This is the time of year we are all compelled to think about taxes. A few of us might get excited about the prospect of receiving a refund, but most of us dread this annual chore and would rather do without it. This time of year also presents us with an opportunity to reflect on what taxes are and what purpose they serve in society.
Taxes are essential investments in public resources. Without taxes we would not have hospitals and highways, schools and satellites, or power grids and ports. Through taxes, citizens pool resources to create public goods for the use and benefit of all. Everyday, we benefit from the investments our parents and grandparents made to create quality health care, effective public
education, dependable transportation and reliable communication. These public goods are such an integral part of our everyday life that they are almost invisible to us.
We need to maintain these public investments and grow them for future generations so they too may enjoy the benefits that we have come to take for granted. The way we can do this is, firstly, by supporting a fair and robust taxation system; and, secondly, by strengthening government which is the system we have devised to combine, create and manage public resources for the common good.
What does a fair and robust taxation system look like? Simply put, it should support the idea that those who take more from public resources should pay more into them. This would include large corporations and very wealthy families and individuals who are heavier users of publicly funded
transportation infrastructure, utility grids and a workforce educated by public funds, than small businesses or middle-class families and individuals.
Taxation also needs to be redistributive and work to create a level playing field to reduce inequality in society. We know that income inequality adversely affects both rich and poor with unequal societies having higher crime rates, and increased physical and mental illness.
Progressive taxation – taxing individuals and corporations making more income or profit at higher rates – not only ensures that they pay their fair share for use of public resources but also redistributes resources to those who need them by strengthening financial, social and physical
While many small family businesses have struggled or closed during the COVID-19 pandemic, several of the largest corporations have performed very well. An excess profits tax on these corporations will ensure that governments collect much-needed revenue to pay for the costs of
the pandemic while preventing these entities from profiting disproportionately from the pandemic.
Another form of fair taxation is a wealth tax such as the one that exists in Norway. Canada is the only G7 country without a wealth, inheritance or estate tax, and we allow money to become concentrated into the hands of a few ultra-rich families. During the pandemic, Canada’s top billionaires have increased their wealth by 28% (or $50 billion). And over the past decade, only the top 1% of Canadians have increased their share of wealth. Fairness requires that if you get wealthy using public resources that others paid for, then you should pay a share of your wealth in taxes so others are repaid.
In Canada, the federal NDP proposed a one percent tax on those with a net wealth of more than $20 million. This modest proposal would raise more than $5 billion dollars in federal revenue and would go a long way towards paying for services of value to Canadians such as national pharmacare and universal access to childcare. National survey data shows that 79% of Canadians are in favour of the 1% wealth tax, with support being strong across all provinces.
A number of tax loopholes act as barriers to fair taxation at the federal level. They result in wealthier individuals and families paying taxes at lower tax rates than middle-class and lower income families.
For example, when you work for a salary, you pay taxes on every dollar you make, but when you sell an investment at a profit, capital gains tax only applies to half the gain and the other half goes untaxed. Treating profits from investments like wages would raise an additional $17 billion
in tax revenue to invest in public resources. This would also prevent speculation, particularly real-estate speculation, that is making housing unaffordable for many Canadians.
As engaged citizens, we need to advocate for a combination of fair taxation policies and effective, accountable and responsible governance. This will ensure that our investments will provide dividends now and for years to come.
By Vamini Selvanandan© 2021. This work is licensed under a Creative Commons CC BY 4.0 license. This article was originally published in the Rocky Mountain Outlook on April 15, 2021. Photo credit: Nataliya Vaitkevich on Pexels.com
Recommended further reading:
- Healthy Debate. Let’s turn wealth into health with a 1% tax on the rich.
- Canadians for Tax Fairness. Fair Tax Recovery Plan.
- OECD. Tax policies for inclusive growth in a changing world.