Reform the tax code to counter income inequality: Broadbent

This article originally appeared on iPolitics.

Income inequality is threatening Canada’s economic growth and is dragging the country’s standard of living down with it, says former NDP leader Ed Broadbent.

Appearing before the Commons finance committee Tuesday, eight experts — including some of the country’s top economists and policy specialists — took turns outlining why income disparity can no longer be ignored.

“There isn’t a sane adult in Canada who is against equal opportunity,” Broadbent told the committee.

“Income inequality is a subject of great concern for Canada, one that threatens to undermine democracy and the common good.”

The solution, he said, is greater tax fairness — higher income taxes and fewer tax exemptions for the country’s top earners, a policy pitch put forth in a 2012 report by The Broadbent Institute, a left-leaning think tank founded by Broadbent.

“Tax cuts have gone to upper income Canadians. We need to increase taxes on the top one per cent,” he told the committee, adding the government should consider restoring past tax levels.

When asked, Broadbent said he did not believe such tax increases would scare the wealthiest into leaving Canada.

“I don’t think they’re going anywhere. They’re not going to pack up and move,” he said.

But professor Stephen Richardson, an executive fellow at the University of Calgary’s School of Public Policy, argues the numbers tell a different story, one that suggests the idea of a growing income gap in Canada is a myth.

“If the rich are getting richer, which may be the case, something else must be at play because the numbers aren’t changing,” he told the committee.

There are two ways of measuring income discrepancy in Canada: through the Gini coefficient and by comparing the wealth of various income groups. The Gini method calculates inequality on a scale from one (total inequality) to zero (exact equality).

In both cases, the gap between Canada’s rich and poor appears to be stagnant. Since 1998, Canada’s Gini coefficient has remained unchanged at 0.43, Richardson said.

Income inequality in Canada, he told the committee, is “a relative concept” and entirely dependent on public perception.

“Canada could have a high level of income inequality and appear more well-off than a country that has lower inequality rates,” Richardson said.

While the numbers may not show direct income inequality, several committee members voiced concerns about unequal access to education, training and employment.

It’s this discrepancy that MPs say could be behind the decline in standards of living — particularly among aboriginal and young people — Canadians say is being felt across the country.

The challenge, said Conservative MP Mark Adler, is that most of the areas in question are provincial responsibilities. While they’re partly funded by transfer payments, he said, the federal government has no way of ensuring the money is spent properly.

Still, said Conservative MP Shelly Glover, the government is working toward improved access to these areas by creating programs like the Canada Jobs Grant, a proposed federal-provincial-industry partnership that would train Canadians in skills in short supply in today’s job market.

When questioned on this initiative, Broadbent admitted that he wasn’t familiar with the proposal but cautioned job training must also be supported by the creation of more unionized jobs.