Opinion: A Wealth Tax

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By Peter Chow

Let’s say you were alive when Jesus Christ lived, and were bestowed not only immortality, but $100,000 a day, every day, every year, indefinitely.   After the past 2,020 years, you would still have less money than Bill Gates has now.  $200,000 a day?  You would still have less money than Jeff Bezos.

If you were able to save 1 million dollars a year, every year, it would take you 182,000 years to reach Jeff Bezos.

Even to become ‘just’ a billionaire, you would need to save $1 million a year for 1,000 years.

Business Insider calculated that Bezos has earned $6.54 billion a month, more than $1.5 billion a week, and more than $215 million a day in the last 12 months.

Bezos’ wealth increases by $149,353 every minute, almost $3,000 per second. Per hour, he earns $8,961,187 million – roughly 315 times what the average Amazon worker earns in a year ($28,466).

As of this year,  Forbes counted 2,095 billionaires.  At no time in history has there ever been as many Canadian billionaires as there are now – 45 to be exact.  The US leads with 614.  China is second with 389.

Jeff Bezos is the world’s wealthiest person for the third year in a row, despite giving $36 billion worth of his Amazon stock to his ex-wife MacKenzie Bezos as part of their divorce settlement last summer. He’s worth over $182 billion.  Elon Musk, at $128 billion, just moved ahead of Bill Gates.   Alice Walton, an heir to the Walmart fortune, is the richest woman, ranked No. 9 at $54.4 billion. Altogether 241 women made the list.

Trump’s net worth is now listed by Forbes at $2.1 billion, down a billion due to the pandemic. He ranks number 1,001 world-wide on the list.

The richest 26 billionaires in the world own as much combined wealth as the bottom 50% of the human race, 3.8 billion people.

In fact, some of those ultra-wealthy billionaires are now on track, if their incomes continue to rise, to become the world’s first trillionaires.

With these obscene levels of income and wealth inequality, that inequality is becoming much worse.

Wealth and income inequality will rise inexorably over time because returns on wealth normally exceed the overall growth of income. Those with very large fortunes benefit more because rates of return on large fortunes typically far exceed the average on wealth overall.

Incredibly, thanks to Trump’s tax giveaway to the rich, billionaires in America now pay a lower effective tax rate than teachers, nurses, firefighters, or truck drivers.

At a time when so many of people are struggling economically during this pandemic, it is morally obscene that a tiny handful of billionaires – the top 0.0001% – are using a global pandemic as an opportunity to make outrageous profits.

Some more enlightened billionaires have arrived at the realization that such vast concentrations of wealth are not only bad news for society; they are bad for the wealthy. Warren Buffett and Bill Gates are both advocates of higher taxes on the rich, but the rates they consider fair are nowhere near enough to bridge the inequality chasm that has emerged, to rebuild our tattered social safety nets, to lift the world’s poorest out of poverty and to heal the environmental and climate devastation caused by the hoarding of such extremes of wealth.

What we need are not half-baked efforts to make being a billionaire undesirable – we should make becoming a billionaire, let alone a trillionaire, impossible. This would require a collective, global effort to introduce “equanomics”.

This could be achieved through a variety of mechanisms, from a coordinated taxation system so progressive that there remains no incentive or possibility to build up such vast fortunes, to enacting an actual cap on wealth and incomes. Maybe, after an individual reaches $100 million, we should just award him a gold medal for being a champion capitalist.

Although inheritance taxes are still quite commonly levied on large fortunes being passed from one generation to another, the tax “burden” in Canada, as in most advanced economies, has shifted from taxation of capital and the affluent to taxes on labour and ordinary working families over the past three decades.

Annual wealth taxes were generally eliminated in the 1980’s as part of a general trend across OECD countries towards lower taxation of income from capital, which included cuts to effective corporate tax rates and tax breaks for personal income from capital gains and dividends. Decades later, it has become clear that this shift in the tax system has greatly exacerbated the sharp rise in economic inequality.

The top 87 Canadian family fortunes totalled $259 billion in 2016, the same amount of wealth shared among 12 million Canadians at the lower end of the ladder. More shocking is the rate of growth – those top-level fortunes have risen by a stunning 37% from 2012, which is more than double the average increase in wealth generally in Canada during that period.

