Wall Street Journal article on Canada, and related question to Canadians who actively participate in US political discussions

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    Aug 10, 2010 1:35 AM GMT
    This is in the Opinion Section of today's Wall Street Journal. Reposting instead of providing a link; I subscribe and am not sure it is available online without a subscription.

    General question to our Canadian friends, some of whom generally post defending the current US Government, if I might characterize it that way. My question to you is, you see our record spending, yet you are evidently aware, if this article is correct, that your relative economic health is associated with reduced government spending. Why don't your comments generally reflect the successful measures taken in your country that might apply to the US?

    Canada, Land of Smaller Government
    Its corporate income tax rate is 18% and falling. America's is 35%.

    By JASON CLEMENS

    When Americans look to Canada, they generally think of an ally, though one dominated by socialist economic policies. But the Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists. America's northern neighbor has transformed itself economically over the last 20 years.

    The Canadian reforms began in 1988 with a U.S. free trade pact that would lead to the North American Free Trade Agreement. But change really began to take off in 1993. A socialist-leaning government in Saskatchewan started by reducing spending and moving towards a balanced budget. This was followed by historic reforms by the Conservatives in Alberta, who relied on spending reductions to balance their budget quickly.

    In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt. Provincial governments similarly focused on eliminating deficits by paring spending and reducing debt, and then they started to offer tax relief.

    All government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by 2008. (Government spending in the U.S. was 38.8% of GDP that year.) The recession has caused government spending to increase in both countries. But if present trends continue, within two or three years Canada will have a smaller government as a share of its economy than the U.S.

    Canadian taxes have also come down at the federal and provincial level. They were reduced with the stated goal of improving incentives for work effort, savings, investment and entrepreneurship.

    Jean Chrétien (a Liberal) won elections in 1993, 1997 and 2000 by promising to balance the books, to prioritize federal spending to ensure that government was doing what was needed, and also to deliver tax relief. Mr. Chrétien's former finance minister, Paul Martin, became prime minister in 2003, but he lost power to the Conservative Party in 2006, in part because he moved away from some of the Chrétien principles.

    Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%.

    Yet much of the tax relief since 2000 has been on personal income taxes. The bottom two personal income tax rates have been reduced, and the income thresholds for all four rates have been increased and indexed to inflation. Canada has also reduced capital gains taxes twice (the rate is now 14.5%), cut the national sales tax to 5% from 7%, increased contribution limits to the Canadian equivalent of 401(k)s, and created new accounts similar to Roth IRAs.

    Government austerity has been accompanied by prosperity. According to the Organization for Economic Cooperation and Development (OECD), between 1997 and 2007 Canada's economic performance outstripped the OECD average and led the G-7 countries. Growth in total employment in Canada averaged 2.1%, compared to an OECD average of 1.1%.

    During the mid-1990s, Canada's commitment to reform allowed it to tackle two formerly untouchable programs: welfare and the Canada Pension Plan (CPP), equivalent to Social Security in the U.S. Over three years, federal and provincial governments agreed to changes that included investing surplus contributions in market instruments such as stocks amd bonds, curtailing some benefits, and increasing the contribution rate. The CPP is financially solvent and will be able to weather the retiring baby boomers.

    The one area Canada has been slow to reform is health care, which continues to be dominated by government. However, some provinces have allowed a series of small experiments: a completely private emergency hospital in Montreal and several private clinics in Vancouver. British Columbia and Alberta also are experimenting with market-based payments to hospitals. While these are incremental steps, the path in Canada is fairly clear: More markets and choice will exist in the future. The trend in the U.S. is the opposite.

    Most strikingly, Canada is emerging more quickly from the recession than almost any industrialized country. It's unemployment rate, which peaked at 9% in August 2009, has already fallen to 7.9%. Americans can learn much by looking north.

    Mr. Clemens is the director of research at the Pacific Research Institute and a co-author of "The Canadian Century: Moving Out of America's Shadow" (Key Porter Books, 2010).
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    Aug 10, 2010 1:43 AM GMT
    socalfitness saidThis is in the Opinion Section of today's Wall Street Journal. Reposting instead of providing a link; I subscribe and am not sure it is available online without a subscription.

