Should there be a wealth tax on the very rich?

September 24, 2019

In 2019, Canada is richer than ever before.

Our total economic activity per person — what economists call “real GDP per capita” — is at a record level.

So why do so many of us feel broke?

Many of us are: the benefits of our economy aren’t being shared fairly. While unemployment rates today are low, many Canadians don’t have decent work. They struggle to get by on part-time or temporary jobs with low wages, few benefits, and no job security to speak of.

Our politicians have done too little to make bad jobs better. And they haven’t done enough to strengthen the public services we all depend on. That’s why parents are struggling to pay for child care; students are burdened with too much debt; and housing costs are through the roof. Meanwhile, our response to the climate crisis has been lukewarm at best. We need to invest more.

But if Canada is richer than ever, where’s the money?

In 2016, the 87 richest families in Canada had a total net worth of $259 billion. According to a report by the CCPA’s David Macdonald, that’s nearly the net worth of every person living in Prince Edward Island, New Brunswick, and Newfoundland and Labrador put together.

Put another way, those 87 families own the same wealth as the 12 million poorest Canadians. Those 87 families have more than 4,400 times the wealth of the average Canadian family.

The corrosive effects of inequality on society are well known. High levels of inequality lead to reduced life expectancy, lower economic growth, and other social ills. And when people work hard but never seem to get ahead, it’s fertile ground for populist politicians who blame it all on immigrants or taxes.

There is no surer way to reduce inequality and boost our economy than to fund the public programs people need. Why can’t child care be affordable, post-secondary tuition free and decent housing within reach? Why can’t we find a place for every senior who needs the care and attention of a well-staffed nursing home? Why can’t we be a leader on the climate crisis?

The answer is, we can. But to do so, we need to direct the wealth of this country to where it will do the most good. And a wealth tax would help us do it.

The idea that those who have more should pay more is a well-established principle of Canadian taxation. A wealth tax would make our current tax system more progressive — and fairer.

Wealth is very lightly taxed in Canada, with loopholes throughout the tax system. If you make money selling stock or real estate, you get a half-off coupon on your taxes. If you make much of your income from corporate dividends, there’s a tax break for you too.

Individual wealth is built on the wealth of our nation as a whole. None of the individual investments that made the rich richer could have happened without the vast public investments in infrastructure, education, and the institutions (like our courts) that make a modern economy possible. Millions of Canadians, past and present, have worked hard to make Canada a place where investments pay off.

We all deserve a fair share of the wealth we have created together.

Look up. Look way, way up.

Will some individuals try to avoid paying a wealth tax? Undoubtedly. Any government that taxes wealth must be vigilant in tracking — and adapting to — the strategies high-priced accountants will use to help their clients minimize their taxes paid.

But even taking possible tax avoidance into account, the Parliamentary Budget Office estimates that the New Democratic Party’s current proposal for a one per cent wealth tax on wealth above $20 million would raise almost $70 billion over 10 years.

One per cent of net worth is a very modest level of taxation. With a wealth tax at that level, the fewer than 10,000 Canadian families who would pay it wouldn’t be forced to change their lifestyles in any way. But Canada wide, the money raised could do a lot of good.

It’s time to mobilize the resources of this incredible country. It’s time for a wealth tax in Canada.

Sheila Block is a senior economist at the Canadian Centre for Policy Alternatives. This piece was originally published in the Toronto Star