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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, 2011
“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
“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
Rising tides lift some boats only
Adjusted Income of All Family Units (2009 Constant $)
Average
Median
Gap
5
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
60000
Adjusted
1975
1980
1985
1990
1995
2000
2005
2010
Source:
000Between
CANSIM
Income
Income
Income
Average
of AllIncome
Family and
UnitsMedian
(2009 Income
Constant
$)
60000
Average Income
55000
50000
45000
Median Income
40000
35000
30000
25000
20000
Gap Between Average Income and Median Income
15000
10000
5000
0
1975
Source: CANSIM
1980
1985
1990
1995
2000
2005
2010
Canada faces rising income inequality
Market
Total
After-tax
.27
.29
.31
.33
.35
.37
.39
.41
.43
.45
Gini
Based
1975
1980
1985
1990
1995
2000
2005
2010
Source:
Index
Income
on
CANSIM
Income
Adjusted
Income
Income of All Family Units
Gini Index
Based on Adjusted Income of All Family Units
.45
Market Income
.43
.41
.39
Total Income
.37
.35
.33
.31
After-tax Income
.29
.27
1975
Source: CANSIM
1980
1985
1990
1995
2000
2005
2010
The top 1% income share surges;
it wasn’t always like this
Australia
U.S.
Canada
4
6
1
8
10
12
14
16
18
20
22
24
Top
1915
1925
1935
1945
1955
1965
1975
1985
1995
2005
-The
0
1947
1975
1870
1929
1%
Golden
Great
Gilded
Compression
to
Income
1975
2010
1929
1947
Divergence
Ages
AgeShare
of Capitalism
(Including Capital Gains)
24
The Gilded Ages
- 1870 to 1929
The Compression The Golden Age of Capitalism
- 1929 to 1947
- 1947 to 1975
The Great Divergence
- 1975 to 2010
Top 1% Income Share (Including Capital Gains)
U.S.
22
20
18
16
14
Canada
12
10
8
Australia
6
4
1915
1925
1935
1945
1955
1965
1975
1985
1995
2005
Top 1% income share up in
some
lower-tax
since 1949
00 1% Income
2
4
6
1
8
10
12
14
16
18
20
Top
Around
2005
1949
Share Excluding
Capital Gains countries
(%)
Top 1% Income Share Excluding Capital Gains (%)
US Zealand
Argentina
UK
Canada
Singapore
Norway
Germany
Ireland
Japan
India
Australia
New
France
Switzerland
Sweden
Netherlands
Finland
Source:
49(1)
Journal
Anthony
of Economic
B. Atkinson,
Literature,
Thomas Piketty,
3-71. and Emmanuel Saez, “Top Incomes in the Long Run of History,” (2011)
20
Around 2005
Around 1949
18
16
14
12
10
8
6
4
2
0
US
Argentina
UK
Singapore
Germany
Canada
Norway
Ireland
Japan
India
Australia
France
Sweden
Finland
New Zealand
Switzerland
Netherlands
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.
In past four decades, Canada’s tax ratio
rose less than 6%
-20 Zealand
0
2
4
6
1
8
10
12
14
16
18
20
Change
Ireland
United
Canada
Germany
Netherlands
Australia
New
France
Iceland
Austria
Luxembourg
Japan
Norway
Greece
Belgium
Finland
Switzerland
Sweden
Turkey
Spain
Italy
Denmark
Portugal
Source:
Kingdom
States
in
Calculated
Tax as Percent
based on
of GDP,
OECD1965-2009
data; 2008 data used for Australia, Japan, Netherlands and Portugal.
Portugal
Denmark
Italy
Spain
Turkey
Sweden
Switzerland
Finland
Belgium
Greece
Norway
Japan
Luxembourg
Austria
Iceland
France
New Zealand
Australia
Netherlands
Germany
Canada
United Kingdom
Ireland
United States
-2
0
2
4
6
8
10
12
14
Change in Tax as Percent of GDP, 1965-2009
16
Source: Calculated based on OECD data; 2008 data used for Australia, Japan, Netherlands and Portugal.