    General question to our Canadian friends, some of whom generally post defending the current US Government, if I might characterize it that way. My question to you is, you see our record spending, yet you are evidently aware, if this article is correct, that your relative economic health is associated with reduced government spending. Why don't your comments generally reflect the successful measures taken in your country that might apply to the US?

    Canada, Land of Smaller Government
    Its corporate income tax rate is 18% and falling. America's is 35%.

    By JASON CLEMENS

    When Americans look to Canada, they generally think of an ally, though one dominated by socialist economic policies. But the Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists. America's northern neighbor has transformed itself economically over the last 20 years.

    The Canadian reforms began in 1988 with a U.S. free trade pact that would lead to the North American Free Trade Agreement. But change really began to take off in 1993. A socialist-leaning government in Saskatchewan started by reducing spending and moving towards a balanced budget. This was followed by historic reforms by the Conservatives in Alberta, who relied on spending reductions to balance their budget quickly.

    In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt. Provincial governments similarly focused on eliminating deficits by paring spending and reducing debt, and then they started to offer tax relief.

    View Full Image
    amcolclemens
    Associated Press
    amcolclemens
    amcolclemens

    All government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by 2008. (Government spending in the U.S. was 38.8% of GDP that year.) The recession has caused government spending to increase in both countries. But if present trends continue, within two or three years Canada will have a smaller government as a share of its economy than the U.S.

    Canadian taxes have also come down at the federal and provincial level. They were reduced with the stated goal of improving incentives for work effort, savings, investment and entrepreneurship.

    Jean Chrétien (a Liberal) won elections in 1993, 1997 and 2000 by promising to balance the books, to prioritize federal spending to ensure that government was doing what was needed, and also to deliver tax relief. Mr. Chrétien's former finance minister, Paul Martin, became prime minister in 2003, but he lost power to the Conservative Party in 2006, in part because he moved away from some of the Chrétien principles.

    Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%.

    Yet much of the tax relief since 2000 has been on personal income taxes. The bottom two personal income tax rates have been reduced, and the income thresholds for all four rates have been increased and indexed to inflation. Canada has also reduced capital gains taxes twice (the rate is now 14.5%), cut the national sales tax to 5% from 7%, increased contribution limits to the Canadian equivalent of 401(k)s, and created new accounts similar to Roth IRAs.

    Government austerity has been accompanied by prosperity. According to the Organization for Economic Cooperation and Development (OECD), between 1997 and 2007 Canada's economic performance outstripped the OECD average and led the G-7 countries. Growth in total employment in Canada averaged 2.1%, compared to an OECD average of 1.1%.

    During the mid-1990s, Canada's commitment to reform allowed it to tackle two formerly untouchable programs: welfare and the Canada Pension Plan (CPP), equivalent to Social Security in the U.S. Over three years, federal and provincial governments agreed to changes that included investing surplus contributions in market instruments such as stocks amd bonds, curtailing some benefits, and increasing the contribution rate. The CPP is financially solvent and will be able to weather the retiring baby boomers.

    The one area Canada has been slow to reform is health care, which continues to be dominated by government. However, some provinces have allowed a series of small experiments: a completely private emergency hospital in Montreal and several private clinics in Vancouver. British Columbia and Alberta also are experimenting with market-based payments to hospitals. While these are incremental steps, the path in Canada is fairly clear: More markets and choice will exist in the future. The trend in the U.S. is the opposite.

    Most strikingly, Canada is emerging more quickly from the recession than almost any industrialized country. It's unemployment rate, which peaked at 9% in August 2009, has already fallen to 7.9%. Americans can learn much by looking north.

    Mr. Clemens is the director of research at the Pacific Research Institute and a co-author of "The Canadian Century: Moving Out of America's Shadow" (Key Porter Books, 2010).



    I had read this in the paper this morning (The Wall Street Journal is the newspaper I read). How cool is 18% Corporate Income Tax. That is AWESOME! Could you imagine how much growth we could have if that took place in the USA?

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    Aug 10, 2010 1:48 AM GMT
    socalfitness saidThis is in the Opinion Section of today's Wall Street Journal. Reposting instead of providing a link; I subscribe and am not sure it is available online without a subscription.

    General question to our Canadian friends, some of whom generally post defending the current US Government, if I might characterize it that way. My question to you is, you see our record spending, yet you are evidently aware, if this article is correct, that your relative economic health is associated with reduced government spending. Why don't your comments generally reflect the successful measures taken in your country that might apply to the US?

