We’re often told that the rich are overtaxed. Certainly, the rich often tell us this. But driving through the affluent parts of Toronto, one is struck by the sight of much opulent living.
If the rich are so heavily taxed, how do they manage to live so well?
One possibility is that they’re not really that heavily taxed; we just hear a lot about the heaviness of their tax burden. This probably has something to do with the fact that they own virtually all media outlets in the country.
Consider what happened last spring. In March, Statistics Canada published a study showing that property taxes all across Canada are regressive — that is, they impose a heavier tax burden on those lower down the income ladder. In some municipalities, the relative burden on low-income homeowners is four or five times greater than on rich homeowners. These dramatic findings would surely have interested a lot of Canadians — but the media barely mentioned them. Perhaps the media simply consider StatsCan studies too boring?
Not exactly. A month later, StatsCan published another study showing that Canada’s top income earners pay roughly half of all income tax. Now there’s a story! The media gave this study wide coverage. The Globe and Mail reported it on the front page under the headline: “Canada’s top 10 per cent pay 52 per cent of total tax bill.”
This second study became fresh ammunition for the many vocal commentators who urge more tax cuts for the rich. It certainly seemed to back up their argument that the rich are bearing a particularly heavy tax burden.
But this isn’t actually true.
In a paper published last week by the Canadian Centre for Policy Alternatives, Osgoode Hall tax professor Neil Brooks notes that the top 10 per cent pay a lot of tax simply because they have a lot of income, and their share of the tax burden has increased in recent years simply because their share of the national income has increased.
In other words, the rich have gotten richer — a whole lot richer — so their tax bill is bigger.
The real story behind the tax data, writes Brooks, is that “Canada is becoming a much more unequal society.” The top 1 per cent almost doubled their share of national income between 1980 and 2000.
But this significant increase in inequality is largely absent from the ongoing debate over taxes.
Brooks also notes that focusing exclusively on income tax distorts the picture. The income tax is mildly progressive, but the other key taxes, notably sales taxes and property taxes, are regressive.
When all taxes are considered, Canadians at all income levels — whether $10,000, $100,000 or $1,000,000 — pay between 30 and 35 per cent of their incomes in tax. Canadians already have a flat tax system.
But don’t expect much media coverage of all this, since it does little to bolster the case for more tax cuts for the rich.