By ERIC MARCH
In his Aug. 21 “How much tax is enough?” Viewpoint piece, Colin Ross questions Canadians’ acceptance of the June 25 increase of the capital gains inclusion rate and asks readers to consider whether we should reduce the tax burden on Canada’s struggling ultra rich.
If you work to earn wages in Canada, as I do, 100 per cent of your wages are considered as income when deciding how much income tax you pay. If you earned capital gains, passive income from selling assets such as stocks, bonds, property, etc., prior to June 25, 2024, only 50 per cent of those gains were considered income when deciding how much tax you pay.
The change that occurred on June 25 was to consider 50 per cent of capital gains below $250,000 and 66 per cent of capital gains above $250,000 as income for the purpose of determining how much income tax you pay. The Liberal party has only increased what is called the “tax inclusion” rate. The tax inclusion rate for income from wages is 100 per cent, but the tax inclusion rate for income from capital gains is only 50 to 66 per cent. Perhaps we should be asking ourselves why passive income deserves to be taxed less than income from labour.
In November of 2023, Statistics Canada published a report regarding capital gains and high-income earners. In 2021 only 11.9 per cent of the bottom 99 per cent of Canadian income earners had any capital gains. Those capital gains averaged out to be $30,200. On the other hand, 47.3 per cent of the top one per cent of Canadian income earners had capital gains, earning on average $223,400. Sixty-six per cent of the top 0.1 per cent and 72 per cent of the top 0.01 per cent earned $684,100 and $1,723,100. The June 25 increase to the capital gains tax inclusion rate will only affect the very wealthiest of Canadians. Considering the tax inclusion for capital gains in 2021 was 50 per cent, that top 0.01 per cent received an approximate average of $861,550 in tax-free income in 2021.
This report also includes total income for 2020 and 2021 and the difference between them. In 2020, the bottom 99 per cent of Canadians earned $52,300, and in 2021, that figure was $52,900, an increase of 1.1 per cent. The top one per cent earned $673,800 and $811,800, an increase of 20.5 per cent. The top 0.1 per cent earned $2,531,000 and $3,230,100, an increase of 27.6 per cent. And finally, the top 0.01 per cent of Canadians saw their income increase a whopping 31 per cent, from $9,571,700 in 2020 to $12,542,100 in 2021.
If someone’s total income is over $12 million, do they really deserve to earn over $800,000 tax free when someone earning only $52,900 has to pay tax on the entirety of their income? Colin Ross may think so, but I disagree.
Canadian workers are struggling. According to an RBC report in 2023, 55 per cent of Canadians are unable to afford a starter condo with their income; 74 per cent of Canadians are unable to afford a single-family home; 83 per cent of renters here in British Columbia would be forced to downsize or move to a different community if they faced eviction. The wages of the working class have stagnated while the income of the rich has ballooned. Canada’s top one per cent are doing just fine and, despite Colin Ross’ protests, could handle being taxed even more.
If, like me, you are working class, just imagine how improved your life would be if your income went up 31 per cent, or even just 20.5 per cent. If, like me, you are one of 740,000 British Columbians who earn below a living wage, imagine how improved your life would be if your income increased even to just that level. Then ask yourself if Canada’s ownership and investment class really deserves so much more wealth than Canada’s working class.
Colin Ross asks how much is too much? The cost of living in Canada is too much. An annual income of $12,000,000 while food banks are busier than ever is too much. Half of Canadians being unable to afford to buy a home is too much. Being allowed to take home 33 per cent of passive income completely untaxed is too much. Income inequality in Canada is too much. The taxes on the rich? Not nearly enough.
The writer is a Salt Spring resident.