Here’s a fiscal Rorschach test: What is the net worth of a “super-rich multimillionaire”?
If your answer is $10-million, then you are likely to like the federal NDP’s reworked proposal for an annual wealth tax, part of a suite of tax-the-rich measures in the party’s not-a-platform election platform released last Thursday.
In the 2019 election (and as recently as its April policy convention), the NDP’s annual wealth tax of 1 per cent would have only encompassed households with $20-million or more in wealth. However, that proposal quite clearly would have left scads of super-rich multimillionaires off scot-free.
The document released Thursday is scant on details, with the NDP promising detailed costing during the campaign. But the party did say the tax would be applied on a household, rather than an individual, basis. (That would avoid spouses splitting up assets to slip under the threshold.)
A July, 2020, analysis by the Parliamentary Budget Officer concluded that a 1-per-cent tax on net wealth over $20-million would have raised $5.4-billion in fiscal 2021-22. However, the PBO cautioned that a “large behavioural response” would be expected, a polite way of saying that wealthy Canadians would sprint to their accountants to find ways to shield themselves from that tax.
Significantly, that PBO analysis assumed that all assets, with the exception of lottery winnings, would be caught up in the tax: Principal residences and the value of defined benefit pension plans would all be part of the calculation.
Taxing questions
Responding to a recent column by my colleague David Parkinson on a C.D. Howe Institute analysis that contends Ottawa’s debt path is unsustainable, one online reader asks: Is subsidized day care a productivity enhancer, or just an expensive social program?
Notionally, expanded child care does generate economic benefits. If parents with young children (women, for the most part) are able to access safe, dependable child care, they will be more likely to re-enter or stay in the work force. Quebec has seen participation rates for women climb since it introduced subsidized daycare in the 1990s.
Strictly speaking, however, those economic benefits aren’t productivity gains; they are increases in economic inputs, in this case, the amount of labour.
In her April budget speech, Finance Minister Chrystia Freeland said child care is “the national economic policy we need now.” The budget itself said that high-quality daycare could add 240,000 workers to the labour force over the next two decades, adding to real growth in GDP by 0.05 per cent a year over that timeframe. The budget claimed the child care initiative is “one of the most significant actions taken since the introduction of North American free-trade agreements to expand economic opportunity for Canadians.”
Some supporters of the government’s plan contend that the program will pay for itself, with the tax revenues from expanded economic activity more than offsetting the billions of dollars Ottawa intends to spend each year. (The Liberals themselves have not made that claim.)
But others are more skeptical. Alexandre Laurin and Don Drummond, the authors of that C.D. Howe study on debt sustainability, wrote that they are not convinced that child care will provide a major economic lift. Their analysis did not include an increase in GDP from child care, or from recent new technologies. “Any effects are highly uncertain, likely to be small and should lift the growth rate over a transition period only,” they wrote.
In an e-mail, Mr. Laurin, director of research at C.D. Howe, said the Liberal plan will end up subsidizing many parents who would have put their children into daycare in any case. While the subsidies will undoubtedly make life easier for those families, there wouldn’t be an uplift to labour force participation in such cases. “I think it is highly unlikely that it would entirely pay for itself,” Mr. Laurin wrote, noting that a system that tied subsidies to family income would have been cheaper, and stood a better chance of at least breaking even.
The bottom line: There will be some economic benefits to child care, but the cautious view says the costs of the program will only be partly defrayed.
Line Item
Soaring profits: Ottawa will turn a tidy profit on its $5.9-billion aid package for Air Canada, the Parliamentary Budget Officer concludes in an analysis released last week. Over 10 years, the government is projected to make $177-million from that assistance package, which gave Ottawa equity in Air Canada, as well as warrants to purchase additional shares, along with extending several lines of credit to the airline. Gains from those assets, plus interest payments from Air Canada, will more than offset the government’s borrowing costs. The PBO notes, however, that it’s unclear how long the government intends to hold on to its shares.
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Patrick Brethour