Income inequality soars as rich Canadians get richer
By Katherine Scott
and Jon Milton
A hundred Canadians are standing in a room together, with $100 on a table. They’re figuring out how to divide the money.
In this thought experiment, that $100 represents all of the income earned by all Canadians in 2021 – a year into the pandemic, when governments began to withdraw relief funds that had kept members of the public afloat.
Instead of dividing that $100 equally, where everyone would get $1, one person – the richest in the room – claims $13.40.
This isn’t just a thought experiment; it’s happening in real life.
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That’s right – one percent of tax filers collected 13.4 percent of the total aggregate income in 2021. More than one out of every eight dollars went to just one percent of tax filers.
In 2021, that top one percent saw their incomes rise by an average of 9.4 percent. The bottom 50 percent saw their incomes actually decline – by 6.2 percent.
That’s only the beginning of the story. The real prize, for the rich, was not in their salaries and market income – it was in capital gains, or the increase in value of capital assets they already held. A rise in stock prices – or an increase in the value of your home – is capital gains.
Once we take capital gains into account, the top one percent earned a whopping 20.5 percent more than they did in 2020. The bottom 50 percent of Canadians lost 6.5 percent.
The one percenters took in an average of $223,400 in 2021 in capital gains alone – that’s not income they earned in any way. That’s purely money that they got from owning things. It is a payment for already being rich.
People in the bottom half of Canadian tax filers reported basically no capital gains income. Their average total income after capital gains was just $21,600 – only $500 more than their pre-investment income.
The top one percent is, for the most part, a boy’s club. Just over a quarter of the membership in this elite strata is women, while nearly three-quarters are men. The women who are part of that strata are much less likely to be living in couple families or to rely on the labour market – which means they are more likely to be single, older women with sizable (inherited) wealth and savings.
In 2021, Canada’s financial elites rode a wave of high stock markets and real estate values to sizable profits. They scooped up rentier checks and watched their assets’ value boom. There’s no question as to who “won” the pandemic – the rich made out like bandits.
Inequality is not some sort of inescapable fact of nature, like the first snowfall of the winter. It is the result of deliberate policy choices that governments have made over generations, and continue to make today.
Every dollar of workers’ pay gets taxed, but only half of capital gains – the income from buying and selling financial assets – gets taxed. Over half of this income goes to the richest one percent. The federal government could tax capital gains like income by raising the inclusion rate for capital gains to 75 percent – a move which would bring in more than $9.5 billion.
When the federal government gives preferential treatment to financial activity, it widens the wealth gap and costs the federal government over $20 billion every year. The feds could implement a progressive wealth tax beginning on net worth over $10 million, which would bring in $32 billion in the first year and $409 billion over 10 years.
It’s time that our governments started making different choices.
Katherine Scott is a senior researcher and Jon Milton is a senior communications specialist with the Canadian Centre for Policy Alternatives.
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