The super-wealthy have everything they could ask for. Internationally, their global power and influence have enabled them to concentrate corporate ownership, reap record profits, keep workers’ wages low and pay less tax than they did 30 years ago. Canada is no exception.
The current state of affairs is not an accident; it stems directly from political decisions and an economic system designed to benefit the wealthiest among us. Since the 1980s, governments around the world have reduced taxes on corporate profits and personal wealth, weakened regulations and privatized public infrastructure. These decisions allow the powerful to hoard wealth at the expense of workers, consumers, the environment, and social cohesion.
Broadly speaking, much of the attention focused on economic inequality in Canada has been on income inequality, while the role of wealth inequality has slid under the radar. The two phenomena are linked, and an understanding of one can help us reflect on the nature of the other.
Tax wealth, not just income
Wealth inequality shows the opportunity that some groups have to accumulate substantial resources over time. An understanding of wealth inequality shows us that economic inequality is not random; rather, it’s part of a self-perpetuating cycle. If economic inequality were based on pure chance, we would not see the extreme concentration of wealth and privilege that we have today in a small group of bankers, family heirs, CEOs and media barons.
As Canada’s wealth pie has grown over the years, the share of the richest 1% has increased while that of the 99% has decreased; this led Canada’s top 1% to increase their share of net wealth from 15% in 1999 to 25.7% in 2019. In the past ten years alone, the richest Canadians have doubled their wealth, compared to virtually no change for the bottom 50%.
Calculated from Credit Suisse Global Wealth Databook, 2020 and 2019
Economic inequality isn’t just unfair; it also creates a deeply dysfunctional economy. The more those at the top make decisions based on increasing their own wealth rather than our shared wealth, the less the economy can perform its role of sustaining people and our societies.
There are clear and concrete solutions that we can implement as a society - if we have the political will.
Wealth accumulation in Canada has been fostered and facilitated by political decisions:
- Corporate and personal tax cuts have allowed the wealthy to accumulate more wealth — and more power.
- This power has been used in turn to pressure governments to deregulate — especially by reducing protections for workers, consumers, and the environment.
Taxing the rich is a real possibility to address both income and wealth inequality, by:
- Creating an annual net wealth tax is a good start toward a fairer economy, but is not enough on its own.
- Changing how we tax capital gains will raise almost as much money as a modest wealth tax.
- Increasing the tax rate for corporations, closing loopholes, and increasing taxes on the highest income earners will make the economy more equal, and raise revenue that can be used to fund important public investments.
These proposed tax changes are actually quite moderate, and well within the range governments in Canada have set in recent history. While this means that doomsday predictions about devastating impacts to the economy are clearly exaggerated, it also means that we need to do more than just tax wealth — we need to also change the built-in levers in our system that ensure the rich get richer and the poor stay poor.
The impact of a wealth tax
There is significant resistance to the changes that we’re proposing, so it is important to note that, after a certain point, the accumulation of wealth no longer makes a difference to a person who is wealthy - $100,000 more or less will not prevent them from getting what they want. This includes all the luxury items and privileges they have become accustomed to, that are already far away from anything that could remotely be thought of as essential needs. Most of the money that we are looking at taxing is never used, and could never conceivably be used productively in a single person’s lifetime.
Take David Thomson and family, Canadians who own and control a media and publishing empire founded by their patriarch Roy Thomson. The family’s wealth was estimated at $50.6 billion in September 2020, a jump of $8.8 billion from the beginning of the pandemic. Forbes lists David as the 33rd richest person in the world, and Bloomberg estimates that this wealth is split between David, his two siblings, and four cousins. Even split between seven people, this amount is difficult to wrap our heads around. Billions. If you lived for 100 years and spent $1 million dollars every day of your life, you’d still have money left over.
This, at the same time that there are nearly 5 million people living in poverty in the same country. Years of tax cuts and austerity have helped the Thomson family accumulate this wealth and left too many of the rest of us with insecure jobs, inadequate housing, and a failing social safety net. We risk the tax cut / austerity dynamic happening again in the post-pandemic response if we don’t organize to ensure that our governments choose a different path.
The wealth tax proposed by the NDP in the 2019 federal election would have taxed each Thomson heir at 1% of their total wealth (over $20 million). At their current valuation, that would be an additional $505 million a year to the federal government, a fraction of the expected growth in their wealth over the year. This amount alone would cover the cost of eliminating the interest on all federal student loans in Canada.
It’s long past time to build a society and economy that will foster shared wealth.
Excerpt adapted from “Share the Wealth: How we can tax Canada’s super-rich and create a better country for everyone,” by Jonathan Gauvin and Angella MacEwen, which is available online and in bookstores from May 25, 2021.