The Canadian Centre for Policy Alternatives says a more aggressive federal wealth tax than those that have been previously proposed could generate as much as $32.7 billion in its first year, thus paying for universal public pharmacare, free post-secondary tuition, 100,000 affordable homes and a “major increase” to public transit.
The centre’s left-wing economist Alex Hemingway says upping the annual take from high net-worth Canadian residents combined with updated data from the Parliamentary Budget Office results in an amount that would generate $409 billion over 10 years.
“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,” said Hemingway.
“Based on up-to-date modelling of a moderate wealth tax, my analysis shows this tax could provide a huge source of ongoing revenue for public investment while helping to rein in extreme inequality,” added Hemingway.
According to Canadians for Tax Fairness, wealth taxes work like a property tax on a home but they apply much more broadly, to stocks, trust funds, vehicles, boats and art. The tax applies to an individual’s net worth.
Canadians for Tax Fairness estimated in 2022 that a one per cent for wealth over $10 million, two per cent for over $100 million and three per cent for wealth over $1 billion, would generate $20 billion.
Hemingway says new data shows high net-worth Canadians have even more wealth, especially after the COVID-19 pandemic. His proposal is a one per cent wealth tax over $10 million, two per cent for over $50 million and three per cent for wealth over $100 million, which far exceeds the federal NDP proposal of only one per cent over $10 million.
Whereas Canadians for Tax Fairness estimated the NDP tax to pull in $60 billion over five years, Hemingway says his estimate indicates that figure is likely to be $246 billion over 10 years.
Hemingway said a wealth tax is not a panacea to inequality and enforcement is a key element required for the tax. “Third-party reporting of assets from financial institutions must be mandatory, building on the type of capital gains income reporting already required under the existing income tax system,” said Hemingway.
“Proposals for a wealth tax enjoy massive and consistent public support in Canada, reaching 89 per cent in national polling including 83 per cent of Conservative voters,” said Hemingway, citing an Abacus Data poll commissioned by the left-wing think-tank Broadbent Institute.
“Despite this level of popularity, the wealthy in this country have so far seemingly managed to keep it largely off the policy agenda.
“Such a stark disconnect between public opinion and public policy points to a broader deficiency in our democracy, which requires concerted working-class and social movement organizing to overcome. If that movement power can be built, the policy tools to fight extreme inequality are at our fingertips,” said Hemingway.
The economist argues the social benefits procured from a wealth tax will benefit the economy, whereas critics contend such a tax discourages accumulation of capital needed to drive economic growth.
Wealth taxes declined in 1990s but are experiencing a resurgence of interest: OECD
The Organization for Economic Cooperation (OECD) notes wealth taxes have been on the decline since the 1990s and thereafter as money flows more freely between borders.
“Many factors have been put forward to justify the repeal of net wealth taxes. The main arguments relate to their efficiency costs and the risks of capital flight, in particular in light of increased capital mobility and wealthy taxpayers’ access to tax havens; the observation that net wealth taxes often failed to meet their redistributive goals as a result of their narrow tax bases as well as tax avoidance and evasion,” noted an OECD report.
But, the report states the pendulum is swinging in the other direction now, given the rising inequality in many developed nations and too many tax cuts over the past three decades.
The OECD report states how a wealth tax would primarily target property and property taxes in particular have declined since 1965 despite having the lowest impact on economic growth: “Empirically, recurrent taxes on immovable property have been found to be the least damaging tax to long-run economic growth, in comparison to consumption taxes, other property taxes, personal income taxes and corporate income taxes.”
