A federal wealth tax would be wildly popular. Why haven’t we heard more about the idea in the election campaign?
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Hey there, time traveller!
This article was published 21/08/2021 (467 days ago), so information in it may no longer be current.
Evaluating the scorecard of the two-year minority government, one of the most puzzling questions is why a wealth tax hasn’t been introduced.
On the face of it, it should have been easy. The NDP pitched a “super-wealth tax” as a centrepiece of its platform before the 2019 elections. And when the Liberals formed a minority government, the New Democrats had the political power to push Justin Trudeau to introduce such a tax; he, in turn, could have argued that “he had no choice.”
But in November 2020, when the NDP made a motion to implement a one per cent wealth tax, the Liberals (as well as the Conservatives and Bloc Québécois) voted against it. Jagmeet Singh and company didn’t press the matter.
If such a tax were unpopular among Canadians, that could have been the reason explaining why three parties voted against it, but a recent survey published in July by Abacus Data and Broadbent Institute found that it has overwhelming support.
In fact, 89 per cent of Canadians support a wealth tax of one per cent paid by the wealthiest, the study found. Surprisingly, even among Conservative Party supporters, 82 per cent support such a tax.
It’s hard to think of any public policy question that has such a strong consensus. Yet the federal campaign is underway and no party has made a bold statement with respect to a wealth tax.
The NDP, in its fresh campaign commitment document, basically repeated the same one per cent plan from the previous elections (it did lower the threshold from $20 million to $10 million, which is meaningful). But the language used in the NDP’s proposal is almost apologetic: “Those at the very top — superrich multimillionaires with over $10 million in wealth — will be asked to pay more toward our shared services with a one per cent wealth tax.”
Other parties haven’t addressed the issue directly so far. So would it be different this time? Will politicians listen to their voters and realize the potential gains of putting tax-justice measures at the centre of the political campaign?
Katrina Miller, program director for the Broadbent Institute, sees dramatic shifts in public opinion in the institute’s recent Tax Fairness report.
“The most important take from the report is the level at which we’re seeing Canadians grow in interest, and urgency and support around measures like a wealth tax,” she said over Zoom. Some 90 per cent of Canadians back such a tax, she added — “ That’s a 10-point increase from just nine months ago.
“Sixty-two per cent of people who we polled said the tax system is unfair. Canadians feel like life is sort of tenuous, and potentially getting more unaffordable for most of us. While there’s (these) very few sets of people and entities at the top that are kind of making away with all the cash, that’s very apparent,” said Miller.
The one per cent wealth tax as the NDP is proposing is quite modest. The rate certainly pales in comparison to the two per cent going all the way to eight per cent propositions made by U.S. senators Bernie Sanders and Elizabeth Warren.
Moreover, a crucial part in any proposition would be the definition of “wealth.” It is essential that it be defined in the broadest possible way, including liquid and illiquid assets as well as unrealized gains such as stock holdings.
As Sen. Warren recently put it in an appearance on CNBC: “Whatever form you have your assets — diamonds, yachts, paintings — or whether you have a bazillion shares of Amazon. I think there ought to be a tax on that annually.”
To give an order of magnitude of the amount that could be raised, the Parliamentary Budget Office published a report in July, estimating that a one-time wealth tax of three per cent on net wealth of more than $10 million and five per cent on net wealth over $20 million, could raise between $44 billion and $61 billion.
But this kind of tax should serve as more than a mechanism for collecting revenue or even a way to make the rich “pay their fair share.” It actually carries a strong message of reducing inequality and eliminating the concentration of money and power in the hands of few. And for that, a one per cent wealth tax falls short.
The ultra-rich have access to investments and deals that generate higher returns than those ordinary Canadians can realize. A quick look at the pace in which the wealth of Canada’s wealthiest has grown over the past few years confirms just that:
David Thomson and his family saw their wealth grow from $25 billion (all figures U.S.) in 2018 to $41.8 billion in 2021; Tobi Lütke, co-founder and CEO of Shopify, jumped from $1.2 billion in 2018 to $9.8 billion in the same three years; and Jim Pattison’s stash climbed from $6.9 billion in 2018 to $9.6 billion during that span.
A one per cent wealth tax is a joke for these individuals. It would be just a small setback in their wealth accumulation and won’t fundamentally reverse the pattern of expanding gaps and inequality.
It’s time for party leaders to stop apologizing and hesitating. Reducing inequality should be a top priority in Canada and as the Broadbent Institute survey shows, there is a huge base of voters just waiting for a clear commitment to a wealth tax.
Aren’t party leaders supposed to be experts in reading opinion polls?
Amir Barnea is an associate professor of finance at HEC Montréal and a freelance contributing columnist for the Star. Follow him on Twitter: @abarnea1