure and monitor Ontario’s competitive- Development and Trade. [...] Instead of counting spreading the asset costs over a shorter period paid would result in a 30 cent increase in the cost of the investment in the year it is and getting the tax benefits of the investment economic well-being for the average Canadian made, they spread the accounting of the cost sooner – the average Canadian would be better (Exhibit 3). [...] Taxing smarter for prosperity | 23 Marginal effective The marginal effective tax burden on capital than the median of 15 percent in the five peer influences the willingness of firms to go the states examined: California, Georgia, Illinois, tax burdens on extra step and invest the incremental dollar in Massachusetts, and Michigan.d labour and capital, such as machinery, equipment and soft- ware. [...] In addition, it influences the decision by We illustrate the difference between the METR capital influence investors – from entrepreneurs to angel and marginal effective tax burden on capital in investors to venture capitalists to financial insti- Ontario and the average of the five peer states motivations tutions – to invest in Ontario or elsewhere. [...] In the peer states, The purpose of this approach is to recognize subtracted from taxes on capital to arrive at the the cost of business investments is increased by that investment and work effort decisions are marginal burden.