What to know
- Wealth disparity is growing. The richest people in Canada hold more political and economic power than ever while regular working people are struggling to pay rent, put food on the table, and heat their homes.
- One of the reasons the rich get richer is because they are not required to pay fair taxes.
- We can start to address wealth inequality by implementing fair taxation that includes windfall taxes, wealth taxes, and the closing of unfair tax loopholes.
- The money from this taxation can be used to address income inequality and implement a just transition.
- There is precedent in Canada for a fairer system of taxation, and other countries including Norway, Switzerland, Argentina, France, and the Netherlands have successfully implemented wealth taxes.
Thinking about how to address the intersecting economic and climate crises often feels like an insurmountable challenge – or it did for me, until I was offered a change in perspective.
I was babysitting a friend’s daughter recently, and she asked me how I was doing in that curious and expectant five-year-old way. I tried to explain to her why I was feeling sad – the seemingly inevitable warming of the planet, about people not being able to support themselves and their families, and how the people with the money and resources to fix it are hurting others instead of helping them. She listened carefully, thought about it for a minute, and then asked, “But why don’t they share?”
The social, ecological, and economic situation we find ourselves in is very complex, but the question of “why don’t they share?” very clearly illuminates the problem – and the solution. The richest people on Earth, including Canadian billionaires like Chip Wilson (CEO of lululemon), Daryl Katz (pharmacies), or Galen Weston Jr. (Loblaws) – are putting their interests and the interests of their shareholders ahead of workers, communities, and the planet.
“Sharing” the wealth of billionaires, profiteering corporations, and the 1 per cent is a solution, not only to the climate crisis, but also to addressing the income inequality and lack of supports for people and communities unable to make ends meet in this challenging economic situation. That’s why the Council of Canadians is demanding a just and reasonable transformation of our taxation system, especially in relation to the ultra-wealthy and corporations.
Wealth inequality and the climate emergency go hand-in-hand
We’ve all heard the statistics – two years into the pandemic, the ten richest men in the world more than doubled their net worths. In addition, new billionaires are being minted every 26 hours.
In Canada there are 41 billionaires, many of whom you’ve probably never heard of. Those 41 people, including David Thomson, Jim Pattison, and Galen Weston Jr., hold more wealth than the 40 per cent of Canadians at the bottom of the economic pile due to their ability to set prices for food, housing, energy, and more. This, at a time when food bank use has gone up 35 per cent in the last three years, home heating and electricity bills are slated to rise between 50 to 100 per cent over the winter, and we’re being told by our Minister of Finance that the solution to our problems is to cancel our streaming service subscriptions.
However, the economic hardship we are facing is not due to household budgeting – the problem is wealth hoarding by the few, which means income inequality for the many. This inequality is allowing the ultra-wealthy to live extravagant lifestyles, emitting 1 million times more greenhouse gasses than the average person.
In order to maintain the status quo that allows them to continue to amass tremendous amounts of wealth, billionaires are invested in all manner of extractive and tax schemes that exploit people, the planet, and the most vulnerable. Many of us likely remember tax-avoidance scandals like the Panama Papers, but what we might not be aware of is that Canada has 84 tax treaties that often prevent people and corporations from paying tax in either country. In addition to these tax schemes, Oxfam recently investigated the investments of 125 billionaires and found that many of those people are heavily invested in fossil fuels.
We don’t need to look far to see the growing impacts of the climate crisis on our communities and pocketbooks – people on the east coast are still recovering from Hurricane Fiona, farmers in the prairies are feeling the effects of extreme weather on crop yields, and people in the Pacific are coping with the whiplash impacts of unbelievable fires followed by incredible floods.
Paying for a just transition
The way that our economy is set up needs to change – there are ways to generate prosperity that don’t rely on the exploitation of people and the planet. Addressing wealth hoarding by taxing the ultra-wealthy and corporations is one step towards paying for a just transition that will move us towards a decarbonized economy that enables jobs for workers, dignity for the public, and Indigenous sovereignty.
Corporate profits made off the backs of struggling Canadians, or at the expense of the environment, could and should be reinvested into society and into addressing the climate crisis. Canadians for Tax Fairness and the Canadian Centre for Policy Alternatives show that it would be possible to increase tax revenue by $26 billion if we imposed a wealth tax, and another $22 billion if we increased the corporate income tax rate and implemented a windfall profits tax to corporate pandemic profits.
According to the CCPA, a just transition will cost $16.5 billion per year, with that amount declining over the lifetime of the transition. This amount would easily be covered by the proposed tax system amendments above.
By not imposing just and reasonable taxes on billionaires and corporations, while people in Canada struggle to heat their homes and put food on the table, our government is choosing to prioritize the profit of a few over a just transition that’s needed to ensure the wellbeing of people, communities, and the planet.
