For decades, successive governments have ignored the central problem at the heart of the Canadian economy. Bruce Campbell writes:
In response to the brutal inequality of the 1920s and the Great Depression, and under widespread political pressure after World War II, Canadian and other western governments brought in major reductions in income and wealth inequality through tax and transfer policies.
It was an era of full employment, high taxes on the wealthy, universal Medicare, expanded unemployment insurance, Old Age Security and CPP/QPP pension systems, and other transfers, which significantly reduced inequality.
Canadian society, for the most part, shared in the economic prosperity of the era.
Then Milton Friedman won the Nobel Prize in economics. His mission to return to classical economics became gospel:
That changed in the late-1970s, with the advent of laissez-faire capitalism (neoliberalism), led by former U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher. According to this ideology, the market was no longer in embedded in society, but society became subservient to the whims of the market and its beneficiaries.
Corporations and wealthy elites were back in the driver's seat. Over the next four decades, income and wealth inequality skyrocketed.
Over subsequent decades, the 1971 highest income tax bracket of 80% dropped by more than half, to 29%. Taxes on capital gains were slashed and tax loopholes were created to facilitate tax avoidance and evasion via an archipelago of tax havens.
Corporate tax rates dropped from 40% in 1980 to 15% in the following decades. Median worker earnings stagnated or fell. Labour’s share of Canada’s GDP declined in relation to capital’s share.
For the top 1%, as a whole, average market income doubled between 1982 and 2018. For the top 0.01%, it soared by 189% during this period. The income of the bottom 50% failed to keep up with inflation.
In the wake of the 2008-09 recession, from 2010 to 2019, only the top 1% increased their share of total wealth, while it fell for everyone else.
The number of Canadian billionaires and their wealth more than doubled. Canada’s club of 100 billionaires now has as much wealth as the 12 million poorest Canadians. The Parliamentary Budget Office projects that, in the second quarter of 2021, there were approximately 161,700 families in the top 1% and they each had a net wealth of at least $7.3 million.
According to the latest Canadian Centre for Policy Alternatives figures, Canada’s average top CEO pay was 191 times greater than the earnings of the average worker in 2020.
The Parliamentary Budget Office estimates Canada’s top 1% hold almost 26% of the country’s total wealth. Its share has jumped by five percentage points over the last two decades. In contrast, the bottom 40% of Canadians hold only 1.2% of total wealth.
The richest 1% hold 15% of national income—almost as much as the bottom 50% of the Canadian population. Since 1981, the gain in income share of Canada’s top 1% has been more than 10 times larger than that of the middle 20%.
The federal budget continues the trend:
There is still no wealth tax on the super-rich.
No increase in the top income tax bracket, beyond the 33% tax bracket implemented in its 2016 budget.
No general corporate income tax increase.
No elimination of the tax break for capital gains and dividends.
No estate or inheritance tax on assets over $2 million to limit family dynasties’ ability to pass down exorbitant wealth to their descendants.
No minimum 15% effective tax rate on the top 1%, as previously promised.
No surtax on Canadian billionaires profiteering from the pandemic.
What Campbell calls "the great sidestep" continues.
Image: Liquipedia
