The Exploding Canadian Income Gap
Statistics Canada today released an excellent study ofÂ high incomes and inequality -Â http://www.statcan.ca/Daily/English/070924/d070924a.htm
Thanks to Michael Wolfson, Brian Murphy and Paul Roberts for getting this powerful data out into the light of day.
No big surprises here – the top end grabs a disproportionate share of all income, and their share has been growing apace. The tax data used in this study demonstrate the point more clearly than StatsCan income surveys, which tend to miss the very high end of the spectrum.Â I find the study particularly useful for giving us much more insight into the changing distribution of market (employment and investment) income at the individual level, though family level data are provided as well.
Among individuals, the top 1% starts at $181,000 in pre tax income (in 2004), though average income for this group is $429,000 because incomes at the very top are extremely high (the top 0.01% or 1 person in 10,000 made more than $2.8 million in 2004, and averaged $5.9 million.)
The threshold of the top 1% of individual tax filers in 2004 was 7.4 times median income of $25,000 in 2004, up from 6.0 times as much in 1992 and 5.7 times as much in 1982.Â The threshold of the top 0.01% was 115 times as much as the median in 2004, compared to “just” 57 times as much in 1992 and 55 times as much in 1982.
The share of all taxfiler income going to the top 1% has soared from 8.6% in 1992 to 12.2% in 2004, and the share of the top 0.01% has doubled, from 0.9% to 1.7% (though the authors show that the income share of the very top pales in comparison to that in the US.)Â This is mainly a story of exploding wage inequality, though capital gains also contribute play t 0ugh troy
Another way of getting at fast-rising market income inequality is to compare the rise in real incomes between 1992 and 2004.Â Real incomes were essentially unchanged for the bottom 80%, but the average inflation-adjusted income of those in the top 1% jumped from $268,000 to $429,000, and the average incomes ofÂ the top 0.01% soared, from $2.5 million to $5.9 million.
The data show that the top 1% are disproportionately older men living in big cities (one third live in Toronto.)
The study also shows that the income tax “burden” on top earners is surprisingly light – the top 5% of taxfilers in 2004 received 25% of income, and paid 36% of income taxes (the only progressive part of the tax system.)Â Effective tax rates for the top 1% and 0.01% have fallen quite sharply since 1992 . For the top 0.01% – those averaging $5.9 million in 2004 – the effective tax rate fell from 42% to 31%.
In summary, an extremely useful documentation of the grotesquely unequalÂ distribution ofÂ Canadian income, and the big shift of before and after tax income to the very top in recent years. Grist for the mill of progressives in the debates ahead.