Such taxes are neither onerous nor unprecedented, and polling shows they’re supported by an overwhelming majority of Canadians. Canada has a history of taxes that have checked unfair and opportunistic wealth accumulation in times of intense hardship, like during World War II. This current moment should be understood as a time of intense hardship too – wealth inequality is at an all-time high, many families can’t afford to put food on the table and keep the lights on, and the climate crisis is delivering disaster after disaster.
As we continue to live through the climate crisis and an escalating cost-of-living crisis, we need our governments to marshal our collective resources to address these crises, and that means appropriately taxing the very wealthy. Governments even have the backing of a strong majority of Canadians to do so – an Abacus poll from 2021 shows that 87 per cent of Canadians back a tax on excess profits from large corporations.
How did we get here?
Corporations and the wealthy capitalizing on hard times is not a new phenomenon.
Canada’s income landscape has not always looked this way. Through and following the Second World War, as more people (especially women) joined the workforce, migrated into cities, and unionization took off, Canadians saw a rapid rise in income and a trend towards greater income equality. The richest 0.01 per cent of Canadians held only 0.5 per cent of the country’s wealth until the end of the 70s.
However, following two significant recessions in the 1970s and 80s, increased corporate globalization and the decimation of local manufacturing, and the elimination of progressive taxation, the wealthy were well on their way to becoming ultra-wealthy. Today, the richest 0.01 per cent of Canadians make 477 times more than the bottom 50 per cent, and that gap continues to grow.
As discussed in “The Rise of Canada’s Richest 1%”, a report by the Canadian Centre for Policy Alternatives, “the main reason the rich are getting richer is how much they are getting paid. The flip side is how much they are getting taxed.”
In 1948, when income inequality was significantly less of a problem than it is now, those in the top tax bracket were taxed at 80 per cent. This helped curb the runaway profits that are causing so much inequality and suffering in our society today. But after years of tax cuts, especially in the ‘70s and ‘80s, we were left in a position where those in the top income bracket are taxed at only 33 percent.
Corporate taxation has also declined significantly – in 1960, corporations were paying 40% federal tax on profits – today, the net federal corporate income tax rates sit at 15 per cent, with no increase, despite significant increases in profits over the last few years. This has had a devastating impact on social equity, and on our ability to fund public services and maintain public infrastructure.
Taxing corporations means they have less money for lobbying – and fewer opportunities to capture our democratic institutions
Instead of a half-hearted luxury tax that doesn’t address the root of the problem, we need system of taxation that eliminates the impacts of corporate profiteering on our utilities, food, and shelter. Billionaires and corporations can afford significantly more taxation and fewer subsidies – and taxing these groups will reduce the capacity and capital they rely on to exploit people and the planet.
More taxation means fewer resources and opportunities for corporations and billionaires to use to lobby the government around lower taxation for the wealthy, or ongoing fossil fuel subsidies. Taxing these groups reduces the capture of our democratic institutions.
Increased taxation revenue on billionaires and corporations also answers the question of who will pay for climate change mitigation and the social and economic transformations required for a just transition: the people who are responsible for the crisis in the first place.
In addition to raising concerns about the effects of extreme increases in corporate profits on affordability for households and governments, join us in urging the federal government to:
- Implement a windfall tax – a tax on the huge profits being made off of oil and gas extraction, etc. that would see profits go into transitioning communities away from fossil fuel reliance and towards energy resilience, rather than into shareholder pockets.
- Impose an annual wealth tax – a tax on the net wealth of the richest people, those whose net worth is more than $10 million. A wealth tax would take into account and tax all of the existing assets of the ultra-wealthy as they get very little of their wealth from taxable income.
- Close egregious tax loopholes – including raising the corporate tax rate, setting caps on executive salary deductions, eliminating the preferential tax treatment of capital gains, and ending agreements with tax havens.
You can learn more about these demands through Canadians for Tax Fairness and their analysis of the Canadian Centre for Policy Alternatives’ Alternative Federal Budget here.
Other countries are already doing this
The UK has already implemented a windfall tax on oil and gas companies in light of record-breaking profits in the past year, taxing companies about 25 per cent on profits derived from extracting oil in the UK. The BCC reported that BP alone would pay $800 million USD (about $1.2 billion CAD) in windfall tax in 2022.
Several countries have a wealth tax, too. According to Canadians for Tax Fairness:
- Norway saw 1.6 billion euros in revenue in 2019 due to their wealth tax, in a country with a population of only five million.
- Switzerland’s wealth tax is based on region and level of wealth, and this brings in an additional 4 per cent in tax revenue annually. Many of the world’s wealthiest people still bank in Switzerland knowing they will pay a wealth tax.
- Argentina implemented a wealth tax that enabled the government to distribute $2.4 billion in emergency COVID-19 relief for citizens
- France, Colombia, the Netherlands, Italy, and Belgium all have some form of wealth tax as well.
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