2021 should have marked a turning point for progressive taxation in Canada. The COVID-19 pandemic laid bare the deep inequities within our economy. The rhetoric of "we're all in this together" echoed through every corner of society. But the sentiment felt hollow, as the socio-economic challenges posed by the pandemic were not shared by all Canadians.
From 2020 to 2021, the bottom half of tax filers experienced a decline in their average total income, dropping by $500, while the cost of essential goods surged. Then, in late 2021, grocery prices began outpacing the general rate of inflation. The outcome? Continued hardship for most Canadians, but not for everyone.
During the same period, the top 1% of Canadians saw their total income soar by an astonishing 20.5%, reaching $811,800. The top 0.1% saw an even steeper rise, with their income climbing 27.6% to $3,230,000. The top 0.01% experienced a staggering increase of 30%, with their income hitting $12,542,100. The rich, in the midst of a historic public health crisis, grew richer at a rate not seen in four decades.
None of this went unnoticed; many of us saw this happen in real time. An Abacus poll from 2021 revealed that 88% of Canadians supported a wealth tax. With the richest Canadians seeing record-breaking wealth growth, the call for taxing the ultra-wealthy was louder than ever.
Yet that same year, both Liberal and Conservative Members of Parliament, including Prime Minister Justin Trudeau and Conservative leader Pierre Poilievre, voted against a motion to establish a 1% annual wealth tax on individuals with fortunes exceeding $20 million.
Now, in 2024, three years after what should have been the pivotal year to restore the progressivity of Canada’s tax system, the economic landscape remains grim for most Canadians.
Canadians through the bottom half of the income distribution are paying their fair share, with the median income family paying 43 per cent of their income in taxes. But at the very top, the one per cent pay only 23.6 per cent of their income in taxes, enjoying a significantly discounted total tax rate.
Corporations continue to exert strong control over prices while benefiting from stagnant tax rates. And as our recent report revealed, inflated corporate profit margins are a significant factor driving both inflation and inequality.
According to new estimates from the Tax Justice Network, a progressive wealth tax on the richest Canadians could generate up to $39.6 billion in revenue. However, patience is running out in Canada. With a federal election anticipated next year, this fall’s economic statement might be the Liberal government’s last chance to push for a wealth tax.
The current government has taken some small but meaningful steps in the right direction, such as Budget 2024’s commitment to partially close the capital gains loophole. But more must be done. A wealth tax that funds increased transfers, well-paying jobs and investments in public services would provide some relief to Canadians struggling with the cost of living crisis. It would also begin to reverse the blatant inequity of a tax system where the wealthiest pay a lower effective tax rate than the bottom half.
Polling suggests that Pierre Poilievre’s Conservative Party is favoured to form the next government. Poilievre’s campaign to "axe the tax" and his characterization of taxes as punishment for success are meant to stymie the momentum behind all progressive tax measures that we see right now, including a wealth tax on the rich.
However, all parties hoping to form Government, including the conservatives, should pay heed to the popularity of taxing the rich. A recent poll found that “taxing the 1%” is the top vote-winning policy measure among all Canadians, regardless of partisan leaning.
If a wealth tax is to see the light of day, we can’t depend on politicians to act on their own, even with such clear and compelling evidence that it benefits both their political future and our country. Canadians must escalate their efforts to pressure policymakers and make their voices heard. Our patience may be wearing thin, but the time to act is now.
Show your support for a wealth tax in Canada here!
