The COVID-19 pandemic has magnified both income and wealth inequality in Canada, exposing longstanding unfairness in our tax system. Income inequality is the difference in how much we earn each year, and wealth inequality is about differences in how much we’re able to accumulate over time.
The way the Canadian system is structured helps the rich get richer. For example, returns on wealth, such as capital gains or dividends, are not taxed at the same rate as income from employment. These profits are taxed at a lower rate than in the 1990s.
Since the 1990s, successive Liberal and Conservative governments have also cut corporate tax rates in half, and allowed corporations to use accounting tools to avoid paying tax. Corporate tax cuts and loopholes allow shareholders to accumulate more wealth than workers and enable huge compensation packages for executives.
Widening wealth gap
Between 2010 and 2019, the average wealth of Canada’s richest one per cent more than doubled from $4.9 million to $10 million. The average wealth of the bottom half of people in Canada grew at a snail’s pace in comparison, increasing from $32,043 to $37,403. As of 2019, the richest one per cent in Canada owned more than a quarter of the wealth in our country.
Time to tax the rich
Inequality is not inevitable; it is the result of policy choices. Important changes to personal and corporate taxation could help rebalance wealth and power, and would fund public services that are the heart of a more equal society.
CUPE has partnered with the Broadbent Institute, Canadians for Tax Fairness, and others to call on the federal government to implement a wealth tax, close tax loopholes used to hoard wealth, and implement a tax on excess profits made during the pandemic.
Canada is the only G7 nation that doesn’t have a wealth, estate, or inheritance tax for large fortunes. There is growing support for an annual wealth tax in Canada.
Fair taxation funds an equitable recovery
Canada’s richest people get most of their wealth from ownership of corporations.
Corporate tax cuts and tax avoidance have helped enable rising wealth inequality. Restoring the federal general corporate tax rate from 15 per cent to 21 per cent would generate over $10 billion a year.
The shape of our economic recovery is going to be a key issue in the next federal election, and restoring fairness in our tax system is at the heart of creating a more equitable economy and society. Tax fairness not only prevents wealth hoarding, it also helps pay for the services that we all rely on.