When ‘tax the rich’ became fashionable
In 2019, Trudeau’s Liberals are once again putting forward a theme of addressing inequality through tax fairness, but how have they fared on this front?
Months before the 2015 election campaign that swept him into the prime minister’s office, Justin Trudeau made an appeal to an audience at the Canadian Club of Toronto.
In front of a crowd of wealthy businesspeople, Trudeau suggested that “those with the most do a little bit more to help those in Canada with less.”
“I might say, if we don’t deliver fairness, Canadians will eventually entertain more radical options,” Trudeau told the audience, making an obvious reference to the NDP.
This scene opens Martin Lukacs’ new book, “The Trudeau Formula: Seduction and Betrayal in an Age of Discontent.”
It chronicles the methods by which Trudeau’s Liberal party branded itself as the vehicle for addressing frustrations over the gaping income inequality exposed by the 2008 financial crisis.
Once in power, Lukacs argues, Trudeau made only feeble efforts to rein in inequality.
“The Trudeau Formula” points out Trudeau drew heavily on slogans from leftist social movements, such as Occupy Wall Street, while reassuring corporate leaders the status quo would be maintained.
“It was very effective,” Lukacs said of the Liberals’ 2015 campaign.
“I call it simulated class warfare.”
But Lukacs says Trudeau’s policies over the last four years have actually increased wealth inequality.
“The top one per cent in this country, their income has grown faster than anyone else’s under the Trudeau years. And, with the reductions in provincial taxes as well, they’re actually paying less now than they were before 2015,” Lukacs said. “So, the one per cent are doing just fine.”
While tax rates were marginally increased for the top one per cent, corporate tax rates were maintained and offshore tax loopholes were left intact.
However, Kevin Milligan, a professor at the University of British Columbia school of economics, says the Trudeau Liberals can claim some wins on addressing wealth inequality.
He points to the Canada Child Benefit as the key Liberal program that has addressed inequality.
The Canada Child Benefit was introduced in 2016 and offers a cash payout to parents of children.
“There was a drop from 2015 to 2017 of child poverty by about one-third,” Milligan said. “It’s pretty likely that that’s mostly driven by the introduction of the Canada Child Benefit.”
Lukacs acknowledges the Canada Child Benefit has helped many, but says it has not gone far enough.
“Fifty per cent of Canadians are still $200 away from insolvency at the end of every month,” Lukacs said.
In 2019, the Liberals are not the only party talking a good game on inequality.
Conservative Leader Andrew Scheer has also pledged to cut “corporate welfare” by billions.
Both the NDP and Greens have pledged to impose a one per cent “wealth tax” on assets of over $20 million, while funding large-scale social programs.
The tax cuts promised by the Liberals are projected to cost $5.6 billion by 2023-24, while the Conservative tax cuts would cost $6.1 billion by 2024-25.
Milligan says there is little to distinguish between the tax policies of both parties.
“There’s differences between them, but they are, in terms of magnitude and targets, pretty similar,” Milligan said.
However, a proposal by the Conservatives to scrap the 2017 Liberal policy related to income sprinkling stands out to Milligan.
“That’s aimed at a pretty high-income group and that one really raised my eyebrow,” Milligan said.
“The reason it raised my eyebrow is because most of the rest of the tax platform from the Conservatives was aimed again at this middle-class range.”
Like the Liberals, Lukacs says the Conservatives are now using language cribbed from the political left. The term “corporate welfare” is borrowed from the title of a 1972 book written by former NDP leader David Lewis.
Milligan said the NDP’S wealth tax has also caught his eye.
The NDP has proposed a one per cent tax on assets worth over $20 million, to fund social programs such as child-care spaces and a national pharmacare plan. The Green Party has proposed a similar tax.
The parliamentary budget officer has said the tax could provide $70 billion in revenue over 10 years, but also cautioned that wealthy earners could take steps to avoid the tax.
Milligan said redistributive tax policies, aimed at taking from the rich to benefit the poor or middle class, are something parties can no longer avoid talking about.
“I think there’s really been an upsurge in that over the past few years,” he said.
“We see that in the U.S., with several democratic candidates proposing new measures on high earners. I think we’ve seen it in Canada in 2015 and again in 2019.”