(This article was originally published by the Canadian Labour Institute.)
12 November 2021
By Toby Sanger
There's growing interest and support for a wealth tax on the ultra-rich—and for very good reasons.
As ordinary working people have struggled for years—before and during the pandemic—the top 1% have only got wealthier and wealthier. In the decade since the Occupy Wall Street protests over the top 1% and rising inequality the wake of the “Great Recession”, things have actually got worse!
The top 1% was the only group that actually increased their share of national wealth in the decade from 2010 to 2019: the share of all other groups declined or stayed the same. The top 1% have accumulated more than 25% of net national household wealth: that’s more than 75% of Canadian households. This extreme wealth inequality is bad for our society, bad for democracy, as the wealthiest accumulate more political power along with their economic power, and also bad for the economy, as is now widely accepted.
How can reverse this growth of extreme wealth inequality? We need to strengthen the power of workers through unions, increase real wages, strengthen labour standards, increase minimum wages and expand public services and social benefits, but we also need to reduce the wealth of the top 1% and increase revenues—and the best way to do that is with an annual wealth tax.
Because inequalities of wealth have become so extreme, even an annual wealth tax on the ultra-wealthy at a low rate would raise many billions each year. In fact, a wealth tax of just 1% on net wealth of over $10 million, 2% on net wealth of over $100 million and 3% on wealth of over $1 billion would generate about $20 billion annually.
This wouldn’t affect anybody with net wealth of $10 million or less, or the first $10 million of net wealth of any family. It would modestly affect—and likely not even reduce—the wealth of just the top 0.5%: just 76 thousand families. And a modestly progressive wealth tax like this could pay for important public services that would significantly benefit millions of Canadians. For instance:
$12 billion annually would cover the cost of tuition for all 2.2 million Canadian university and college post-secondary students.
$9.2 billion will pay for a national accessible child care program.
$10 billion could pay for a national pharmacare program that would save Canadians families an average of over $600 per year.
Some say that a wealth tax would be confiscatory and jealously take the well-deserved assets of entrepreneurial business leaders who create jobs, but this is false for many reasons:
Our tax system is unfair at the top: the top 1% pay a lower overall rate of tax as a share of their income than all other income groups, including the poorest 10%--and it’s even more unequal by wealth group.
Most Canadian families already pay an annual tax of close to 1% on their main asset, through property taxes on their houses—but the financial assets of the wealthiest are largely untaxed.
A disturbing number of millionaires and billionaires have been able to avoid paying any income tax at all through their use of tax loopholes and tax havens, and pay very little tax on their wealth at all.
Many of the wealthiest have accumulated their wealth through anti-competitive behaviour, price gouging and public subsidies, and through inheritance and Canada is the only G7 country without any form of inheritance or estate tax.
A wealth tax on the ultra-rich would also be relatively inexpensive to collect and hard to avoid. Most of the wealth of the ultra-rich is held in their businesses and corporate holdings, and their value is often tracked in real time. While some have been able to hide some of their assets through tax havens, those opportunities are closing as nations around the world introduce registries of the owners of assets and agree to automatic exchange of tax information
There’s enormous public support for wealth taxes. The latest polling found that 89% of Canadians support an annual wealth tax paid on the richest Canadians, including 91% of Liberal supporters, 83% of Conservative supporters, 93% of NDP supporters, 96% of Bloc supporters and 95% of Green party supporters. Even many of the wealthiest billionaires and millionaires also strongly support brining in wealth and inheritance taxes.
So what is our government waiting for?
The Trudeau government promised in their 2020 Throne Speech to “explore ways to tax extreme wealth inequality” but haven’t done anything yet.
Fortunately, the NDP has made tax fairness and making the rich pay a top priority, including through a wealth tax. The Bloc Quebecois also included a wealth tax—but only for three years—in their platform.
The federal government will need all the revenue it can to pay for the costs of the pandemic and to build back better—and in the minority government, the Liberals will need the support of the NDP or Bloc to implement their promises. There has never been a better opportunity to make our tax system fairer and reduce inequalities with a wealth tax. The ultra-rich are certain to use their influence with the Liberals to fight it—and that’s why we need the power of people and strong public pressure to achieve it.