Share the Wealth: How a Fair Taxation System Provides the Money for a Progressive Education System.
When we began this blog, we made a commitment to stick with education, especially K12 education. There are many blogs that focus primarily on politics or economics. The pandemic, however, has revealed longstanding funding shortfalls that have strongly mitigated against education priorities, as well as other needed services, particularly services to children and young adults, like unaffordable childcare, dentacare, pharmacare, vision and hearing care, the future environment, student loans, tuition, not to mention the incredible backlog in school repairs, the class sizes, and transportation issues in rural school boards. The funding of indiginous education is a national shame. What is needed is an answer to the common right wing and even centrist refrain “but where will all the money come from for all of this?” We now have a clear answer. Jonathan Gauvin and Angella MacEwen have written a short, 180 page book “Share the Wealth’ subtitled How we can tax Canada’s super-rich and create a better country for everyone. It ought to be on the bookshelf of every education activist in Canada.
So what is the fundamental connection between the inequality in societies and the low taxes paid by the rich and profitable corporations? Simply put, income and wealth inequality creates poverty and poor kids, in aggregate, do not do well in school, the world over. Increased services to poors schools, in the form of smaller classes, more support staff, cheap to free childcare, free tuition, and similar, all help but they are like bailing out the leaky rowboat with a spoon.
The real solution is reducing inequality, slashing poverty, for all groups. In fact, Canadian spending on social services is one of the lowest in the industrialized world. Public services have a much more profound effect on lower income Canadians than the affluent who have private plans to cover drugs, dental, vision, and hearing. Pharmacare, dentacare, vision and hearing care, public childcare, have both a dramatic effect on the low income family budget as well as the learning ability of poor children. Delays in that first pair of glasses can set a poor kid back months or even years at a critical period. Dental issues eventually spread to the brain and other parts of the body.
The easy solution is to increase income taxes on the 1% (annual incomes $250 000+). It helps of course, we will discuss it later, but it's not where the real money is. Many wealthy people do not derive their wealth from a salary. It comes from inheritances, rent, the increased value of shares, and dividends.
To protect this wealth, the already prosperous will go to extraordinary political, legal and even illegal lengths. The culture wars south of the border appear to be based on race, gender, orientation, and so on but the right wing culture warriors are being heavily financed by billionaires like Koch, Sheldon Adelson, the Mercers, and their ilk. They elect Trump type mouthpieces, but the major reform of the Trump years was the biggest tax cut in generations, almost all vacuumed up by the uber rich. The MAGA crowd are just stooges being played by the 1%.
They focus their ire on immigrants, POC, women, but the rich chortle as these dopes create the tax cuts that fuel their own inequality. In Canada, so far we are lucky that the class war is gentiler, conducted by lobbyists of the Business Council of Canada, Big Pharma, Big Insurance, the banks, round up the usual suspects, but if the situation was threatened, the authoritarian side of the Canadian right wing would become the steel fist in the velvet glove.
As Gauvin and MacEwen point out, a series of ‘myths’ surround the obviously obscene wealth accumulation of the already rich. “The market only works or works best if it is left alone” “Don’t focus on redistribution, grow a bigger pie”. Meanwhile all the income growth for decades has gone to the 1% and trickle down theory has been proven to be a colossal scam.
Inequality is a Political Choice
Inequality is not “natural”. Many democratic societies, like the Scandinavians, have far less inequality than Canada, and Canada has less than the USA.
The authors remind us that inequality has arisen from tech change, and trade policy, outsourcing the good jobs for cheap labour, but it has been radically compounded by corporate tax cuts, beginning with Mulroney, but continuing through Chretien, Martin and Harper. Full employment as a goal has been largely abandoned, work has moved offshore, part time work abounds, robotics, AI, have destroyed much of the working class income and power across the board. The labour share of Canadian income has shrunk as the share returned to capital has expanded.
The Chretien-Martin Liberals cut corporate taxes from 27% to 21%. Harper cut them from 21% to 15%. The money saved by the corps has not been invested in research, new plants or equipment. It is what Mark Carney himself called “dead money”. It went to executive compensation, stock buybacks, and dividends. In short, only the rich benefitted.
How Do We Recover the Money Required to Fund Quality Education and Other Services?
Now the key question as always, what is to be done? Well, it comes down to this. Creating wealth taxes, closing tax loopholes, higher income taxes on the 1%, getting serious about tax havens, increasing corporate taxes, taxing the tech giants, tax and luxury taxes.
