Does anybody really need more than $10 million to live a good life?
I don’t think so. Most of us will never come close to that kind of wealth, but we get along fine without it, assuming we earn enough to provide our basic needs, plus a little extra for things like vacations, retirement savings and peace of mind.
Inflation has reduced everybody’s spending power. Everything is much, much more expensive than it was at the beginning of the pandemic, including food, rent and transportation. People are being squeezed between high-interest rates, soaring personal debts and increasing costs.
If those high costs are painful on an individual level, imagine how painful they are on a government. Recent high-profile collapses of banks in the United States reveal the consequences of these fiscal conditions, which affect everyone.
And yet, when times are tough, governments need to provide more supports, to ensure people are not homeless or hungry, which means they’re spending more money and incurring more expensive debt. How to pay for it is a burning question, one that some say could be answered with a wealth tax.
In 2021, Canada’s Parliamentary Budget Officer estimated the revenue from a one-time wealth tax of three per cent for wealth higher than $10 million and five per cent for net wealth higher than $20 million. It showed such a one-time tax would collect between $44 and $60 billion, after administrative costs.
The Canadian Centre for Policy Alternatives’ senior economist Alex Hemingway recently did a similar exercise and found that an ongoing wealth tax of one per cent for net wealth over $10 million, two per cent for net wealth over $50 million and three per cent for those with net wealth higher than $100 million would bring in $409 billion over 10 years.
Such a tax would cover universal public pharmacare, free tuition for post-secondary, 100,000 non-market homes per year and a major investment in public transit, Hemingway’s research found.
The idea is popular. Two-thirds of Canadians polled supported the idea of a wealth tax for people with more than $50 million in assets, a 2019 Abacus poll of 2,000 Canadians found.
Extreme wealth is growing. The margin of error for a comparable probability-based random sample of the same size is plus or minus 2.2 per cent, 19 times out of 20.
“The Parliamentary Budget Office estimates that the richest one per cent in Canada controls 25 per cent of our country’s wealth and recent academic research puts that figure even higher at 29 per cent,” Hemingway said in a news release.
The Canadian Taxpayers Association, on the other hand, says a wealth tax would hurt both the rich and the poor, calling it a “colossal mistake.” They say wealth taxes motivate people to leave the country, taking their investments and businesses with them. They point out that France had a wealth tax for decades but abandoned it in 2017. That’s correct, but what they don’t say is that France replaced it with a national annual three-per-cent tax on real estate, including people’s principal residence. For a $1 million home, that’s $30,000 a year, on top of local property taxes. I suspect a similar tax in Canada would not be popular.
Taxes on capital can address inequality and make tax systems more efficient and fair, a director at the Organization for Economic Cooperation and Development said in a news release. I tend to agree.
Many people I’ve chatted with recently are struggling. Some are in insecure housing, wondering how they will afford to move when their rental home is redeveloped. Others are house rich, cash poor, deferring their property taxes and unable to pay for much-needed repairs, especially with rising mortgage costs. Still others are worried about losing their jobs as layoffs spread and the economy wobbles. Young folks, itching to start families, are unable to get into the housing market, unless they win the lottery. Times are not pretty.
The concept of a wealth tax is untested in Canada. It may cause a mass exodus of rich people, fleeing to other parts of the world, and that could have unknown knock-on effects, but I think that might be worth the risk. Heck, it might even free up some much-needed housing for folks, a change that would be welcomed by many. Maybe $10 million isn’t enough for a good life and extra taxation should start at $20 million or $50 million. Maybe personal residences would be exempt. Whatever the details, a wealth tax is an idea that deserves to be explored.
Tracy Sherlock is a freelance journalist who writes about education and social issues. Read her blog or email her [email protected]
