Whenever governments are strapped for cash, eyes quickly turn to corporate income taxes as an expedient and presumed painless way to help balance their books. The erroneous thinking behind raising corporate income taxes, however, is that corporations and not people bear their burden. Economic theory and common sense both argue that corporate taxes are actually paid by consumers, workers, and/or investors.

Politically, however, it has proved impossible to convince large parts of the public of the futility of shifting the tax burden to corporations. Given the difficult optics of abolishing the corporate income tax, the next best alternative is to lower the rate as much as possible. Canada has a slightly lower corporate income-tax rate than the OECD average, although it varies by province. A standard federal rate of 15% applies across the country, while provincial rates in 2013 ranged from 10% in Alberta to 16% in Nova Scotia and Prince Edward Island, with rates just below 12% in the two largest provinces of Ontario and Quebec. Corporate income taxes actually account for a small share of total government revenues in Canada: about 8%.

There are several reasons that governments should reduce their reliance on corporate income taxes. First, every percentage-point increase in corporate tax rates leads to a significant erosion of the tax base. Another reason to keep corporate income taxes as low as possible is to minimize the distorting impact they have on economic behaviour, a rationale that applies to all taxes. Ultimately, the major stumbling block to lowering or eliminating corporate income taxes comes down to the public's perception of equity. The concern for "fair" treatment is misplaced; corporate income taxes are ultimately paid by people.