Canada-U.S. Tax Comparisons.

• Author: Ambos, Paul

This book contains 12 papers written by prominent public finance scholars from Canada and the U.S. whose goal was "to explore jointly the similarities and differences in tax structures, the reasons for any differences identified, the contrasting experiences with tax reform (especially in the 1980s), and whether the tax systems are converging or diverging and why."

The authors are commended for undertaking this comparative study. Their comments and conclusions are current, comprehensive and well footnoted. The economic models or formulas developed in some of the papers, however, are of more interest to readers with an economic academic background. Also, most papers contain several useful comparative tables and charts. Unfortunately the index does not include references to the charts and tables found in the papers.

The first paper, Pressures for the Harmonization of Income Taxation between Canada and the United States, suggests that economic forces, specifically the mobility of capital, will tend to harmonize Canadian and U.S. corporate tax systems and that the immobility of labour will cause personal tax systems to vary between the countries. The paper includes a good summary and comparisons of U.S. and Canadian taxes.

Another author suggests that the increasing economic integration of Canada and the U.S. will lead more to a benefit tax system, where the tax paid equals the cost imposed on the public sector. Consumption taxes, value added taxes (VAT) or user fees are signs of the evolution to a benefit tax system.

The third paper describes, compares and charts income security programs--both those provided through the tax system and those independent of it. The paper notes that the income security programs' provisions in Canada and the U.S. are complex and dissimilar; therefore, harmonization is likely only in specific markets or industries.

Another paper, looking at tax base, tax rates and tax mix annually and over a longer time frame, concludes that personal income taxes are the most progressive tax, whether viewed annually or over a lifetime, while general sales taxes are less regressive when viewed over a lifetime rather than annually. Accordingly, Canada's tax system is more progressive because of its continued reliance on personal income taxes and on sales taxes, which are less regressive over a lifetime than U.S. social insurance contributions.

Two papers examine the cost of capital. The first tries to identify the distortions on the...