A winning strategy in politics these days is to promise to tax the rich.
In its platform for the June 7 election, Ontario’s provincial NDP prominently says it will ask the wealthiest people to pay more in tax. The NDP has been surprisingly competitive in the election campaign and some polls suggest the party is even with the Conservatives.
Variations on the tax-the-rich theme worked for the Liberals in the 2015 federal election, and for the BC NDP in 2017. There’s no agreement on what it means to be rich, but we’re getting a sense of it. If you earn roughly $150,000 to $220,000 or more, politicians have recently grown comfortable about raising your taxes. “Things could get a whole lot worse than this, but there has been a swing in the pendulum,” said William Robson, president and chief executive officer of the C.D. Howe Institute.
High earners, it’s becoming clear that the financial advice you get in the years ahead will have to focus a lot on minimizing taxes. Expect your income to be targeted and possibly expensive homes as well. If you don’t have a tax-smart accountant, financial planner and/or investment adviser to guide you through this, you need to get on that.
Increasing taxes for well-off individuals sends a message that they’re not paying their fair share. The Canadian Taxpayers Federation has countered with data showing that people with income of $250,000 or more represented 1 per cent of tax filers in 2014, but paid 21 per cent of federal tax. Those making more than $100,000 a year represented 8.4 per cent of tax filers and 52 per cent of federal tax revenue.
Still, people listen when politicians talk about tax fairness. Ontario’s NDP has been vocal about an ambitious spending plan – pharmacare, dental care, $12-a-day child care – that will be funded in part by tax increases on the wealthy and on business.
Not much talked about is another measure directed at the wealthy in the NDP platform – a tax of 3 per cent on cars sold for more than $90,000. It sounds a bit like the recent move by the NDP government in British Columbia to increase property taxes on homes with an assessed value of more than $3-million. One recent poll showed that measure got a thumbs-up from 82 per cent of NDP supporters – and 47 per cent of people who supported the provincial Liberals. Anywhere there are strong housing markets, politicians have to be watching this property tax story closely.
The same B.C. government raised the personal income tax rate last year to 16.8 per cent from 14.7 per cent on taxable income exceeding $150,000. Budgets in recent years from an NDP government in Alberta and a Liberal government in Ontario also increased taxes for high earners. The federal Liberals won the last election on a platform that included the introduction of a new tax bracket for high earners, and they tightened tax rules for the private corporations that professionals such as doctors use in some cases.
Mr. Robson worries that making both the wealthy and corporations pay more tax will have a negative effect on the economy that is felt by all. “It’s not that the person in the street is going to stand up shouting business investment is too low,” he said. “But they’re going to notice that they’re not getting the raises they expected, or that job creation isn’t as strong as it could be.”
Voters seem to be tuning out this argument, and the reason may have something to do with unease many Canadians feel about their financial situation. Economic and financial indicators are fairly strong on the whole, but polls and surveys consistently show people are worried about their spending, saving and debt levels. People may be open to government trying to solve their financial problems through programs such as public daycare, pharmacare and dental care. If taxing the rich will make it happen, then so be it.
Whether taxing the rich actually works is another question. According to a CBC report, the New Brunswick government tried it in 2015 and found the highest earners actually lowered their tax bills. That’s your tax-smart accountants, financial planners and/or investment advisers in action.