The Onion magazine once sardonically described the gap between rich and poor as the Eighth Wonder of the World — “a tremendous, millennia-old expanse that fills us with both wonder and humility… the most colossal and enduring of mankind’s creations.”
Another aspect of the rich-poor gap that fills me with wonder is the way the rich manage to keep it off the political agenda, although that may be changing.
Prominent U.S. Democratic presidential contenders Elizabeth Warren and Bernie Sanders are campaigning on taxing the super-rich, with Warren calling for a two per cent annual tax on wealth above $50 million, rising to three per cent on billionaires.
In Canada, where politicians have shied away from even putting their toe in the water when it comes to taxing the rich, NDP Leader Jagmeet Singh has taken a bold plunge, calling for a version of Warren’s tax — an annual one per cent tax on wealth over $20 million.
This is an excellent idea, and is apparently popular. A new Abacus poll shows that 67 per cent of Canadians support (or somewhat support) a wealth tax, along the lines proposed by Warren, and that even a majority of Conservative voters support it. That’s probably about the same percentage of Canadians who support (or somewhat support) Mother’s Day.
Yet the wealth tax has received little media coverage — beyond denunciations in the National Post, which surely has nothing to do with the fact the media is largely owned by billionaires.
One Post columnist posed the bizarre question: what is the problem to which creating a wealth tax is a solution?
Fortunately, the brilliant French economist Thomas Piketty answered that question at length in his celebrated international best-seller, Capital in the 21st Century, where he made the case for wealth taxes.
Without them, he argued with extensive data, wealth will become ever more concentrated, allowing the mega-rich to swallow up an ever larger share of the world’s resources.
Given that 26 individuals now have as much wealth as the bottom half of humanity (3.8 billion people), one wonders at what point conservative commentators might consider this a problem. What if one individual had as much as the rest of humanity — or if she had all the world’s wealth? Would that cause alarm at the Post?
Let’s not forget that the super-rich typically made their fortunes by selling products built by employees we all paid to educate, and shipping those products on roads we all paid to build.
A wealth tax would redirect a tiny fraction of those fortunes back to the community to help ordinary Canadians. I’d call that a good solution to the problem of millions of Canadians working really hard but still struggling to get by.
A wealth tax would also help curb the enormous political power of the super-rich. Fossil fuel billionaires, for instance, have effectively managed to block global efforts against climate change.
Billionaires and their defenders maintain the super-rich would find ways to hide their money from tax authorities. But then why do billionaires resist such taxes? Because they know they would actually pay more — just as they did in the early postwar years, when taxes on the rich were much higher.
Piketty notes that Warren’s wealth tax is in line with historically high U.S. tax rates on the rich. He maintains those higher rates were key to the strong economic growth from 1940 to 1980 — before Republicans gutted taxes on the rich, slowing down growth and swelling family fortunes.
The Canadian tax system also helps perpetuate dynastic fortunes. Canada is the only G7 country without an inheritance tax.
According to a study by the Canadian Centre for Policy Alternatives, between 2012 and 2016, the net worth of Canada’s wealthiest 87 families grew by more than $800 million — per family.
The study also found that inheritance is growing in importance. Among the wealthiest Canadian families, 45 per cent had passed down wealth at least one generation in 1999, compared to 53 per cent in 2016.
So much for the argument that the super-rich are increasingly self-made entrepreneurs.
Turns out that Canada’s billionaires are mostly winners in what Warren Buffett calls the “ovarian lottery.” They just think they hit a triple.