Despite promises it made in its 2020 Throne Speech, the federal government failed to “tax extreme wealth inequality” in the 2021 budget - the first federal budget to be tabled in two years. Instead, relatively minor measures to increase taxes on foreign digital sales and luxury goods tax, small movements towards closing the stock options loophole and reducing tax evasion, make up the scant package of tax reforms Trudeau’s Liberal minority government wants to move forward to help Canada recover from the largest economic setback in decades.
Income inequality in Canada has been rising for decades, and the pandemic only brought this reality to the forefront. Median household income has remained flat since 1982, while upper income brackets have steadily risen over time. Finance Minister Chrystia Freeland herself has written extensively about this trend in and the hollowing out of the middle class. Right now, the bottom 40% of Canadians own a mere 1.2% of total wealth, while the top 1% control about 29%, according to new research. Recently, a CCPA report also revealed that in just one year of the pandemic, the top 47 billionaires in Canada have increased their wealth by $78 billion, to a total $270 billion.
Canada is the only G7 country without a tax on wealth, inheritance or estates, and by failing to include a wealth tax, Canadians have lost $10 billion in annual revenue which it could have raised through a 1% tax on wealth over 20 million. This revenue alone could fund 100,000 nurses or more than four-million affordable childcare spaces.
Other available tax reforms such as closing the Capital Gains tax loophole, as well as the rest of “Filthy Five” tax loopholes the Institute has previously written about would raise at least $16 billion every year.
In contrast to the tens of billions of dollars Canada would have raised through a wealth tax and closing tax loopholes to invest back into inclusive economic growth and the kind of recovery Canadians want, new tax reforms in the federal government’s 2021 budget will raise a few hundred million a year and do nothing to reduce wealth and income inequality. Its 3% digital services tax on companies like Netflix and Facebook will raise approximately $3.4 billion over five years starting 2021; and a sales tax on luxury goods such as yachts and private planes worth over $100,000 will raise about $700 million over five years. A tax on foriegn-owned vacant homes, to be implemented starting January 2022, is expected to rake in $175 million every year. These tax measures reflect only a small portion of wealth, when in fact, it’s the years of deduction in corporate tax rates, and failing to tax income from investment at the same rate as income from waged work that has allowed the super rich to hoard wealth.
No doubt, the budget had some big wins on childcare and increasing the minimum wage to $15/hour, but it also missed important commitments on issues such as nationalising pharmacare, expanding healthcare, EI reform, and increasing funding for LTC - these are gaping holes in our society that became evident during the pandemic. Budget 2021 has made short-term commitments, but only little long-term commitments to ensure that the systems that failed Canadians during the pandemic are mended permanently. Progressive tax measures can win Canada all that it needs. By implementing tax reforms like creating a wealth tax, implementing an excess pandemic profits tax, and closing tax loopholes, Canada can raise the revenue it needs to fund its post-pandemic recovery. We don’t have to choose between childcare and pharmacare; or making substantial investment in eldercare to implement new national standards the government has committed to establishing for Long-term care. With real tax reform, Canada can fund a climate action plan that ends Canada’s dependency on oil and gas.
There’s currently a huge appetite for a wealth tax in Canada - close to 80% of Canadians of all backgrounds and political stripes would like the government to implement it. The latest poll on this issue found that three in four people endorse a wealth tax. Minister Freeland was right - “Canadians want a tax system that’s fair, and where everyone pays their fair share” - but, by missing the opportunity to tax the rich, the government quite literally failed to cash in on what the people want.
We’re going to keep building momentum to get progressive tax reforms so that everyone is paying their fair share, and we need your support. If you would like the federal government to create a wealth tax, implement an excess pandemic profits tax, and close tax loopholes, then sign this petition.
