Share the
Wealth: How we can Tax Canada’s
Super-Rich and Create a Better Country for
Everyone, James
Lorimer
& Co. Ltd., 2021 is by Jonathan Gauvin and
Angella MacEwen. The
authors are the NDP Director of Policy and a
union’s Senior Economist (CUPE)
who is also a policy fellow of the Broadbent
Institute. Not surprisingly, the
thoughts in this book formed the basis for the
NDP’s election program in Summer
2021. What is remarkable is that an ambitious
progressive policy program could
be set out, costed and determined to be
viable. Sadly, the progressive program
and its demonstrated viability did not reach
widespread public debate in the
election. However,
ideas retain their
value and can sometimes re-emerge, pick up
traction and become policy currency. This is not a
subtle book. It sets out a logical message
and tells it as the authors see it. The first
“Part”argues:
(1) that the
present economy works for the wealthy; (2) that myths
justify the inequality of rewards from
the economy; (3) that choices
made allowed this inequality of rewards.
This part covers
issues addressed in other books examined
over the years – the effects of globalization,
the growth concentrations of
wealth in the pockets of the super-rich, and
the lowering of taxes for wealthy
and corporate sectors. It covers the notion
that the market works best when left
alone - surely debunked by the 2009 financial
crisis. Piketty’s major work on
Capital in the 21st century shows
the need to make an economy work
efficiently in and of itself and for everyone
participating – that is, for everyone.
The authors of this book argue that the
policies are “rigged” to benefit the wealthy.
The evidence is that the share of the “rest”
has fallen for decades. I join the
authors in believing that the innovative
individual or company cannot be viewed
in isolation but as part of a society. Success
and
wealth depend on a range of actors in a
society and the infrastructure that
they represent. The rich benefit. The rest and
the infrastructure deserve a fuller
share. The
second “Part”is
about sharing wealth and the variety of tools
needed to do that practically.
It deserves a bit more writing from me. 4) Taxing
individual wealthis
an idea from Piketty’s book – although Piketty
saw it as an international challenge
rather than a national one. The authors
suggest a 1% tax on individual wealth
over $20 million. They are adjusting the level
seeing flaws in the EU tax and
noting the viability of the wealth taxes under
way in Norway, Switzerland and Spain.
In sum, the wealth tax is a viable source of
revenue. It has broad support. It
is better than an inheritance tax. And it
provides a partial answer to the
unfairness of the present distribution of the
fruits of the economy and taxes. (5) Closing
Tax Loopholes.There
are three big loopholes. (a) Restore the tax
on capital gains. Selling assets
like a cottage and stock market earnings are
taxed at 50% of the earning. Before
2000, 75% was taxed. The idea of a lower tax
was to allow the wealthy to invest
more, boost the economy and benefit us all.
The benefit evaporated. Cuts in social
programs remained. They left less support for
everyone else as the wealthy just
grew wealthier. Putting the 50% back to 75%
would restore around 10 billion of
tax revenue. Although small investors would be
affected, the big impact of taxing
capital gains at 75% would fall on the 1% -
the very wealthy. (b) Eliminate stock
options. Originally intended to help
struggling companies, the stock option offers
employees payment in stock at below
market rates that can be redeemed in the
future. This has been hi-jacked by
wealthy CEOs to earn income at low tax rates.
Stock options add much to formal
CEO income and any gain in the stock falls
under the capital gain rule of tax
-- only 50% when sold. Increasing this cut is
worth tax revenues of $500
million annually for a government. (c) Drop
entertainment expenses. These are money
paid by corporations to solicit business. They
are taxed at 50% of the expense.
Examples extend from meals to concerts, clubs,
cruises and vacations. The authors’
strategy on this is to keep the loophole only
for self-employed individuals and
small businesses. Closing all three loopholes
is worth $10 billion annual extra
revenue for a government. (6)
Increasing Taxes for the 1%.
Those in the top 10% of incomes and above have
seen incomes grow from $125k
1982 to $186k in1918, but those in the top
0.01% went from an astonishing $2.7
million in 1982 to $7.8 million in 2018.
Meanwhile taxes for these people have
fallen. The highest marginal tax rates were
80% in 1948 but after cuts in 1982
and 1987 were around 47%. They are currently
around 45%. Despite around a 50%
marginal tax rate, after tax planning etc.,
the average top 1% income earner paid
an average tax rate of around 18% as did the
average 10% income earner. This is
an international pattern. International
experts suggest the optimal maximum tax
rate is 73%. For Canada, an academic found 65%
is optimal. The book examines whether
wealthy individuals would leave Canada and
suggests not for the Caribbean. Few
countries are more favourable than Canada to
reside in. The book asks
whether the rich would in fact end up
paying. It says they would if the tax were
implemented with a package of cuts
in tax loopholes. Also, the book proposes
increasing the marginal federal tax rate
by a small 2% to 35% making a 52% combined
federal/provincial marginal rate. This
is less than the 65% recommended academically
for Canada, but it would raise 1
billion annually. (7)
Tackling Tax Havens.Despite
public visibility, there is little progress
and the richest people and
big corporations continue to “avoid” tax
(legal) and “evade” their tax (illegal).
