Really Learning from the Past: Tax is the Price We Pay for a Civil - - PowerPoint PPT Presentation

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Really Learning from the Past: Tax is the Price We Pay for a Civil Society ________________________________________________________________________ Thaddeus Hwong Faculty of Liberal Arts & Professional Studies York University Nov. 23,

SLIDE 1

Really Learning from the Past:

Tax is the Price We Pay for a Civil Society

Thaddeus Hwong Faculty of Liberal Arts & Professional Studies York University

Nov. 23, 2011

________________________________________________________________________ ¡

SLIDE 2

“We are acting on a new vision of the role of government ... smaller government ... smarter government.” [Bold added here for emphasis]

Fraser Institute quotes Paul Martin as saying in his 1995 Budget Speech

“We are acting on a new vision of the role of government in the economy. In many cases that means smaller government. In all cases it means smarter government.” [Bold added here for emphasis]

What Paul Martin actually said in his 1995 Budget Speech

¡ ¡

SLIDE 3

“The fact is that the free market system works, but unless governments and people are constantly on the watch out for rampant inequality, unless they understand the need for redistribution programs, unless they understand the need to invest in education and better health care and a better environment, then effectively the free market system will fall on its own accord.” [Bold added here for emphasis]

Paul Martin Huffington Post, Nov. 18, 2011

SLIDE 4

Rising tides lift some boats only

Average Income Average Income Average Income Median Income Median Income Median Income Gap Between Average Income and Median Income Gap Between Average Income and Median Income Gap Between Average Income and Median Income 5000 5000 5000 10000 10000 10000 15000 15000 15000 20000 20000 20000 25000 25000 25000 30000 30000 30000 35000 35000 35000 40000 40000 40000 45000 45000 45000 50000 50000 50000 55000 55000 55000 60000 60000 60000 Adjusted Income of All Family Units (2009 Constant $) Adjusted Income of All Family Units (2009 Constant $) Adjusted Income of All Family Units (2009 Constant $) 1975 1975 1975 1980 1980 1980 1985 1985 1985 1990 1990 1990 1995 1995 1995 2000 2000 2000 2005 2005 2005 2010 2010 2010

Source: CANSIM Source: CANSIM Source: CANSIM

SLIDE 5

Canada faces rising income inequality

Market Income Market Income Market Income Total Income Total Income Total Income After-tax Income After-tax Income After-tax Income .27 .27 .27 .29 .29 .29 .31 .31 .31 .33 .33 .33 .35 .35 .35 .37 .37 .37 .39 .39 .39 .41 .41 .41 .43 .43 .43 .45 .45 .45 Gini Index Gini Index Gini Index Based on Adjusted Income of All Family Units Based on Adjusted Income of All Family Units Based on Adjusted Income of All Family Units 1975 1975 1975 1980 1980 1980 1985 1985 1985 1990 1990 1990 1995 1995 1995 2000 2000 2000 2005 2005 2005 2010 2010 2010

Source: CANSIM Source: CANSIM Source: CANSIM

SLIDE 6

The top 1% income share surges; it wasn’t always like this

Australia Australia Australia U.S. U.S. U.S. Canada Canada Canada The Golden Age of Capitalism The Golden Age of Capitalism The Golden Age of Capitalism

1947 to 1975
1947 to 1975
1947 to 1975

The Great Divergence The Great Divergence The Great Divergence

1975 to 2010
1975 to 2010
1975 to 2010

4 4 4 6 6 6 8 8 8 10 10 10 12 12 12 14 14 14 16 16 16 18 18 18 20 20 20 22 22 22 24 24 24 Top 1% Income Share (Including Capital Gains) Top 1% Income Share (Including Capital Gains) Top 1% Income Share (Including Capital Gains) 1915 1915 1915 1925 1925 1925 1935 1935 1935 1945 1945 1945 1955 1955 1955 1965 1965 1965 1975 1975 1975 1985 1985 1985 1995 1995 1995 2005 2005 2005 The Gilded Ages The Gilded Ages The Gilded Ages

1870 to 1929
1870 to 1929
1870 to 1929

The Compression The Compression The Compression

1929 to 1947
1929 to 1947
1929 to 1947

SLIDE 7

Top 1% income share up in some lower-tax countries since 1949

2 2 2 4 4 4 6 6 6 8 8 8 10 10 10 12 12 12 14 14 14 16 16 16 18 18 18 20 20 20 Top 1% Income Share Excluding Capital Gains (%) Top 1% Income Share Excluding Capital Gains (%) Top 1% Income Share Excluding Capital Gains (%)