    Canada, Land of Smaller Government
    Its corporate income tax rate is 18% and falling. America's is 35%.

    By JASON CLEMENS

    When Americans look to Canada, they generally think of an ally, though one dominated by socialist economic policies. But the Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists. America's northern neighbor has transformed itself economically over the last 20 years.

    The Canadian reforms began in 1988 with a U.S. free trade pact that would lead to the North American Free Trade Agreement. But change really began to take off in 1993. A socialist-leaning government in Saskatchewan started by reducing spending and moving towards a balanced budget. This was followed by historic reforms by the Conservatives in Alberta, who relied on spending reductions to balance their budget quickly.

    In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt. Provincial governments similarly focused on eliminating deficits by paring spending and reducing debt, and then they started to offer tax relief.

    View Full Image
    amcolclemens
    Associated Press
    amcolclemens
    amcolclemens

    All government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by 2008. (Government spending in the U.S. was 38.8% of GDP that year.) The recession has caused government spending to increase in both countries. But if present trends continue, within two or three years Canada will have a smaller government as a share of its economy than the U.S.

    Canadian taxes have also come down at the federal and provincial level. They were reduced with the stated goal of improving incentives for work effort, savings, investment and entrepreneurship.

    Jean Chrétien (a Liberal) won elections in 1993, 1997 and 2000 by promising to balance the books, to prioritize federal spending to ensure that government was doing what was needed, and also to deliver tax relief. Mr. Chrétien's former finance minister, Paul Martin, became prime minister in 2003, but he lost power to the Conservative Party in 2006, in part because he moved away from some of the Chrétien principles.

    Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%.

    Yet much of the tax relief since 2000 has been on personal income taxes. The bottom two personal income tax rates have been reduced, and the income thresholds for all four rates have been increased and indexed to inflation. Canada has also reduced capital gains taxes twice (the rate is now 14.5%), cut the national sales tax to 5% from 7%, increased contribution limits to the Canadian equivalent of 401(k)s, and created new accounts similar to Roth IRAs.

    Government austerity has been accompanied by prosperity. According to the Organization for Economic Cooperation and Development (OECD), between 1997 and 2007 Canada's economic performance outstripped the OECD average and led the G-7 countries. Growth in total employment in Canada averaged 2.1%, compared to an OECD average of 1.1%.

    During the mid-1990s, Canada's commitment to reform allowed it to tackle two formerly untouchable programs: welfare and the Canada Pension Plan (CPP), equivalent to Social Security in the U.S. Over three years, federal and provincial governments agreed to changes that included investing surplus contributions in market instruments such as stocks amd bonds, curtailing some benefits, and increasing the contribution rate. The CPP is financially solvent and will be able to weather the retiring baby boomers.

    The one area Canada has been slow to reform is health care, which continues to be dominated by government. However, some provinces have allowed a series of small experiments: a completely private emergency hospital in Montreal and several private clinics in Vancouver. British Columbia and Alberta also are experimenting with market-based payments to hospitals. While these are incremental steps, the path in Canada is fairly clear: More markets and choice will exist in the future. The trend in the U.S. is the opposite.

    Most strikingly, Canada is emerging more quickly from the recession than almost any industrialized country. It's unemployment rate, which peaked at 9% in August 2009, has already fallen to 7.9%. Americans can learn much by looking north.

    Mr. Clemens is the director of research at the Pacific Research Institute and a co-author of "The Canadian Century: Moving Out of America's Shadow" (Key Porter Books, 2010).


    The United States needs to cut the Capital Gains Tax (both Long Term and Short Term) down to ZERO. It also needs to phase out the tax on Dividends. Taxing these things discourages investment. The Estate Tax needs to be Abolish. That money has already been taxed. People should not be taxed for dieing. The Federal Income Tax needs to go to a 15% Flat Tax. Everyone will pay their share that way, thats the only fair way to do it. Paying down the deficit in the USA can be accomplished by more tax revenue coming in from the tax cuts and cutting government spending.


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    Aug 10, 2010 1:54 AM GMT
    Well, our Conservative gov't that's in charge is farther Left leaning than your Liberal party.

    Our corporate taxes have dropped, and the shortfall has been made up by taxing individuals more.
    We, as well as Ontario now have a 12% hst (tax) on just about everything except food.

