It is time for Liberals to tax the Super Rich in Canada

The Wealth Tax alone could generate $100 billion in revenues

It is time for Liberals in Canada to impose an annual wealth tax of 1% to the super rich holding wealth well over $20 million and increase the top marginal tax rate to 80%. The progressive tax law is already in place which could be used by the Liberal government as a tool to introduce this change without going to the court. This is the only solution to deal with the budget deficit of C$90.2 billion reported in 2022 in Canada. According to a public poll in Canada, there are more people supporting this progressive and wealth tax today than ever before.

There is no doubt that the right-wing conservatives would resist this change by making unreasonable arguments that this would effectively hurt the economy and businesses which would lead to a capital flight. However, it could be very well argued that there can’t be a better time than now for the Trudeau government to implement this change and increase taxes to be able to protect the working class and the welfare system in Canada. It is also time for the courts to come forward to protect the citizens by honoring their Charter rights that guarantees the security of life and equality for all Canadians under its S. 7, 15 and 36.

The healthcare system in Canada is underfunded which why there were more deaths of senior citizens during the Covid -19 pandemic. We also have a shortage of shelter homes because of high rate of inflation which is a big problem in Canada. Therefore, the responsible government in power has to provide for these basic necessities and honor the rights guaranteed by the Charter.

The deficit today is a good enough reason for the Liberals to act by introducing a wealth tax and simultaneously increase the progressive tax rate which will help revive the economy rather than letting it slip into a possible recession.  The wealth tax being proposed will generate a revenue of around $100 billion according to an estimate by CCPA. In addition, increasing the progressive tax rate will raise enough revenue to deal with the long term problems of wealth and income inequality, homelessness and poverty, systemic racism which are on the rise according to the recent trends as reported by a study carried out by Oxfam.

According to OECD , the top 1% of ultra-rich owns about 16% of the total wealth in Canada, while in the US, they owned more that 42%. However, the recent reports by PBO show that the wealth gap has recently increased in Canada from 16% to 25%. Therefore, the wealth gap between the rich and poor is increasing at an alarming rate to unprecedented levels.

On the contrary, the working class have been paying their fair share of taxes. For example, when they buy a property they pay property tax. The tax for the working class applied on their income is the progressive tax rate which is as high as 37% in some cases in Canada. The rich on the other hand, hardly pay any taxes on capital gains especially when they hold their investments for a year and reinvest their profits.

For example in the US, Warren Buffett, who is the Chairman and CEO of Berkshire Hathaway, who has amassed a fortune that is in excess of $100 billion using some of the tax loopholes. He has been holding some of his investments like in Coca Cola since 1965. His unrealized gains from Coke alone have been accumulating for more than fifty years and he has never paid any tax on these unrealized gains despite their value going up manyfold. This is the reason Berkshire’s A class shares today trade at $460,000 per share making it the most expensive stock on the US stock exchange.

Buffett is well known for his philanthropy after pledging half of his net worth to Bill and Melinda Gates foundation.  He also makes annual donations to his two sisters and three children. He does all this without incurring any tax on transferring his wealth in the US. He is also known to pay a meager salary of $100,000 to himself like many other CEOs, which means paying an effective personal tax rate of less than 1% despite a net worth of more than $100 billion.  

The average top marginal income tax rates in the US between 1930s to 1970s were close to 90%. This was sufficient to fund a decaying infrastructure, create jobs, pay for quality education, healthcare and pension plans. However, it all changed in the 1980s by the Republican leader Ronald Reagan because of his right-wing libertarian and neo liberal economic policies and dismantling the welfare system. He had cut the taxes, promoting free markets and free trade policies which is what led to the wealth gap and income inequality that we are seeing today. Therefore, Canada cannot use the US as a role model and follow the suit.

In the US, the total corporate income tax received by treasury in a decade is just about $32.3 trillion and it spent about 43.9 trillion which is why it has a huge fiscal deficit today. The Corporate America contributes just about 8 ½% of this tax as compared to 48% contributed by the working class in income taxes. For this reason, president Joe Biden in his 2023 budget, has proposed to double the capital gains tax rate to a minimum of 25% for the rich with a net worth of more than $100 million.

I believe we as Canadians have a moral duty towards our fellow citizens especially those who cannot afford the basic necessities because of rising cost of living. It is time to make the super rich pay their fair share of taxes that they have been avoiding for a long time which will help close the budgetary gap. If Liberals fail to increase the progressive and wealth tax rate for the super rich then we as citizens have the power not to vote for hem in future. We must vote for the party that can implement this change to effectively tax the super rich, a policy proposed by NDP in Canada, somewhat similar to what is being proposed by the Biden administration in the US. This is the only way the socio-economic rights and justice can be advanced for the common good in our free and democratic society in Canada.