Implement Wealth and Inheritance Taxes for a Just Recovery
Various committees at the federal level are currently accepting brief submissions. A brief is a written submission that provides opinions, comments, and recommendations on a subject being studied by a parliamentary committee.
Resource Movement has recently submitted the following brief to three different committees: the Standing Committee on Industry, Science & Technology, the House Finance Committee, and the Senate Finance Committee.
Wealth distribution in Canada is highly unequal, and this inequality has been growing in recent decades
The COVID-19 crisis has disproportionately hurt communities who were already vulnerable before the pandemic; a minority of the country’s wealthiest citizens continue to do well, and some are even seeing their wealth grow
Implementing wealth and inheritance taxes on the ultra-wealthy could help curb this inequality while at the same time fund needed programs as we aim for a just recovery
Wealth and inheritance taxes have wide support among Canadians from all ends of the political spectrum
Wealth Distribution in Canada is Highly Unequal
Over the past two decades, Canada has seen inequality skyrocket. 20 years ago, the richest 20% of citizens held about 44% of the country’s total wealth, while today they hold over 73%. The top 1% collectively own about a quarter of Canada’s total wealth, about $2.6 trillion, according to a report just released in June 2020 by the Parliamentary Budget Office (Figure 1). In fact, 87 families alone had a combined net worth of $259 billion in 2018, equal to roughly 15% of the country’s entire GDP for that year.
Meanwhile, over five million people in Canada live below the poverty line. Almost half of Canadians worry about their ability to cover basic living expenses without taking on more debt. Greater inequality in developed countries is also associated with higher rates of stress and mental illness, addiction, school bullying, and crime rates.
Figure 1. Share of wealth held by the richest Canadians, as of June 2020.
Source: Wodrich, Nigel, and Aidan Worswick. 2020. Estimating the Top Tail of the Family Wealth Distribution in Canada. Parliamentary Budget Office
The Impacts of the COVID-19 Crisis Have Been Just as Unequal
Research shows that communities who were already vulnerable before the crisis are bearing the brunt of the devastation: low-wage workers are far more likely to lose their jobs, Black and Indigenous communities have higher rates of infection and death, LGBTQI2S+ people are being hit harder by the financial impacts, and some of the largest outbreaks are occurring among populations of migrant workers.
As millions struggle to meet basic needs, many people with comfortable lifestyles who have kept their jobs are in fact saving money by not commuting and not spending on entertainment, and dining outside the home. Further, some corporations and their owners – mainly the suppliers of those basic needs, like Loblaws and Rogers – are seeing record profits. In addition, we have not seen firm policy commitments that would prevent large companies that use tax havens and other tax evasion practices from receiving emergency response money. This allows public money to go towards companies with a long history of not paying their fair share to those same public coffers.
Wealth and Inheritance Taxes are a Big Part of the Solution
Wealth and Inheritance taxes can be a critical tool to reverse growing inequality. Resource Movement has called for the establishment of a progressive inheritance tax that hits the top 10% of estates, increasing to a marginal rate of 55 percent on estates over $7.5 million, as well as a wealth tax that hits the top 10% of Canadians, increasing to a marginal rate of 10% on each dollar of wealth over $20 million, exempting principal residences.
These two policies affect only individuals in the top 10 percent — those who have gained most from wealth concentration in the last 20 years. Canada is in fact the only G7 nation without an inheritance tax. The U.S., Japan, Spain, and many other countries all have one, and many leading experts say inheritance taxes are a “key mechanism” for promoting wealth distribution. For context, while 48 percent of Canadians expect to receive an inheritance, the average size is just under $100,000 — a level that would not come close to being affected by this levy.
Wealth taxes have also been gaining support around the world. Several renowned economists, including Emmanuel Saez and Thomas Piketty, are calling on governments to establish wealth taxes. Even the OECD has recommended implementing wealth taxes as a means to reduce inequality. This work has generated well-thought-out formulae for constructing wealth and inheritance taxes that could be readily adapted in Canada.
There is Broad Support for Wealth and Inheritance Taxes
Wealth taxes enjoy incredibly high support in Canada, across the political spectrum, and even more so in the face of the COVID-19 crisis. In fact, a recent national survey conducted by Abacus found that 75% of Canadians support a wealth tax, including support from 69% of Conservative voters (Figure 2).
Figure 2. Results of National survey showing support for a wealth tax in Canada.
Source: Broadbent Institute poll on COVID-19 Recovery. 2020. Conducted by Abacus Data
Wealth and Inheritance Taxes can help Fund a Just Recovery
Combined with other measures like closing corporate tax loopholes and introducing digital services and excess profits taxes, wealth and inheritance taxes can help to ensure that Canada re-emerges from this crisis with strong public services and a fairer distribution of wealth.
The Parliamentary Budget Office estimated that a modest wealth tax of 2% on fortunes over $20 million could raise at least 9 billion dollars a year, and the more progressive rates we are calling for could raise substantially more. This funding could be marshaled to help fund a just recovery: investing in publicly owned renewable energy systems, free public transit, energy-efficient and affordable housing, investments in head-to-toe health care, protections for low-wage and insecure workers, and reparations for Black Canadians and Indigenous nations for past wrongs.
Over 70% of Canadians say it is essential to them that the economic recovery helps to make Canada more self-sufficient, is fair, and ensures those with the most contribute the most—introducing progressive wealth and inheritance taxes can help achieve this goal.