US US US Argentina Argentina Argentina UK UK UK Canada Canada Canada Singapore Singapore Singapore Norway Norway Norway Germany Germany Germany Ireland Ireland Ireland Japan Japan Japan India India India Australia Australia Australia New Zealand New Zealand New Zealand France France France Switzerland Switzerland Switzerland Sweden Sweden Sweden Netherlands Netherlands Netherlands Finland Finland Finland

Around 2005 Around 2005 Around 2005 Around 1949 Around 1949 Around 1949

Source: Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, “Top Incomes in the Long Run of History,” (2011) Source: Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, “Top Incomes in the Long Run of History,” (2011) Source: Anthony B. Atkinson, Thomas Piketty, and Emmanuel Saez, “Top Incomes in the Long Run of History,” (2011) 49(1) Journal of Economic Literature, 3-71. 49(1) Journal of Economic Literature, 3-71. 49(1) Journal of Economic Literature, 3-71.

SLIDE 8

In past four decades, Canada’s tax ratio rose less than 6%

2 2 2 4 4 4 6 6 6 8 8 8 10 10 10 12 12 12 14 14 14 16 16 16 18 18 18 20 20 20 Change in Tax as Percent of GDP, 1965-2009 Change in Tax as Percent of GDP, 1965-2009 Change in Tax as Percent of GDP, 1965-2009 United States United States United States Ireland Ireland Ireland United Kingdom United Kingdom United Kingdom Canada Canada Canada Germany Germany Germany Netherlands Netherlands Netherlands Australia Australia Australia New Zealand New Zealand New Zealand France France France Iceland Iceland Iceland Austria Austria Austria Luxembourg Luxembourg Luxembourg Japan Japan Japan Norway Norway Norway Greece Greece Greece Belgium Belgium Belgium Finland Finland Finland Switzerland Switzerland Switzerland Sweden Sweden Sweden Turkey Turkey Turkey Spain Spain Spain Italy Italy Italy Denmark Denmark Denmark Portugal Portugal Portugal Source: Calculated based on OECD data; 2008 data used for Australia, Japan, Netherlands and Portugal. Source: Calculated based on OECD data; 2008 data used for Australia, Japan, Netherlands and Portugal. Source: Calculated based on OECD data; 2008 data used for Australia, Japan, Netherlands and Portugal.

SLIDE 9

Top marginal tax rate down to 46% from 80%

$301,600 $301,600 $301,600 $452,400 $452,400 $452,400 $678,600 $678,600 $678,600 $942,500 $942,500 $942,500 $1,696,500 $1,696,500 $1,696,500 $188,500 $188,500 $188,500

1960 Rates 1960 Rates 1960 Rates 2010 Rates 2010 Rates 2010 Rates 15 15 15 20 20 20 25 25 25 30 30 30 35 35 35 40 40 40 45 45 45 50 50 50 55 55 55 60 60 60 65 65 65 70 70 70 75 75 75 80 80 80 Combined Federal-Provincial Personal Income Tax Rates Combined Federal-Provincial Personal Income Tax Rates Combined Federal-Provincial Personal Income Tax Rates for Ontario Residents (%) for Ontario Residents (%) for Ontario Residents (%) $1,377 $1,377 $1,377 $400,000 $400,000 $400,000 Taxable Income in 1960 (1 $ = 7.54 $ in 2010) Taxable Income in 1960 (1 $ = 7.54 $ in 2010) Taxable Income in 1960 (1 $ = 7.54 $ in 2010) $10,383 $10,383 $10,383 $3,016,000 $3,016,000 $3,016,000 Taxable Income in 2010 ($) Taxable Income in 2010 ($) Taxable Income in 2010 ($)

