WHAT’S AT STAKE?
Growing Income Inequality
The Issue
Over the last three decades, the annual incomes of top earners in Canada have more than
doubled while the median taxpayer’s income has remained relatively stagnant. Income
inequality has increased during the Harper government. The top one per cent of earners is
taking home an ever-greater share of the national income.
While some of the increasing wealth gap can be attributed to the effects of globalization
and the loss of middle-class, unionized, manufacturing jobs, much of it is caused by the
Harper government’s tax and fiscal policies.
A 2015 International Monetary Fund study found that lower rates of inequality are
correlated with faster and more durable economic growth. Implications of income
inequality include reduced social mobility, social and political instability, and diminished
support for policies that redistribute income to address inequality.
Background
Canada’s top one per cent of earners took home 13.3 per cent of all income in 2011,
based on the most recent data available. Previous data have indicated that the top one
per cent accounted for 10.6 per cent of the national income, but a recent study found that
these individuals have significant income from private corporations that is not calculated
when traditional individual income tax data are used.
Canada is among the developed nations that do the least to reduce inequality through
taxes and transfer payments. Canada’s ranking on income inequality is ninth among OECD
nations when calculated on the basis of market income but falls to 19 th on the basis of
after-tax income.
The Harper government’s tax policies have, overall, favoured the wealthiest Canadians.
These policies include income splitting, tax-free accounts, the Universal Child Care Benefit,
and such “boutique” tax policies as the children’s fitness, green renovation, university
textbook, and adult gym membership tax credits.
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More families live in poverty as of 2012 than was the case in 1989 when the House of
Commons passed a unanimous motion to end child poverty by the year 2000. According to
Campaign 2000’s 2014 Report on Child and Family Poverty in Canada, “child and family
poverty has increased to 1,331,530 children (19.1%) from 1,066,150 children (15.8%) in
1989 according to taxfiler data.” In First Nations communities, where the federal
government has the primary responsibility for income support and community services, one
out of two First Nations children lives in poverty.
Policies to Address Economic Inequality
The federal government can reduce economic inequality by introducing progressive tax
measures that increase income taxes on wealthier Canadians and on corporations and by
increasing the child benefit for low-income families. Other measures include increasing
investment in affordable housing; introducing reforms that increase the benefits of the
Canada Pension Plan; investing in education, especially in Aboriginal education; and
increasing access to high quality, affordable early childhood care and education.
Questions for Candidates
1. Does your party support federal tax reform so that wealthier Canadians and
corporations are contributing more to support health care and other public services?
2. Does your party support an increased National Child Benefit for low-income families?
3. Does your party support a national policy that makes high quality and affordable early
childhood education and care more accessible to parents?
4. Does your party support greater federal investment in affordable housing?
5. Does your party support changes to the Canada Pension Plan to increase retirement
income for Canadian seniors?
Sources:
Alexander, Craig and Francis Fong (2014), “The Case for Leaning against Income Inequality in
Canada”, Special Report: TD Economics.
Campaign 2000 (2014), 2014 Report Card on Child and Family Poverty in Canada, Toronto.
OECD (2014), Economic Surveys Canada, Overview.
Ostry, Jonathan D., Andrew Berg and Charalambos G. Tsandarides (2014), “Redistribution, Inequality
and Growth, International Monetary Fund.
Wolfson, Michael, Mike Veall and Neil Brooks (2014), “Piercing the Veil – Private Corporations and
the Income of the Affluent,” http://igopp.org/wp-content/uploads/2014/06/wolfson-brooks-veall__incomes_of_affluent.pdf downloaded March 19, 2015.
VM:VO
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