Earlier this week, the federal government released an economic and fiscal snapshot for so-called Canada.
One particular point the release highlighted—and that the media and conservative politicians latched onto—was the fact that the Liberals were projecting a deficit of $343.2 billion for the 2020–2021 fiscal year.
Twelve years ago, the national debt was at $457.6 billion, the lowest it’d been since 1993. Thanks to 11 consecutive deficits run under both Stephen Harper and Justin Trudeau, that number increased to $685.5 billion, the highest our debt has ever been.
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The new deficit will push the national debt past the $1 trillion mark for the first time in history: to $1.029 trillion to be more accurate.
Both of those points—one of the largest deficits in our history and a debt over a trillion dollars—made a lot of headlines and made a lot of conservatives angry.
I’m personally not too worried about it. Our debt-to-GDP ratio is pretty reasonable still and borrowing rates are super low. The Bank of Canada overnight rate, for example, is only 0.25%. That’s less than 1%. It hasn’t been above 2% in over a decade.
But even so, if historical deficits and trillion-dollar debt levels are a concern for you, well, there is a solution.
Also released this week was a costing note from the Office of the Parliamentary Budget Officer. At the prompting of someone in parliament, the PBO researched how much revenue the federal government could generate with a wealth tax.
The PBO was restricted to just 1% on anything over $20 million, including all assets and liabilities, except for lottery winnings.
What the PBO discovered was that if this 1% tax was applied to the 13,800 families it would affect, it would generate about $5.7 billion in revenue. Take off about $111 million in admin costs, and we’d still be left with a little under $5.6 billion.
First of all, does that mean 13,800 families in Canada collectively possess nearly $570 billion in wealth? If so, that’s an average of $41 million per family.
Now $5.6 billion in net revenue doesn’t seem like it would make much of a dent in a $342 billion deficit. But that’s only if the tax rate was 1%.
If we increased it to 2%, theoretically, that would give us $11.2 billion revenue. 5% would give us $25 billion. 10%? $56 billion. A 10% wealth tax would allow us to cover 16% of the current deficit. But what if we went higher?
At 25%, it’d theoretically generate $140 billion. A 50% tax would net $280 billion.
Actually, if you want to completely cover the $342 billion deficit, you could do it with a 61% wealth tax, which bring in about $341.6 billion. Theoretically.
I know what some of you might be thinking. “Woah! 61% tax?! That’s way too much!”
First of all, unless your own wealth is over $20 million, a wealth tax wouldn’t affect you.
Second of all, the families are still left with $222.3 billion. That works out to be $16 million per family. It hardly leaves them destitute.
Third of all, wealth is stolen money. Billionaires don’t accumulate wealth through their own hard work.
They get it by paying their workers less than they charge customers for the goods and services the workers produce and pocketing any difference left over after covering other production costs.
Or they get it from buying real estate, charging tenants more for housing than it costs to pay taxe, financing, and maintenance costs for that housing and pocketing the difference.
Or they get it from buying and selling shares in companies who do these two same things.
Or they get it from their parents who did these two same things.
Or they get it from low taxes. Which is kind of ironic since they place a huge burden on public services with their demand for educated, healthy workers who can get to work on time.
Capturing a portion of that stolen wealth back—especially a majority of it—is a way to return it to the public, even if it’s only indirectly, through education, health care, and other public services.
Finally, hoarded wealth isn’t contributing to the economy. Not in any meaningful way. I mean, I’ve spent over a million in the decades I’ve been an adult, but no one considers me a millionaire.
To be a millionaire, you need a million dollars you’re not spending. To be a billionaire, you need a billion dollars you’re not spending. And that money they’re not spending isn’t circulating in the economy. (Not in any real way anyhow. Moving it between billionaires and the companies they own doesn’t really count.)
And not spending $570 billion brings down the GDP, it brings down job creation, it brings down worker wages, and it brings down quality of life for the worker class.
And for reference Alberta’s GDP last year was about $335 billion. These rich families are hoarding more wealth than the entire economy of Alberta generated in 2019.
If you’re serious about balancing the budget, then it’s time to start talking about increasing revenue. And we can start with making the wealthy pay their fair share.