CanWest ran a good summary of my study for the CCPA, “Why Charity Isn’t Enough: The Case for Raising Taxes on Canada’s Rich” released today. (pasted in below) Adding to Marc Lee’s recent work on tax incidence, my piece documents the fact that recent changes to personal income taxes in Canada have compounded rather than offset increased ‘top tail’ driven market income inequality, ie the increased pre and post tax income share of the top 1% and higher. I also make the point that a progressive personal income tax is an important redistributive tool in Canada if we we want to equalize after tax/transfer incomes. Neo liberal countries like Canada and the US rely on the tax lever relatively more as a redistributive tool than do most European countries, which equalize relatively more through transfers. I further argue that we need progressive taxes to stop the very top from growing away from the middle and the bottom, while the primary role of transfers is to raise the bottom end of the income distribution towards the middle.
The full study is available at
Tax wealthy Canadians more heavily, think tank suggests
Levels on very high incomes should move into line with United States, report urges
|CanWest News Service|
Wednesday, December 12, 2007
The federal government should bring its taxes on upper-income Canadians more into line with those in the U.S. by raising them, a left-leaning economic think tank says in a report issued today.
“One can expect reactions of outrage from the very affluent and claims it would drive our talented CEOs and other stars to the U.S.,” acknowledged the report by the Canadian Centre for Policy Alternatives.
“Hidden within these threats, however, is a little known but important fact: federal personal income tax rates on very high incomes in the U.S. are actually higher than in Canada.”
The report calls for an increase in Canada’s top federal personal income tax rate and the taxation of all capital gains to help narrow what other studies, including by Statistics Canada, have found to be a widening gap between rich and poor in Canada.
“Canada’s top federal tax rate is considerably lower than the U.S.,” said the report, prepared by Canadian Labour Congress economist Andrew Jackson, which noted that the top U.S. tax rate is 35 per cent on incomes over $326,000 and 33 per cent on incomes higher than $150,000 while Canada’s top federal income tax rate is 29 per cent on incomes of more than $116,000.
It calls for a new higher federal tax rate of 31.5 per cent on incomes of more than $250,000, and full taxation of all capital gains, 43 per cent of which it said go to people earning $250,000.
The higher income tax rate would boost federal revenues by $1 billion a year, while the taxation of all capital gains would raise $1.8 billion, giving the government nearly $3 billion a year more to spend on social programs and public infrastructure, it says.
David Perry, an analyst with the Canadian Tax Foundation, a taxation research organization, said that while Canada’s top federal tax rate is lower than the top rate in the U.S., it kicks in at a lower income level.
The big difference, however, between how Canada and the U.S. tax the wealthy, Perry said, is that the U.S. has an inheritance tax and Canada doesn’t.
The study by the Canadian Centre for Policy Alternatives cites a 2006 Environics poll indicating that 82 per cent of Canadians support closing tax loopholes for wealthy individuals, and 70 per cent increasing tax on the wealthy, as a way to reduce the growing gap between the rich and the rest of Canadians.
“Instead of continuing to deliver more tax cuts to the rich in the name of competitiveness, Canada should make sure that the wealthy contribute their fair share in taxes,” Jackson said.
The study charges that income inequality is growing rapidly, with Canada’s richest one per cent taking home an increasing share of pre-tax income, and also being given a disproportionate share of recent income tax cuts.
“This is disturbing because a progressive income tax is a particularly important way to promote fairness in the North American context, and because only higher tax rates for the very rich can stop that elite group from growing away from the rest of society,” Jackson said.
- Women On Top, By the Numbers (March 8th, 2013)
- Fairness by design: a framework for tax reform in Canada (February 14th, 2013)
- Tax and the Top 1% (February 1st, 2013)
- Canada’s bloated 1 per cent (January 31st, 2013)
- Wealth Inequality and Neo Liberalism (January 25th, 2013)