    Also, a physically smaller gov't has little to do with gov't involvement in everything, which they are, right up to the elbows.

    Individuals up here are taxed far more than their US counterparts.

    Now in the article, it's noted that the very left leaning Saskatchewan led the way in '93.

    Perhaps your governments are not leaning left enough? Interesting thought. We're rather wary of things going too far Left up here, just as we're leery of too far Right.

    Why did the Canadian cross the road?
    To get to the middle (median) lol!

    -Doug
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    Aug 10, 2010 1:57 AM GMT
    meninlove saidWell, our Conservative gov't that's in charge is farther Left leaning than your Liberal party.

    Our corporate taxes have dropped, and the shortfall has been made up by taxing individuals more.
    We, as well as Ontario now have a 12% hst (tax) on just about everything except food.

    Also, a physically smaller gov't has little to do with gov't involvement in everything, which they are, right up to the elbows.

    Individuals up here are taxed far more than their US counterparts.

    Now in the article, it's noted that the very left leaning Saskatchewan led the way in '93.

    Perhaps your governments are not leaning left enough? Interesting thought. We're rather wary of things going too far Left up here, just as we're leery of too far Right.

    Why did the Canadian cross the road?
    To get to the middle (median) lol!

    -Doug

    I would submit that left-leaning and similar terms are not as relevant when crossing borders compared to actual policies. If you have a left-leaning government that reduces corporate taxes, for example, that would be more consistent with a right-leaning govt in the US. If you have a left-leaning govt that is pro-business, that would probably relate to a right-leaning US govt. But to the original question - why don't you advocate some of these policies for the US?
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    Aug 10, 2010 1:59 AM GMT
    Well, socal, our Conservative gov't would love to see zero corporate taxes. icon_wink.gif


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    Aug 10, 2010 2:04 AM GMT
    As for advocating for lower corporate taxes in your country, you fellows scream bloody murder over the low personal income taxes you already pay. How would all of you feel with the wealthier paying as much tax as they do up here?
  • commoncoll

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    Aug 10, 2010 2:07 AM GMT
    This article is very interesting! Are Canadians really smarter than American?
    What are your personal income tax rates?
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    Aug 10, 2010 2:19 AM GMT
    commoncoll saidThis article is very interesting! Are Canadians really smarter than American?

    Looking at Bill and Doug, it seems to be true.
    But this article is fascinating. I agree with lowering taxes for bottom two and raising taxes for top-earners. It isn't fair, but it's really the rich who have always subsidized the poor. I like the part about whether or not there should be tax cuts but where the tax cuts will be.
    But we do see the socialized health care system failing. Today, I read that hospital in Regina, Saskatchwan(I don't know how to spell it), are tying to have private contractors for their CT scans because people are waiting to long. Many Canadians don't have family practitioners. They still go to ERs that have high waiting times.
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    Aug 10, 2010 2:23 AM GMT

    well, in the US if your gross was 100K you'd pay about 22k plus a bit in taxes. Up here it's 35k on that 100K.

    Then you get to pay 12% tax when you try to spend any of it. icon_wink.gif
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    Aug 10, 2010 2:25 AM GMT
    meninlove said
    Then you get to pay 12% tax when you try to spend any of it. icon_wink.gif

    Is this in addition to the national sales tax that the article says is 5%?
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    Aug 10, 2010 2:26 AM GMT
    Carmine said, "It isn't fair, but it's really the rich who have always subsidized the poor. "

    lol, noblesse oblige, my Mom says, and one of the privileges of being wealthy; we get to help those that aren't. Having been there (at the bottom), there's a great happiness in being able to.
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    Aug 10, 2010 2:31 AM GMT
    Carmine, the national sales tax and the provincial sales taxes make your 'spending' tax different in each Province; it's being replaced with the HST (harmonized sales tax) so in BC it's 12%. Now Alberta, which is very Right leaning, It's 5 %. They can do this because the oil industry taxes etc pays for many things.

    http://en.wikipedia.org/wiki/Sales_taxes_in_Canada
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    Aug 10, 2010 2:35 AM GMT
    Oh. Thanks.
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    Aug 10, 2010 5:17 PM GMT
    You're warmly welcome, as always, Carmine.

