Saturday, June 10, 2023

Wealth, Ultra-Wide Edition

How many ultra-rich are there in Quebec? Quebec Solidaires (QS) believe hundreds of thousands.

Posted yesterday at 7:00 am.

The Left party wants to tax huge wealth and inheritance. “It’s not a tax on the rich, it’s a tax on the super-rich,” claimed its parliamentary leader, Gabriel Nadeau-Dubois.

It casts a very wide net. It is difficult to say how many people have net worth of $1 million or more. These data are partially confidential. Quebec Solidaire has 338,000, or 5% of the population.

The aging of the population and the boom in real estate have led to an increase in household wealth. Among the taxpayers targeted by QS are upper-middle class people who finance their retirement with their wealth. Even if they remain privileged, the expression “over-rich” is derogatory.

For comparison, the New Democratic Party used the term in the previous campaign to refer to 20 million or more people. In the United States, Joe Biden proposed a tax on assets worth more than $32 million.

Many homes must have an annual appraisal of the value of their property, investment or business. And the authorities should confirm it. Not to mention the risk of flying to other provinces.

In return, the check will sometimes be minor.

QS tax will be calculated on net assets exceeding $1 million. From 1 to 10 million, the rate is 0.1%. From 10 to 100 million, it would be 1%. Then 1.5% out of 100 million.

This rate is not unreasonable. If your assets are $2 million, this equates to an annual withdrawal of $1,000. But it also means that if your assets are 1,100,000, you will have to pay $100. That’s a lot of bureaucracy for little gain.

Liberals proposed a simpler and more modest solution: an increase in the tax rate for incomes over $300,000.

However, Dominic Engeld’s idea has two drawbacks.

First: As tax expert Brigitte Allepin shows on our screens1The biggest problem is that the wealthiest people avoid the current tax. Instead of the expected rate of 53%, they only manage to pay 31%. The priority would be to implement the existing tax before it is implemented without knowing whether it will work.

Second: income is not the main source of inequality.

This debate has the ability to ask the essential question: Are inequalities increasing? And what does it play its part?

If we choose Quebecers, the answer is clear: 54% of them believe inequalities are increasing and 87% want to make it a political priority.

It remains to be seen what we are talking about.

Gross income is not the best measure. It is best to compare disposable income after tax and redistribution measures. In Canada inequality according to this measure has increased since the 1980s.

Wealth, ultra-wide edition

In Quebec, however, social policies have offset this effect.2, And consolation at the bottom of the scale: poverty has declined in Quebec, like Canada.

Disposable income isn’t the only indicator. Wealthy people derive much of their wealth from their financial and real estate assets.

In Quebec, income inequalities are low compared to the rest of the country, but wealth inequalities are high. For disposable income after taxes and transfers, the richest quintile earns 7.6 times more than the poorest quintile3, But for inheritance the difference is 508 times!

Here is the evolution of these inequalities for Canada.

Wealth, ultra-wide edition

What to do ? Most OECD countries impose an inheritance tax. Canada does not have one, but it is nonetheless one of the rare places to be taxed on capital gains during inheritance.

QS wants to add another mechanism. The objective isn’t far-fetched—plus, Quebec already has an estate tax.4, He defends himself very well: after all, there is no merit in being born in a wealthy family.

But overall, it seems that the solidarity proposal was conceived too early.

QS has already identified an error. Contrary to what was planned, this would give exemption to the farmers. Quebec has struggled for years to save family farms from closure and to facilitate transfer between generations. The idea of ​​solidarity threatened to undermine these efforts to protect food self-sufficiency.

The fight against inequalities is a necessary battle. But it is in the details that it gets complicated.

2. There are two measures of inequality: the Gini and Palma coefficients. They decreased slightly in Quebec between 1980 and 2020.

4. The Quebec estate tax was abolished in 1985.

World Nation News Desk
World Nation News Desk
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