When the federal government announced that, effective July 1, 2025, the lowest personal income tax rate will be reduced by one percent, from 15% to 14%, it claimed that this may save some families up to $840 per year. Spread over one year’s wages it amounts to less than a cup of coffee a day.
The government’s focus on tax rates is appropriate, but it is aimed at the wrong end. The wealth gap we see today is neoliberalism’s legacy, the international political economic order we signed onto half a century ago. If the tax cut’s objective is to narrow this wealth gap, the impact will be insignificant.
The government needs to consider restoring the progressive tax rates we surrendered to neoliberalism. Put another way, rather than cut the tax rate applied to the bottom 10% by 1% we should increase the tax rate applied to the top 1% by 10%.
Today’s billionaires are yesterday’s millionaires, but the label does not do justice to the magnitude of today’s wealth gap. Any but the “poorest” among Canada’s billionaires could have paid the $633 million cost of our new Ksyen Hospital – cash up front – without endangering his standing as a member of Canada’s billionaire club. Reflecting on such musings highlights the outrageous size of the wealth gap we have created.
As we have grown accustomed to government deficits in the double-digit billion dollar range and long-term debts exceeding the trillion dollar level, we need to remember that one billion dollars is one thousand million dollars and one trillion dollars is one thousand billion dollars.
Should tax policies establish a floor of sufficiency under the middle class or a ceiling on wealth?
In one of his fireside chats 80 years ago, U.S. President Franklin D. Roosevelt listed eight rights he deemed to be essential to the security of every citizen. Included were the right to earn enough to provide adequate food and clothing and recreation, the right of every family to a decent home, and the right to adequate medical care and protection from the economic fears of old age, sickness, accident, and unemployment.
Over sixty years ago, Canadian provincial and federal governments cooperated to enact programs in the pursuit of those goals. Policies were aimed at more than establishing a floor of economic sufficiency; we were pursuing measures aimed at economic and social equality.
By the 1980s, however, we abandoned welfare state ideals to embrace neoliberalism’s promise of greater prosperity through privatization, deregulation, and tax cuts. The state abandoned its pursuit of egalitarianism, settling instead for minimum sufficiency.
This shift in our political economy enabled the wealthiest among us to capture a greater share of our national income. Many of the problems our middle class is struggling with today, problems associated with access to and the cost of housing, food, and education, are neoliberalism’s barter.
“Cut the tax” is a most effective political rallying cry, but tax cuts are deceiving.
We cannot hope, by cutting taxes, to cover all the costs of: a) eliminating deficits and debt; b) upgrading our public infrastructure; c) decarbonizing our economy; d) fire and flood damage caused by climate change; e) beefing up our nation’s defence in the face of growing international discord; f) educating our youth to help them cope with the world we have created, and g) (here I am being selfish) the needs of an aging population.