With that revenue, invest heavily in childcare, expand healthcare to pharmacare, dentacare, vision and hearing care, mental health, public LTC, climate action through renewables, retrofits and public transportation, eliminate student loan debt and tuition fees, spend on indiginious water supply and education, failing infrastructure in public schools, class size improvements, increased wages, and public infrastructure.
Let’s take the revenue side. We know the expenditure side.
We are all familiar with property taxes which are a form of wealth tax. The BC government just jacked up property taxes on homes over $3 million. The figure was obviously chosen to exclude the working and middle classes and ding the rich. Not only did it work well but it is obviously popular with NDP voters because very few live in $3M piles. The wealth taxes Gauvin and MacEwen have in mind, go beyond property tax, of course. One of the most familiar wealth taxes came from US Senator Elizabeth Warren, who proposed a 2% annual tax on all assets over $50 M and 3% over $1B. The NDP, for example, would place a 1% wealth tax on households, not individuals, with assets over $20M. Spain, Norway and Switzerland already have similar taxes.
Closing Tax Loopholes
The tax code is riddled with loopholes but three biggies stand out. Capital gains are taxed but not at the rates of income from wages. This is fundamentally unfair at 50% of the rate of wages and is behind the idea that CEOs are often paid in stock options, rather than higher salary. As an interim strategy this should be moved up to 75%. The stock option loophole is number two. The ability to write off business entertainment expenses is a scam. There is a difference in the company entertaining clients and picking up the tab, no problem. Deducting it against taxes is wrong. Two different things.
Higher Income Taxes on the 1%
When we discuss income tax in Canada, keep in mind only 10% of us make $100 000, 1% make $270 000, and 0.01% make $3,900,000 annually. Between WW2 and today, the top marginal rate of income tax on higher income has dropped dramatically. The top marginal rate is about 50% but the effective rate, what people end up paying, ranges from 4-28%. The average rate ‘actually paid’ by the 1% is 18% this is due to deductions for stock options, tax shelters and charity. The NDP wants to raise the effective rate to 33-35%. A top marginal rate of 65% for the wealthiest earners, which exists in many nations, would raise $15-19 Billion.
Getting Serious About Tax Havens
The Panama Papers and the Paradise Papers finally brought tax havens into the public consciousness. They result in both tax avoidance (legal, but still a problem) and tax evasion (illegal). The Cayman Islands are a famous tax haven but Barbados, Switzerland, Luxembourg, Jamaica, Panama, and Bahamas among others are heavily involved in tax havens in coordination with Canada’s big banks. The estimated tax loss is $80 Billion. CRS itself loses $25 Billion annually. Only 844 Canadians are shielding $240 Billion. Tax havens benefit nobody but the rich.
Morneau promised action, His replacement as finance minister, Freeland has dialed that back to more ‘consultations’. Both the Liberals and Conservatives have too many ‘friends’ who are heavily involved in tax havens. It will take pressure from the Canadian people to overcome this barrier.
Time to Go After the Big Tech Giants
The web giants pay little or no taxes on Canadian profits, or any sales tax. In 2019, this cost Canada $100 Billion. Amazon did however pay taxes at a $0.35% rate. No taxes paid in Canada by Musk, Gates, Zuckerberg, or Bazos personally. Of the G7 countries, only Canada and USA do not require the web giants to pay sales tax. The Liberals have taken the issue under advisement and are ‘studying it’.
A Luxury Tax would raise Big Money
The Scandinavians raise a great deal of money from their VATs or sales taxes. Sales taxes can be very regressive but Nordic countries keep their VAT around 6% for all basic needs. They tax other goods and services at 25%. It is built right into prices and so after an adjustment Nordics just understand, that is the price. It has many virtues. It is very difficult to avoid. It is automatic and it discourages consumerism for its own sake. Putting
Picture a steep tax on luxury cars, high end booze, luxury housing, stocks & bonds, currency transfers, private planes, yachts, high end art, - you get the picture.
Putting it all together, a wealth tax, closing tax loopholes, higher tax rates for the 1%, getting serious about tax havens, taxing Big Tech, higher taxes on the corps, a luxury tax, would allow us to build the undisputed, highest quality, fairest education system
on the planet, and be an example to other nations. Other services need our help as well.
Gauvin & MacEwen have shown us exactly what has to be done. Yes, it's unlikely to happen overnight but every step along the way is progress towards human happiness and fulfillment.
Buy this book, do it now.