Another recent study finds that there are 10,840 “ultra-high net worth” fortunes of $30 million or more in Canada and that the total wealth of this group is over one trillion dollars.

Statistics Canada data shows that wealth inequality has been rising, but understates its true extent since household surveys are unlikely to find billionaires at home, and billionaires do not like to fully and willingly disclose their assets.

The share of all wealth of the top 1% in Canada may be as high as 20%, in line with the OECD estimated average.

Effective tax rates on the very rich are low and falling due a number of factors: the lowering of top tax rates under the personal income tax; increasingly preferential treatment of capital income such as capital gains and dividends; low effective corporate tax rates; and, many corporate tax loopholes.

While these tax breaks could and should be reformed, wealth is a major source of economic inequality in its own right, and is a better indicator of overall ability to pay than income. Our tax code focuses on taxing income, but a family’s wealth is just as important a measure of how much it has benefited from the economy and its ability to pay taxes. And judged against wealth, our tax system asks the rich to pay a lot less than everyone else.

Progressives and social democrats have recently proposed a much bolder tax fairness agenda.  The NDP  and the Green Party have similarly called for an annual wealth tax, levied at a low rate of 1% on net wealth of more than $20 million.

The major goal of a wealth tax is to counter the extreme concentration of wealth and to throw light on the concentration of wealth. It should complement other progressive taxes such as a steeply progressive personal income tax and high, effective corporate income tax rates. The goal is to stop the indefinite increase of inequality of wealth.

November 16 was an indictment of Canadian politics. The Liberal Party, Conservative Party, and Bloc Québécois united to oppose the New Democratic Party motion (supported by the Green Party)  which would have created a one percent tax on an individual’s wealth over $20 million. It would have also provided for an excess profits tax aimed at those who have enriched themselves while millions of Canadians suffer during the COVID-19 pandemic. These three parties all opposed this common-sense motion even though the vast majority of Canadians,  76%, support taxing billionaires and multi-millionaires on their obscene wealth.

If anything, the NDP’s wealth and excess tax proposals are too modest.  In the wealth tax proposed by Senators Bernie Sanders and Elizabeth Warren in the United States, all wealth above $1 billion would be taxed at a minimum of five percent. Sanders, along with Senators Ed Markey and Kirsten Gillibrand, also released a 60 percent excess profits proposal that is more detailed than the one tabled by the NDP.

The point here is that the NDP plan was already a compromise designed to work with the neoliberal Conservative and Liberal parties on a basis that would have ironclad support from the voters of those parties. And they still rejected it.

Canadians like to pride themselves on having a government that is progressive and responsive to their needs. But as long as 90% of Parliament votes against policies supported by 76% of Canadians, that can’t be the case.

16 COMMENTS

  1. There already is a is a wealth tax by function of tax brackets. Since Chow cited U.S. sources I’ll do the same.
    The wealthiest in the U.S. are already taxed at a 5% higher rate than people earning under $75k/year.
    One major point that Chow failed to acknowledge is that when calculating income inequality it’s largely based on unfair taxes and cuts to services and benefits that the wealthier can afford. The additional 5% in taxes was already earmarked to remedy that but true to government behaviour the money wasn’t appropriately spent.
    Similar to Canada’s wartime “income tax” which revenue was only intended to pay for the WW1 war effort with promises to be repealed. 103 years ago.

    • Evylene, does this mean that a person earning $100k/year is taxed the same percentage as someone earning $900k/year? Is there only one cut-off at $75k/year? Or am I mis-understanding that?

      • You’re completely misunderstanding that. Those are just two old examples.
        Currently in the U.S. a person making $900k/year pays 17% more income tax than a person earning $75k/year.
        There are ‘cut offs’ at $10k. $40k, $85k, $163k, $200k, $500k, and above.
        A person making $500k would pay about triple the income tax rate that an a average income earnerwould in the U.S.
        This is the problem, people don’t understand the current taxation system.
        However in Ontario, the average earnings are about $65k taxed at 9.15%.
        In comparison the average family doctor in Ontario earns (according to CIHI) $309k but only pays about 4% more income tax compared to the average earnings.
        Brings out the irony about an Ontario doctor writing an opinion piece about higher earners not being taxed enough.

