Tax cuts and the uber-rich

 A good one from Eric Beauchesne on the Canwest wire. Some highlights:

Canada’s wealthy benefit most from tax cuts, OECD finds

The tax burden on wages has eased in most of the world’s industrial countries this decade, including here, but Canada is among a minority where most of the relief has gone to high-income earners and the least to lower-income workers, according to the Organization for Economic Co-operation and Development.

… “In Australia, Germany, Iceland, Ireland and Luxembourg, and, to a lesser extent in Canada and Norway, tax reforms tended to reduce the progressivity of the tax structure with high-earning employees benefiting the most from significantly higher tax reductions than those in the middle and bottom parts of the earnings range,” it said in the report. “Tax reductions … also tended to mainly benefit high-income earners in the United States.”The report shows the tax burden on wages or so-called tax wedge, which is the difference between total labour costs to an employer and the net take-home pay of workers, eased by 1.3% in Canada between 2000 and 2006, which is significantly more than the 0.1% average reduction across the 30 industrial countries over that period.

However, in Canada most of that relief went to the highest income workers and the least to lower income workers, it said.

It noted, for example, that in Canada the drop in the tax burden for single workers ranged from a hefty 2.3% for those earning 150% to 200% of the average wage to a 1.6% reduction for those earning 100 to 150% of the average wage to just 1.0% for those earning between two-thirds and 100% of the average wage and to only 1.1% for those earning one-third to two-thirds of the national average wage.

… Further, the report deals with the 2000-2006 period, and tax changes since, including the tax-free savings account in the latest federal budget, are tilted even more in favour of better off Canadians.In contrast, the OECD reported that a half-dozen countries, including France, Belgium, Hungary, Italy, the Netherlands, and Portugal have implemented targeted tax cuts this decade which have provided the most relief to employees whose wages were less than two thirds of the national average.

The original article also has some choice quotes from CCPA economist Armine Yalnizyan that I cut to keep this post within (poorly defined) copyright limitations. Instead, here is a short commentary by Armine from the GrowingGap.ca blog:

OECD study fingers Canada for its tax cut agenda

The Financial Post reported today on a new OECD study that shows Canada’s legacy of tax cuts only deepens the gap between the rich and the rest of Canadians.

The OECD study, Taxing Wages 07, shows Canada is out of step with many other countries. Of 30 OECD nations, 13 raised taxes and 15 lowered them between 2000 and 2006.

Canada is among the 15 nations that lowered taxes — but here’s the thing: Canada, the U.S. and Australia didn’t just lower taxes; they implemented the type of tax cuts that worsen income inequality.

This report is just one more document that shows the folly of Canada’s tax cut agenda.

We know that tax cuts don’t reach 31% of Canadian taxfilers at all, because their incomes are too low to be taxable.

These Canadians — one-third of the population — would get more benefit from governments that invest in public services such as child care, affordable housing, postsecondary education, and public transit. Fittingly, the OECD report also notes that Canadian employers’ social security contributions are “far below” the average for industrial countries.

Let’s be clear about Canada’s history with the tax cut agenda. Tax cutting isn’t just about cutting personal income taxes. It’s about shifting responsibility for the public into private, individual hands. It’s a twisted perversion of the line “ask not what your government can do for you” and instead, leaves Canadians to fend for themselves.

The OECD report gives yet another reason to reflect on the relentless tax cut campaign in Canada. It begs the important and telling question: who benefits from this one-dimensional kind of economic fundamentalism? And who doesn’t?

2 comments

  • when are we going to allow an electronic smart financial system connected to our social insurance numbers {because we have them apparently} to “objectively” offer a possible solution to the inequities of the dominant system in place; one that is connected to a rigorous consumptive wage ratio and land impact factor?

  • If the top 10% of the income earners are paying something like 50% of the tax, why shouldn’t their reduction be a greater percentage of their payments?

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