Canada has witnessed the depletion of income growth and the rise of wealth without changing its tax system. This has led to a greater concentration of wealth in the hands of a very few and very privileged group of Canadians. As Canada’s national debt nears $1 trillion, the argument for a wealth tax is no longer controversial.
A wealth tax must be implemented now. To allow for the increased democratization of Canadian society. To allow for the betterment of the economy. The very wealthy must pay their fair share.
In Short: The time for a wealth tax has never been greater in Canada with between 67% and 75% approving the implementation of one. It is necessary to assist in the fight against growing wealth inequality while countering the concentration of power and of wealth firmly held by the “top” 1% of Canadians.
Canada’s 1% hoard a large portion of Canada’s wealth:
- Canada’s top 1% of families clutch 25.6% (≈ $3 trillion) of the country’s wealth.
- Canada’s top 0.5% of families have seized 20.5% (≈ $2.4 trillion) of the country’s wealth.
- Canada’s top 87 families owned $259 billion as of 2016, equivalent to that owned by the bottom 12 million Canadians.
- The bottom 40% of Canada owns a mere ≈1% of the country’s wealth.
The Broadbent Institute commissioned a poll, its results were telling:
- 75% of Canadians supported a wealth tax of 1-2%, specifically 44% “strongly supporting” and 31% “supporting”, with 69% of Conservative voters approving such a tax.
A North99 commissioned poll said:
- 67% of Canadians support a 2% wealth tax on households worth over $50 million, including a 60% approval rating by Conservatives.
It is clear that now is the time for Canada to implement a wealth tax. To address wealth inequality and the ever-growing power and concentration of wealth held by the “top” 1% of Canadians.
- Meanwhile, the COVID-19 pandemic has led to a historic spending boom which is projected to bring the federal debt over $1 trillion dollars. A wealth tax is a logical way for the government to increase revenue without gutting social services.
Recently, the Member of Parliament for Hamilton Centre, New Democrat Matthew Green, proposed a wealth tax that could be implemented.
The MP stated:
“The need for a wealth tax has never been more obvious. Especially at a time when there are calls to cut off critical support for those who are in most need because of the cost, the federal government needs to take action to collect more from the ultra-wealthy”.
The NDP’s Wealth Tax Proposal, From the 2019 Election
During the 2019 Federal Election, the NDP proposed a 1% wealth tax for those with wealth of $20 million and over. A drop in the bucket compared to what was being proposed south of the border by Democratic Candidate Bernie Sanders.
- An estimate done by the Parliamentary Budgetary Officer (PBO), requested by the NDP finance critic Peter Julian, found that a 1% tax over a $20 million family net wealth, which would include all assets as well as real estate in Canada would apply to 13,800 families and generate $5.6 billion in revenue between 2020 and 2021.
- The tax would only incur $113 million in administrative costs; once used an excuse against implementing such a tax by economists Robin Boadway and Pierre Pestieau, who stated the following in the Globe and Mail: “well-functioning capital-income tax renders an annual wealth tax unnecessary. The benefits do not compensate for the significant administrative costs that would be involved.” This is an absurd comment considering the administrative costs found by the PBO and the overall revenue accumulated.
The NDP argued the revenue generated by the wealth tax would assist in the funding of affordable housing (500,000 units), universal dental, pharma and mental health care, and the expansions of public transit.
American Senator, and Then Presidential Hopeful, Bernie Sanders’ Wealth Tax Proposal
- Sanders’ wealth tax was set up as a progressive tax, a tax that would gradually increase per wealth bracket, starting at a
- 1% tax on a married couples net worth of $32 million-plus; with a projected income of $4.35 trillion over the decade.
- The tax rates and wealth brackets went as followed (the brackets are cut in half for those who are single):
- 2% tax on net worth’s between $50 to 250 million,
- 3% between $250 to $500 million,
- 4% between $500 million to $1 billion,
- 5% between $1 to 2.5 billion,
- 6% between $2.5 to $5 billion,
- 7% between $5 to $10 billion, and
- 8% for $10 billion and over.
- The Bernie Sanders campaign argued that a progressive wealth tax would assist in the funding of the following proposed programs: Medicare for All, affordable housing and universal childcare.
- The NDP should heavily consider proposing a progressive tax rate, similar to that of Sanders’ proposal, for their proposed wealth tax.
Why a Wealth Tax?
There are many reasons why specifically a wealth tax is needed. Whether that be for economic or social reasons.
- The French economist Thomas Piketty argues that evaluating one’s wealth, rather than one’s income, is a better method of determining one’s capacity to pay taxes. As one’s stocks, bonds, assets and real estate, must all be considered, which is under looked in the current income tax system.
- Piketty also argues that as wealth increases, so does income inequality, as one’s returns, on investments and such, grow at a much higher rate than the growth of income over time.
- Since the 1980s, the “burden” of tax has greatly moved into the hands of the working class. Allowing for the mass concentration of wealth to stay sitting at the top, barely touched, allowing for greater power, such as the ability to influence policy via lobbying, to be held, and increased inequality to occur, as the 1%’s wealth grows.
- From a moral standpoint, the wealth tax will allow for greater societal democratization via the dismantlement of great wealth and control of the small and advantaged few.
What About Tax Avoidance?
Some people argue that there is no point in implementing a wealth tax, as the wealthy will just avoid paying the tax through tax shelters. That is why, if Canada wants to implement a wealth tax, in cooperation with the other countries, they must also fight tax avoidance.
- A global asset registry (GAR) is one-way governments could track individual tax avoidance and wealth inequality within their country, by putting already existing information together and filling in data holes gathered by the registry that the government may not have been able to attain.
Luckily, the NDP’s Peter Julian and Matthew Green, in a letter to Bill Morneau (Minister of Finance) and Diane Lebouthillier (Minister of National Revenue) called on the Liberals to “address legislative gaps regarding offshore and international tax evasion”.
The Bottom Line: A wealth tax is absolutely essential in Canada’s fight against growing wealth inequality and to end the massive concentration of wealth and power by the very few. It is time that the 99% of Canadians take a stand and push the Liberal minority government to pass and legislate the NDP’s proposal for a wealth tax to ensure a more prosperous future for Canada.
- This fight for a more democratic Canada will not be easy and people should expect some push back. With close to 3/4 of Canadians advocating for a wealth tax, the governing Liberals should understand they only represent the rich minority on this important issue.
For updates on the wealth tax proposal by the NDP, please follow MP’s Matthew Green (@MatthewGreenNDP) and Peter Julian (@MPJulian) on Twitter for more.
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