The statement: "Any of the [tax]proposals here, frankly, have already been in place in Canada. Most everything we're proposing has been in the Canadian fiscal system at some time in the past, but it's been removed by the reckless actions of Brian Mulroney, or Paul Martin as finance minister." NDP Leader Jack Layton, talking about his inheritance tax proposal in Toronto, May 26, 2004.
The message: Taxing the estates of the rich is not a crazy new idea.
The reality: Oops, sorry Mr. Layton. It wasn't Brian Mulroney's Tories -- nor even the more recent Liberal government with Mr. Martin in the finance job -- that got rid of the federal inheritance tax. Pierre Trudeau's Liberals -- the "Just Society" government -- abolished it in 1971 as part of a major overhaul of the tax system.
But New Democrats are right when they say inheritance taxes are not a new idea. The British began imposing what were called estate duties about 200 years ago.
The NDP platform, unveiled in Toronto yesterday, proposes "implementing a U.S.-style inheritance tax on inheritances of more than $1-million." (Family small businesses and farms would be exempt.) A million bucks isn't what it used to be. A fair number of baby boomers really are inheriting estates that are worth that much thanks to hardworking, frugal parents who took out a mortgage 40 years ago on a little bungalow that's now worth a bundle.
So let's look at the U.S. inheritance tax. The tax does not apply to the first $1.5-million (U.S.) of inherited wealth. The exemption used to be just a million. But the Republicans, who call it a "death tax," got the exemption increased starting this year. And in two years, the exemption will be even greater; $2-million estates are not taxed if the heir is the surviving spouse of the dearly departed. It kicks in when the next generation inherits.
The tax rates go up to 49 per cent from 18 per cent for estates valued at more than $3-million. And the tax applies to the market value of all assets, worldwide. That would include the art collection, dad's antiques, mom's golf clubs and the time-share in Nova Scotia.
The U.S. inheritance tax is coupled with a gift tax at the same rates. So if the doctor tells you that you've got a terminal illness, you can't beat the tax collector by giving the kids a really, really big birthday present.
The NDP platform booklet doesn't mention a gift tax. But that would have to be part of the deal, says Hugh Mackenzie, an economic adviser to the party.
Nor does the NDP platform say anything about abolishing the capital gains tax. So that means double taxation -- capital gains plus inheritance -- if dad's antiques really are worth more now than when he bought the stuff as cheap junk.
We'll forgive Mr. Layton for confusing Brian Mulroney with Pierre Trudeau. But he loses points for making something less than a full disclosure of the double taxation implications of his inheritance tax proposal and forgetting to mention the gift tax.