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On the business tax side, the U.S. reform could create significant pressures for Canada

The U.S. proposal would also enable machinery and equipment expenditure to be fully written off instead of depreciated. In the first time in a decade, Canada would lose its competitive business-tax advantage for large corporate investments with most industries except for communications, mining and oil and gas being more heavily taxed.

The U.S. plan also includes a minimum tax on the US$2.5 trillion of multinational profits that are sitting outside of the United States, which could raise significant revenue. But, more importantly, it will let bring companies bring those profits home subject to no additional U.S. taxes over what taxes have already been paid abroad. This is a game-changer for a country like Canada as it could lead to a significant outflow of cash to the United States, depressing our dollar and potentially pushing up interest rates.

And that is not all. The U.S. package proposes a much lower federal rate of 25 per cent for non-corporate business income of so-called S corporations —small businesses — partnerships and proprietorships to be taxed at a federal rate of 25 per cent, instead of higher personal income tax rates. This would result in a significant reduction in the effective tax rate on small-business investment by up to a third. That would put it well below Canada’s corporate and personal tax burdens on small business profits that are now subject to tax rates potentially over 50 per cent. One can hear the giant sucking sound for startup companies from Canada as we burden small businesses with higher taxes while the U.S. goes in an opposite direction.

U.S. tax reform is not all bad news for Canada. A more vibrant U.S. economy will help push up our exports. The only question is whether we can keep businesses here to export to a U.S. market that becomes increasingly protective yet more attractive with lower taxes and less regulation. What is striking is that the U.S. tax policy is focused on growth, while ours is aimed at soaking the job creators.