We don’t have to live with income and wealth inequality
February 9, 2015
We don’t have to live with income and wealth inequality.
As the political climate heats up in Prince Edward Island with provincial and federal elections on the horizon, Islanders are becoming vocal about issues that matter to them. Income and wealth inequality is one issue that is not going away. Oxfam’s recent study clearly points out that wealth is continuing to accumulate in the hands of the few to the detriment of our economy and the middle class.
In Canada there are several factors at play that are fostering income and wealth inequality. Since 2000, the federal corporate tax rate has been cut from 28% to just 15%. Corporations in Canada are now paying the lowest tax rate of any G7 country and the government is losing over $10 billion per year in revenue because of this. Corporations only pay income tax on their profits, and provide just 13.6% of the federal government’s revenues. Individuals pay income tax on their gross income, and contribute to more than 50% of the government’s revenues.
Tax havens and loopholes are also a factor. Federal and provincial governments are losing approximately $7.8 billion in tax revenue on a yearly basis because of tax havens. Corporations and some very wealthy individuals are avoiding paying their fair share of tax and are getting richer at everyone else’s expense. In 2013, $178 billion in Canadian funds were stashed in offshore tax havens.
Governments are losing significant revenue through Real Estate Investment Trusts (REITs) as well. REITs are publicly traded companies that own and manage income producing real estate. However, because they are not classified as “corporations” they are exempt from paying income tax. The profits made by REITs are largely transferred to wealthy investors. REIT’s can afford to pay tax and should, just like businesses and individuals do.
In each of the previous examples, whether it is corporate tax rates, offshore tax havens, or Real Estate Investment Trusts, governments are losing the tax revenue needed for debt management, quality public services, and infrastructure. The tax fairness issue needs attention and should be discussed as the political parties align themselves for public support. Canadians deserve a more level playing field. A fair tax system would address income and wealth inequality, enable governments to pay down debt, and create a healthier economy for all.