VANCOUVER — A federal wealth tax could provide ongoing revenue for much-needed investments in public programs and help rein in extreme economic inequality, the Canadian Centre for Policy Alternatives BC Office’s latest modelling for such a tax shows.
Senior economist Alex Hemingway modelled revenues for a Canadian wealth tax applying to net wealth above a $10 million threshold with three brackets and rates: one per cent for net wealth above $10 million, two per cent for above $50 million and three per cent for above $100 million.
“Such a wealth tax would raise an estimated $32 billion in the first year alone, rising to an estimated $51 billion by the tenth year and a cumulative $409 billion over 10 years,” says Hemingway, also a public finance policy analyst .
That’s enough to pay for all of these programs combined: universal public pharmacare, free tuition for post-secondary education, 100,000 non-market affordable homes annually and a major increase in public transit investment. And, each of these investments would significantly benefit the Canadian economy, he adds.
Canadians massively favour a wealth tax with 89 per cent support in national polling including 83 per cent of Conservative voters. Despite this popularity, an annual wealth tax is nowhere to be seen on the federal government’s agenda, Hemingway notes.
Prior to the COVID-19 pandemic, CCPA research showed the 87 richest families in Canada each held, on average, 4,448 times more wealth than the typical family—and more than the 12 million Canadians at the bottom of the economic ladder combined.
“The Parliamentary Budget Office estimates that the richest one per cent in Canada controls 25 per cent of our country’s wealth and recent academic research puts that figure even higher at 29 per cent,” Hemingway says.
Billionaire wealth skyrocketed in Canada and worldwide during the COVID-19 pandemic and 61 Canadian billionaires alone now control $324 billion in wealth, Hemingway says, noting this is happening as Canadians struggle with an escalating cost of living.
“The rise of extreme inequality has provoked growing calls for an annual wealth tax on the super-rich around the world and Canada is no exception. Proposals for a wealth tax have high levels of support among Canadians across party lines,” he explains.
Extreme inequality has damaging consequences economically, socially and politically. Hemingway explains that organizations like the IMF and OECD have begun to acknowledge this in recent years, and that international epidemiological research shows inequality is linked to worse performance on a wide range of health and social outcomes.
Many ask if a wealth tax is enforceable and Hemingway says growing economic research suggests yes.
“Tax avoidance and evasion are not laws of nature, but rather are determined by policy choices,” he says, explaining that a modern wealth tax must be comprehensive and apply equally to all types of assets so there is no incentive to shift wealth into asset classes that are exempt from the tax.
And, a wealth tax isn’t a panacea in the fight against extreme inequality nor as a source of government revenue, Hemingway adds.