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    Aug 10, 2010 5:23 PM GMT
    socalfitness said
    General question to our Canadian friends, some of whom generally post defending the current US Government, if I might characterize it that way. My question to you is, you see our record spending, yet you are evidently aware, if this article is correct, that your relative economic health is associated with reduced government spending. Why don't your comments generally reflect the successful measures taken in your country that might apply to the US?


    I'll provide the graphic to which our Canadian friends might want to refer in responding (even though I have a feeling that "reduced" spending for Canada might have a context different than what the OP is trying to imply).
    icon_biggrin.gif


    I'll rephrase socalfitness's question a bit. Why don't your comments generally reflect the successful measures taken in your country that might have applied to the US during the egregious spending during the Bush years?
    icon_biggrin.gif


    BudgetCBOProjections.png
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    Aug 10, 2010 5:32 PM GMT

    Fastprof said, "I'll rephrase socalfitness's question a bit. Why don't your comments generally reflect the successful measures taken in your country that might have applied to the US during the egregious spending during the Bush years?"


    ...you guys are hurting, and no one likes the feel of salt in an open wound. Especially after the fact. We joined RJ in late '07.
    ...look at the banking regulations in the US, while yours were being undone, ours were tightening.
    As well, too many here think Canada is some kind of horrible lock-stepping communist country. Why subject ourselves to that kind of miserable ridicule?
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    Aug 10, 2010 5:32 PM GMT
    this is pretty interesting.. enjoyed reading all of your comments. I should start paying more attention icon_idea.gif
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    Aug 10, 2010 5:37 PM GMT
    meninlove saidAs well, too many here think Canada is some kind of horrible lock-stepping communist country. Why subject ourselves to that kind of miserable ridicule?


    Of course, you know my post was "tongue-in-cheek." I have the highest respect and affection for Canada.

    My post was directed simply to the yet another "Obama-is-a-spender" Forum topic....refuting it with facts to provide perspective.

    And, I again want to point out that by responding, I am not buying into the contention that the world is ending. A deficit spending is OK as long as there is income to pay off the debt. I am less concerned about the former, and more concerned about the latter.

    Our Republican friends consistently carp about the former.
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    Aug 10, 2010 5:39 PM GMT
    well SoCal and Carmine, thanks for the thoughtful, considerate and well-mannered discussion, it's been a pleasure.

    Unfortunately, you-know-who has shown up in usual screaming hysteria.




    Hi SB.
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    Aug 10, 2010 5:39 PM GMT
    Hah. I also point out that Barney Frank and Ron Paul have joined forces to suggest balancing the budget by eliminating $1 trillion from the military budget over the next few years.

    They point out, rightfully, that after Social Security and Medicare, the military budget is the largest line item. It's nice to keep that in perspective...instead of worrying about knee-jerk issues related to very tiny line items.
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    Aug 10, 2010 5:41 PM GMT
    ...and of course, we LOVE our fastprof!

    xo -us guys

    and you know...many people up here consider Mr Bush the big spender, in that instead of spending money on his country and his people, he blew wads of it on wars, for example. However, that should really be in another topic.
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    Aug 10, 2010 6:13 PM GMT
    southbeach1500 said
    Interesting.

    So there never really was a surplus.

    It was a "projected" surplus, as if the idiots (of both parties) in Washington DC wouldn't spend that "surplus" before it actually became a surplus.

    Myth busted: There never was a surplus.


    You need to read more carefully. And not through blinders.

    That was a PROJECTED SURPLUS. Not the surplus that was present at the start of the period.

    That PROJECTED SURPLUS was decimated mostly by war spending, but by other factors and mostly by Bush.

    Think about it. Carefully. To yourself. Oh God....please. To yourself.
    icon_twisted.gif
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    Aug 10, 2010 6:44 PM GMT
    CHRISMA said

    I had read this in the paper this morning (The Wall Street Journal is the newspaper I read). How cool is 18% Corporate Income Tax. That is AWESOME! Could you imagine how much growth we could have if that took place in the USA?



    Yeah, one important thing is being left out: The effective U.S. corporate tax rate is nothing like 35 percent. In fact, it's one of the lowest among all major industrialized nations.

    http://www.cbpp.org/cms/?fa=view&id=784

    http://www.reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

    http://mediamatters.org/research/200902030003

    http://mediamatters.org/research/200902030003