Here is a rewritten version of the article in a neutral tone:
Canada’s Capital Stock Shrinks as Productivity Crisis Deepens
The Canadian capital stock of machinery and equipment has declined by 2.8% since peaking in 2014, according to data from the Bank of Canada. This decline in productivity has raised concerns among economists about the long-term effects on the economy.
Tax Hikes and Investment
Finance Minister Chrystia Freeland recently downplayed criticisms that the increase in capital gains tax would send a negative message to businesses. However, some economists argue that this regime of higher taxes could deepen a dire productivity crisis.
The value of machinery and equipment assets declined in seven out of eight years between 2014 and 2022, with only one year showing an increase. This trend is concerning, as it suggests that Canada’s capital stock is not keeping pace with its growing labor force.
Comparison to the US
In contrast to Canada, the United States has seen significant investment in productive capacity through laws such as the Inflation Reduction and CHIPS Acts. These initiatives have channelled trillions into productive capacity, which has helped to drive growth and productivity in the US economy.
Canada’s own subsidies and tax credits for select industries are also being used to attract companies like Volkswagen AG and Stellantis NV to build battery plants for electric vehicles.
Loss of Competitiveness
Despite Canada’s marginal effective tax advantage relative to other advanced economies, it risks losing its competitive edge. The tax rate on new business investment is set to rise to 16.8% in 2028 from 14.5% currently, which is higher than the projected 24.9% in the US.
Productivity Crisis
The decline in Canada’s capital stock and productivity has led some economists to warn of a dire productivity crisis. William Robson, chief executive at the C.D. Howe Institute, stated that "we are really losing the race to equip our workers."
The government’s policies may be contributing to this trend, as the tax hikes on new business investment could discourage companies from investing in Canada.
Conclusion
Canada’s capital stock shrinkage and productivity crisis raise concerns about the long-term effects on the economy. The comparison with the US highlights the need for Canada to invest in productive capacity and competitiveness.
