Editor’s note: Following the publication of this story, Global News was made aware that Scotiabank Economist Brett House had put his name forward for Liberal candidacy in the 2020 Toronto Centre byelection. However, Marci Ien was appointed as candidate with no nomination contest.
If NDP Leader Jagmeet Singh becomes the prime minister of Canada, anyone with over $10 million can expect to pay a new tax: one per cent on every penny of their wealth over $10 million.
The higher public price tag for the rich is just one cornerstone of the NDP’s 115-page campaign commitment document. That document, outlined by Singh on Thursday, provides a blueprint of what to expect from his party when an election campaign eventually kicks off.
“To put it bluntly, no other party can make any commitment to invest in people without either cutting existing services or putting the burden back on people,” Singh claimed at the press conference.
“We’re the only ones with a plan that says it doesn’t have to be that way.”
While the Liberals, Conservatives, Bloc Quebecois and Green Party have yet to lay out their election platforms — and no election has actually been called — experts have mixed opinions about whether a wealth tax policy is one that gets the economic green light.
Singh’s proposed policy would tax anyone making over $210,000 at 35 per cent per year. It would also slap the super-rich — anyone with over $10 million in wealth — with the one per cent wealth tax on anything over that amount.
Parliamentary Budget Officer Yves Giroux crunched the numbers on the NDP’s original wealth tax pitch last year, and he found that even a wealth tax on families with net worth of over $20 million would rake in $5.6 billion in 2020-21.
A $10 million threshold would rake in even more funds for the federal coffers — and that could make a real difference, according to Randy Robinson, director of the Ontario office of the Canadian Centre for Policy Alternatives.
“It’s a good policy and we would encourage all parties to adopt it,” said Robinson.
“We have to do something about the inequality in this country. And fighting inequality is partly about taxing the very wealthy.”
However, one economist warned that wealth taxes as a whole can set a dangerous precedent in the world of taxation.
“There’s a general presumption in economic theory and practice around taxation that you don’t tax the same income twice,” said Brett House, the deputy chief economist at Scotiabank.
“Wealth has been broadly derived from income that has already been taxed once, and so the notion of a wealth tax tends to violate that principle of not taxing the same income a second time.”
This can be an issue of fairness, according to House.
“You make a whole set of decisions on how you’re choosing to earn money, how you’re choosing to save and invest it based on a set of tax rules,” he explained.
“And then if you change those rules such that money you already pay tax on is going to get taxed again, there is a basic fairness principle that’s being violated there.”
On top of that, House warned that wealth taxes don’t have a great global track record.
“Most jurisdictions that have tried wealth taxes over the last few decades have eliminated them because they have been very difficult to collect,” he said.
“So they have distorted incentives and not produced the revenue that was projected at the time of their implementation.”
But if the government wants to do it, they can, according to one advocate who supports a wealth tax.
“If there’s a will, there’s a way that the government can crack down on … tax avoidance measures,” said Toby Sanger, executive director of Canadians for Tax Fairness.
“And they’re increasingly doing that. A lot of the wealth at the very top is corporate shares and business interests. And that’s easily trackable.”
Sanger added that a wealth tax would help to tackle inequality — and the money collected could “be used to pay for public services to pay for the cost of the pandemic.”
In Canada, the top one per cent of families hold about 25.6 per cent of the wealth, the PBO reported last year. That’s about $3 trillion.
“If you have $10 million in wealth, you can certainly afford to pay one percent of that for the betterment of the country. I don’t think there’s any question of that,” said Robinson.
But just because something works in theory doesn’t mean it pans out in practice. According to House, there are a “variety of issues” that come into play and “underpin the difficulty of implementing wealth tax.”
“The assessment of what wealth is, is in many cases, complicated. And it’s very easy to transfer the domicile of wealth out of the country, in many cases,” he explained.
“We do not have a global taxation regime in Canada.”
Robinson agreed that this can be an issue. However, he added, this doesn’t mean we shouldn’t do something about it.
“The government has to get better and invest more resources in tracking down wealth that is being stored abroad, specifically to avoid taxation,” he said.
A wealth tax can also prove to be a “disincentive to further investment” in Canada, House added.
“So it can have offsetting impacts on other types of tax revenue,” House said.
One thing the government can do, House added, is deploy the taxation powers already at its disposal to bolster its coffers.
“It could find it more fruitful to simply ensure that it is fully implementing the measures that it already has in place and actually collecting all of the taxes that it’s due,” he said.
The NDP’s taxation promises go far beyond just the wealth tax. The pre-campaign document promises to raise a number of taxes, including the party’s pledge to boost the capital gains inclusion rate to 75 per cent and to increase the top marginal tax rate.
For the NDP, a lot of these ideas aren’t all that different from the ones the party floated in 2019. But Singh said he’s hoping Canadians will like his pitch better the second time around.
“Sometimes you look at items on the menu and say, you know what, maybe I should have bought that thing last night,” he said.
“And that’s what we’re hoping people realize that all the things we talked about are the things that people need now more than ever.”
Global News reached out to the Liberals and Conservatives for their thoughts on the wealth tax proposal. However, neither party directly answered the question — although the Liberals did critique the NDP promises more broadly.
“Canadians deserve real solutions that address the challenges and opportunities of our time, and yesterday’s recycled list of un-costed and undetailed promises from the NDP were not that,” said Liberal Party spokesperson Matteo Rossi in an emailed statement.
Prime Minister Justin Trudeau is expected to ask Gov. Gen. Mary Simon for an election within days, according to sources. An election is expected to take place on Sept. 20.