18
20
Top marginal tax rate down to 46% from 80%
$301,600
$452,400
$678,600
$942,500
$1,696,500
$188,500
1960
2010
15
20
25
30
35
40
45
50
55
60
65
70
75
80
Combined
for
$1,377
$400,000
$10,383
$3,016,000
Taxable
Ontario
Rates
Income
Federal-Provincial
Residents
in 2010
1960
(%)($)
(1 $ =Personal
7.54 $ in
Income
2010) Tax Rates
Taxable Income in 1960 (1 $ = 7.54 $ in 2010)
Combined Federal-Provincial Personal Income Tax Rates
for Ontario Residents (%)
$1,377
$400,000
80
75
1960 Rates
70
65
60
55
50
$301,600
45
$452,400
$678,600
$1,696,500
$942,500
2010 Rates
40
35
$188,500
30
25
20
15
$10,383
Taxable Income in 2010 ($)
$3,016,000
Effective tax rate for top 1% same as bottom 10%
30 toRax
31
32
33
34
35
36
37
Total
Bottom
10%
20%
30%
40%
50%
60%
70%
80%
90%
95%
99%
Top
1%
Economic
Source:
http://www.policyalternatives.ca/publications/reports/eroding-tax-fairness.
data
Rates
Families
from
in Eroding
2005
by Income
(%)TaxPercentiles
Fairness by Marc Lee in 2007 of Canadian Centre for Policy Alternatives. See
37
Total Rax Rates in 2005 (%)
36
35
34
33
32
31
30
Bottom
10%
20%
30%
40%
50%
60%
70%
80%
Economic Families by Income Percentiles
90%
90% to
95%
95% to
99%
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.
Top
1%
Canada’s tax ratio dipping below OECD average
Sweden
France
OECD
Canada
32
34
36
38
40
42
44
46
48
50
52
Tax
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
as Percent of GDP
52
50
Sweden
48
Tax as Percent of GDP
46
France
44
42
40
38
OECD
36
34
Canada
32
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Public expenditures –
Canada, 40% of GDP; others, 50%
10
0
10
20
30
40
50
60
Percent
Iceland
France
Denmark
Sweden
Belgium
OECD
Canada
Total
Government
of GDP, 2008
Expenditures
Revenues
57.6
44.1
52.9
49.6
51.9
55.2
51.7
53.9
50.2
48.9
41.4
38.1
39.8
Total Government Expenditures
60
Total Government Revenues
57.6
55.2
52.9
51.9
53.9
51.7
49.6
50
50.2
48.9
Percent of GDP, 2008
44.1
41.4
40
38.1
39.8 39.8
30
20
10
0
Iceland
France
Denmark
Sweden
Belgium
OECD
Canada
Top 10% owns 50% of wealth in Canada
-.3
.1
.6
1.7
3.2
5.3
8.1
12.2
18.4
50.6
1
0
10
20
30
40
50
Share
Bottom
2nd
3rd
4th
5th
6th
7th
8th
9th
Top
All
Source:
on
0 Labour
Families
ofdata
Total
and
by
from
Wealth
Income
Wealth
Revisiting
in
Decile
published
2005Wealth
(%)by Statistics
InequalityCanada.
by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives
50.6
Share of Total Wealth in 2005 (%)
50
40
30
18.4
20
12.2
10
0
8.1
-.3
Bottom
.1
.6
2nd
3rd
1.7
4th
3.2
5.3
5th
6th
7th
All Families by Wealth Decile
8th
9th
Top
Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives
on Labour and Income published by Statistics Canada.
Is the free market system failing?
-.1
-.3
--.2
-.7
1.9
-1
0
1
C
2
Change
(percentage
Bottom
2nd
3rd
4th
5th
6th
7th
8th
9th
Top
Families
Source:
on
.1
.7
hange
Labour
in
data
byShare
and
Wealth
point)
from
Income
ofRevisiting
Total
Decile
published
Wealth
Wealth
in
by1999-2005
Statistics
InequalityCanada.
by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives
1.9
Change in Share of Total Wealth in 1999-2005
(percentage point)
2
1
0
0
0
-.1
-.2
-.2
-.3
-.3
-.2
-.7
-1
Bottom
2nd
3rd
4th
5th
6th
7th
Families by Wealth Decile
8th
9th
Top
Source: data from Revisiting Wealth Inequality by René Morissette and Xuelin Zhang in December 2006 issue of Perspectives
on Labour and Income published by Statistics Canada.
Canada needs more progressivity, not less
Market
Total
After-tax
.27
.29
.31
.33
.35
.37
.39
.41
.43
.45
Gini
Based
1975
1980
1985
1990
1995
2000
2005
2010
Source:
Index
Income
on
CANSIM
Income
Adjusted
Income
Income of All Family Units
Gini Index
Based on Adjusted Income of All Family Units
.45
Market Income
.43
.41
.39
Total Income
.37
.35
.33
.31
After-tax Income
.29
.27
1975
Source: CANSIM
1980
1985
1990
1995
2000
2005
2010