Despite relatively robust investments in the well-being of its citizens, Canada is home to a growing wealth gap, with public policy analysts denouncing political leaders for allowing tax laws that heavily favor the richest Canadians—to the detriment of social welfare programs.
The Canadian Center for Policy Alternatives revealed in a new report that the nation's 87 richest families hold an average of $3 billion in wealth—about as much as the 12 million lowest-income Canadians, or a third of the population, combined.
Examining wealth concentration since 1999, senior economist David Macdonald found that the net worth of the 87 richest Canadian families rose by 37 percent in just four years, from 2012 to 2016. The increase was equal to each family adding $806 million, adjusted for inflation, to their coffers. Meanwhile, the average Canadian household's net worth went up just 16 percent over the same period.
"The larger public policy concern relates to the impacts those fortunes have on Canadian society, and whether Canada provides equal opportunity to residents of all income and wealth levels—from those who live in poverty to the country's born billionaires." —Canadian Center for Policy Alternatives
The wealthiest families' combined net worth is nearly equivalent to that of every resident of Prince Edward Island, New Brunswick, and Newfoundland and Labrador, according to the study.
"That sum would include all houses, cottages and other properties, all cars, every savings account in the region, RRSPs, pensions, etc., minus all liabilities such as mortgages and loans," the study reads.
A majority of the richest 87 families have accumulated their wealth over a number of generations, the study noted, with just 45 percent of the richest Canadians identified as owning first-generation wealth.
Tax laws have helped create conditions for immense wealth to be passed down, as Canadians are not subject to an inheritance or estate tax—the rule U.S. President Donald Trump railed against last fall while promoting his tax plan and which he succeeded in weakening.
"You'd expect Canada's tax regime would try to counteract this concentration of wealth at the very top, where it's needed the least. But in fact, federal policies encourage it," Macdonald told the CBC.
Without an estate tax, the wealthiest families in Canada can pass down or transfer an unlimited amount of money to younger generations without being subject to taxation—unlike every other G7 country. Investment profits including capital gains and dividends are also raxed at lower rates than income from employment. Holding the wealthy accountable for more taxes would do little to change the households' enormous wealth—but could make a major difference in public programs for education and childcare, which have suffered cuts due to austerity measures in recent years.
"Instituting a 45 percent estate tax on estates valued over $5 million, in line with the rest of the G7, would add $2 billion to federal revenue," reads the report. "Eliminating the 50 percent tax break for capital gains and the 25 percent tax break on dividends would raise $11 billion and $5 billion annually while almost exclusively targeting Canada’s highest earners."
No brainer public policy. Boost federal revenues by taking a modest portion of from the wealthiest 1% and combat rising inequality.
Canada should step up and follow the lead of its G7 counterparts. https://t.co/sTzxpNmuu9
— Nick Schiavo (@NickSchiavo_) July 31, 2018
"There is no need to pass judgment on Canada’s wealthiest families or the companies they run to assert that wealth inequality can be corrosive on society," writes Macdonald. "The larger public policy concern relates to the impacts those fortunes have on Canadian society, and whether Canada provides equal opportunity to residents of all income and wealth levels—from those who live in poverty to the country's born billionaires. High levels of income inequality have been shown to have negative consequences on everything from life expectancy and health to crime rates and social trust. ...More equal societies tend to be happier and healthier, and better at providing opportunities for low-income people to move up the income ladder."