  2. “the top 0.0001% – are using a global pandemic as an opportunity to make outrageous profits”
    Actually no, the government is ALLOWING them to operate with fewer comparative restrictions while forcing greater comparative restrictions on small businesses which in turn funnels more business back to the “the top 0.0001%”.

  3. Your solution is to cap people at 100 million $? So once they do that, they can close up whatever business they created and lay off the hundreds or thousands of workers they previously employed. No point running the business any longer if you can’t keep making money.

    Simple minds, simple solutions….

    • Absolutely. In essence it’s a weak form of socialism, and every form of socialism has come with a high cost and low success.
      I’m absolutely astounded after seeing the myriad of broken promises, mispending, corruption and cronyism from our federal governments that anyone of sound mind would believe that revenues would be spent appropriately and as intended. Just look at our local government – revenues from fuel taxes were intended to be spend on bettering road infrastructure, but where is it being spent? Last I checked for a weakly planned downtown plaza.

    • Depends on why the owner is running the business. An ethical owner would share some of those profits with his employees who are helping the owner make the profits. The idea with ‘trickle-down economics’ is that when the owner/s save money on tax breaks some of that savings is passed along to the employees. I don’t think that is happening. If all the owner wants to do is make the money and then close the business then I don’t think they’re a very good owner.
      Besides, at least Peter Chow is willing to have a discussion and express an opinion with his actual real name.

      • In the perfect world it may be a good idea, however look at Trudeau alone with his multitude of ethics violations, duplicitous ways, backroom deals to protect and fatten up his corporate buddies like SNC Lavelin.
        The entire premise of starting a business is revenue and make profits – the owner takes 99% of the risks and is entitled to 99% of the reward.
        You can always start a nice little not-for-profit and share the revenue streams like the WE charity…oh wait, no that was fully corrupt too and shut down to avoid investigation.
        What’s stopping the employees from buying shares?
        Canada had businesses that were co-op models that did profit sharing but what happened to that? Oh right, the federal government approved of their sale to non-Canadian companies so those co-ops will no longer be co-op business models.
        Posting under a username does not negative an opinion. Peter is entitled to his, you’re entitled to yours, and we’re entitled to ours.
        Tell me specifically Jennifer Dickson – what is stopping YOU from investing massive capital and major risks to start a company just to share all the profits with those who haven’t taken those risks? I’m legitimately curious to hear about the profit-sharing company that you’ll be starting.

        • I owned 2 businesses. Bought 1. Started up a 2nd one. Bought a competitor. Then sold both. Yes I took the risks. I put my house on the line. I went into debt. I’m not saying share all the profits. What I’m asking is: Is there a point where a person can have too much money? I paid my employees more than the minimum wage. I paid for their training. And yes, when I had a profit the employees were given bonuses. And when I had a loss I did not make them pay it back. It’s the owner who decides if they want other investors. That’s their call. Having worked in the for-profit sector and the not-for-profit sector I’ve seen both sides.

          • I looked at your linkedin profile and does show you owned what is referred to as a micro-businesses, not even a small business. None of your ventures would have what’s considered a workforce or significant capital and was not publicly traded being a sole proprietorship.
            According to your business profile, your FTE’s numbered no more than 8 and your profile also shows that two of your businesses were run out of the same location concurrently. It also indicates that the ‘competitor’ your purchased was your father. One of your ventures outlined a partnership with another venture and that can’t be included under your FTE umbrella or risk.
            None of these ventures that you owned indicate any risk remotely (i.e. many millions in capital) close to the discussion topic and were also short-term being just a touch over 8 years.
            Seems to me like you’re exaggerating.

        • Oh, for me, and only me, I disagree with using a fake name to voice an opinion. I like discussing things. Concepts. Issues. I don’t like discussions with people who hide their name. It seems lots of people have no problem pointing fingers and blaming people. I think if you’re going to do that then you should use your own name.

        • WOW. The competitor I purchased was not my father’s business. Good to know that for you size matters more than anything else. Every business starts out as a small business. Which I think you would know had you ever owned one.

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