The TD Bank shows that from the early 1970s to the mid-1990s, the annual rate of productivity growth was 50 per cent faster in the United States than in Canada. In the late 1990s, it was almost 300 per cent faster. A faster advance in productivity means a wealthier country and a higher standard of living. It stimulates investment, keeping domestic capital at home and attracting foreign money into the country, all of which support the exchange rate. A lower tax burden.
High taxes reduce the incentive to work, save and invest.
All this is bad for currency values. What's more, Canadians shoulder a far heavier tax burden as a share of the economy than in the United States. Last year, Canadian government tax receipts amounted to 40 per cent of gross domestic product, compared with just 32 per cent in the United States. If we were getting more value from government than Americans get, this might be defensible. But we don't.