SLIDE 10

Effective tax rate for top 1% same as bottom 10%

30 30 30 31 31 31 32 32 32 33 33 33 34 34 34 35 35 35 36 36 36 37 37 37 Total Rax Rates in 2005 (%) Total Rax Rates in 2005 (%) Total Rax Rates in 2005 (%) Bottom Bottom Bottom 10% 10% 10% 20% 20% 20% 30% 30% 30% 40% 40% 40% 50% 50% 50% 60% 60% 60% 70% 70% 70% 80% 80% 80% 90% 90% 90% 90% to 90% to 90% to 95% 95% 95% 95% to 95% to 95% to 99% 99% 99% Top Top Top 1% 1% 1% Economic Families by Income Percentiles Economic Families by Income Percentiles Economic Families by Income Percentiles Source: data from Eroding Tax Fairness by Marc Lee in 2007 of Canadian Centre for Policy Alternatives. See Source: data from Eroding Tax Fairness by Marc Lee in 2007 of Canadian Centre for Policy Alternatives. See Source: data from Eroding Tax Fairness by Marc Lee in 2007 of Canadian Centre for Policy Alternatives. See http://www.policyalternatives.ca/publications/reports/eroding-tax-fairness. http://www.policyalternatives.ca/publications/reports/eroding-tax-fairness. http://www.policyalternatives.ca/publications/reports/eroding-tax-fairness.

SLIDE 11

Canada’s tax ratio dipping below OECD average

Sweden Sweden Sweden France France France OECD OECD OECD Canada Canada Canada

32 32 32 34 34 34 36 36 36 38 38 38 40 40 40 42 42 42 44 44 44 46 46 46 48 48 48 50 50 50 52 52 52 Tax as Percent of GDP Tax as Percent of GDP Tax as Percent of GDP 1990 1990 1990 1992 1992 1992 1994 1994 1994 1996 1996 1996 1998 1998 1998 2000 2000 2000 2002 2002 2002 2004 2004 2004 2006 2006 2006 2008 2008 2008

SLIDE 12

Public expenditures – Canada, 40% of GDP; others, 50%

57.6 57.6 57.6 44.1 44.1 44.1 52.9 52.9 52.9 49.6 49.6 49.6 51.9 51.9 51.9 55.2 55.2 55.2 51.7 51.7 51.7 53.9 53.9 53.9 50.2 50.2 50.2 48.9 48.9 48.9 41.4 41.4 41.4 38.1 38.1 38.1 39.8 39.8 39.8 39.8 39.8 39.8

10 10 10 20 20 20 30 30 30 40 40 40 50 50 50 60 60 60 Percent of GDP, 2008 Percent of GDP, 2008 Percent of GDP, 2008 Iceland Iceland Iceland France France France Denmark Denmark Denmark Sweden Sweden Sweden Belgium Belgium Belgium OECD OECD OECD Canada Canada Canada Total Government Expenditures Total Government Expenditures Total Government Expenditures Total Government Revenues Total Government Revenues Total Government Revenues

SLIDE 13

Top 10% owns 50% of wealth in Canada

.1 .1 .1 .6 .6 .6 1.7 1.7 1.7 3.2 3.2 3.2 5.3 5.3 5.3 8.1 8.1 8.1 12.2 12.2 12.2 18.4 18.4 18.4 50.6 50.6 50.6 10 10 10 20 20 20 30 30 30 40 40 40 50 50 50 Share of Total Wealth in 2005 (%) Share of Total Wealth in 2005 (%) Share of Total Wealth in 2005 (%) Bottom Bottom Bottom 2nd 2nd 2nd 3rd 3rd 3rd 4th 4th 4th 5th 5th 5th 6th 6th 6th 7th 7th 7th 8th 8th 8th 9th 9th 9th Top Top Top All Families by Wealth Decile All Families by Wealth Decile All Families by Wealth Decile Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives

n Labour and Income published by Statistics Canada.
n Labour and Income published by Statistics Canada.
n Labour and Income published by Statistics Canada.

SLIDE 14

Is the free market system failing?

1.9 1.9 1.9

1 1 1 2 2 2 Change in Share of Total Wealth in 1999-2005 Change in Share of Total Wealth in 1999-2005 Change in Share of Total Wealth in 1999-2005 (percentage point) (percentage point) (percentage point) Bottom Bottom Bottom 2nd 2nd 2nd 3rd 3rd 3rd 4th 4th 4th 5th 5th 5th 6th 6th 6th 7th 7th 7th 8th 8th 8th 9th 9th 9th Top Top Top Families by Wealth Decile Families by Wealth Decile Families by Wealth Decile Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives

n Labour and Income published by Statistics Canada.
n Labour and Income published by Statistics Canada.
n Labour and Income published by Statistics Canada.

SLIDE 15

Canada needs more progressivity, not less

Source: CANSIM Source: CANSIM Source: CANSIM