The Tax Havens in Canada have been called
“legalized theft”. Wealthy Canadians and
companies have a subsidiary in other
countries. They then conduct business with
the foreign subsidiary in such a way that the
foreign based company attracts
profits rather than the Canadian company.
Taxes are then assessed on the overseas
profits. Foreign countries that charge little
or no tax on these profits are
called tax havens. Then the money can be
brought back into Canada because Canada
has a treaty with these countries saying it
will not levy additional taxes on
profits made in that country and in return the
country will not levy additional
taxes on a company from that country which has
profits in Canada. Offshore
companies are tax avoidance. Tax evasion is
concealing income or misreporting tax
payable. Tax havens like Barbados, Luxemburg,
Switzerland, Cayman Islands have
things in common but specialize – even Canada
qualifies as a regulatory haven
for mining and exploration companies. Canada has made it
easier to use tax havens by the
treaties it has signed and by the laws it has
helped other countries to develop!
Many of these were said to be to avoid double
taxation, but in fact they avoided
any taxation. And when individuals and
companies were identified in the Panama
Papers,
Canada’s revenue agency collected less from
the hidden funds revealed than
other countries. Canadian tax laws and
treaties should be tightened to make corporate
activities more transparent and prosecution
for using tax havens easier. Australia
has done more along these lines. Canada’s NDP
has proposed legislation that would
reduce the effect of tax havens that benefit
wealthy individuals and corporations,
but these have been sidelined by the other
parties. Despite talk, it seems
governments want to preserve these gifts for
the rich. (8)
Increasing Corporate Taxes.
In 1971 the NDP made the case against reducing
corporate taxes in Louder Voices:
The Corporate Welfare Bums. In 1980 the
corporate tax rate was 36%. The Mulroney
Conservatives reduced it to 27%. The Martin
Liberals cut it to 21%. The Harper
Conservatives to 15%. These handouts to
corporations did not create jobs. These
tax cuts did not “trickle down”. The
corporations did not invest the money in
the economy. The corporate tax cuts increased
inequality and affected the quality
of infrastructure and public services by
cutting public revenues. Sixty years ago,
people and corporations contributed about
equally to tax revenues. Recently,
corporations provided 20%. People are making
up the difference. The NDP
suggests moving up the present lowest rate of
15% to 18% - keeping Canada
within the range of other OECD countries.
Disturbed by the huge profits made by
some companies from the Covid 19 pandemic, the
NDP recalls the wartime tax on
excess profits. Profits above 7.5% could be
taxed at a higher rate of 75%. (9) Web
Giants.The
web giants compete with local businesses,
media, and content creators but
do not fall under the old tax laws governing
the locals. They avoid sales taxes.
And the companies can move the production of
digital products from where they
make sales to low tax jurisdictions – the tax
haven issue but on a big scale.
These companies – Amazon, Netflix, Apple etc.
pay almost no taxes. Alongside
sales of products comes advertising. Yet
almost nothing is paid on advertising
revenues earned in Canada. The NDP proposes
using the French approach – a tax
on revenues – limited to companies with
worldwide revenues of $1 billion and
Canadian revenues of $40 million. The
parliamentary budget office says this
would produce over $600 million per year. The Third
“Part” is Building Shared Wealth. (10) The
Government Role in Creating Wealth.
Three tools are now used to measure and
economy. The first is the Debt/GDP
ratio. The second is not the level of debt,
but its cost. The bank balance of
inflation vs unemployment has shifted slightly
to unemployment. The role of
government can include creating a stimulus in
a recession; providing a social
safety net; publicly funding research that
produces innovation – like research
that led to Google’s search algorithm. (11) What
we could build and how we can address
inequality. These are
familiar: child care; restoring the
federal share of health care, long term care;
dental care, pharmacare and public
drug research; climate action – action
including large scale public investment
in renewable energy, public transit and
building retrofits. A Public
Infrastructure Bank is one tool. But it should
not depend on private investors. It could
support green energy community projects
fighting climate change – as in Ste Hyacinthe
QC. Public banks and credit
unions are best for supporting regional
development. Student loans and baby bonuses
are tools for overcoming the financial
inequalities of one generation. Upholding
indigenous rights is an evident responsibility
of any government. This item ends
with what is essentially a review of problems
of inequality for a society. (12) Will
we share the wealth?This
examines the patterns and groups that resist
changes to the status quo and
resist facing and fighting climate change. There is an Afterword
that tells a
reader some things to do to help make the
proposed changes happen.