Wealth Tax: An Idea That’s Doomed to Fail
Montreal, August 5, 2021 – With federal elections reportedly around the corner, Canadian politicians will be putting forward policy proposals that they deem popular with the public. Left-leaning politicians have been promoting the idea of a one-time wealth tax in order to fund spending sprees. A publication launched today by the Montreal Economic Institute takes a hard look at the one-time wealth tax recently analyzed by the Parliamentary Budget Officer (PBO).
“Most countries that have introduced a wealth tax have since done away with this policy, yet it keeps being touted as a viable way to enable government spending sprees,” explains Maria Lily Shaw, Economist at the MEI. “Upon closer inspection, it would appear that the wealth tax being discussed would fall well short of financing that kind of spending and would bring many unintended consequences along with it.”
“In the PBO’s most realistic scenario, a one-time wealth tax would raise $60.7 billion over a five-year period,” says Ms. Shaw. “The government has also put forward other measures in the latest budget such as a luxury tax or closing so-called tax loopholes. Put together, all of these measures are estimated to levy $18 billion per year, whereas the federal government projects to spend just over $1 billion per day next year. It would therefore take the government roughly 16 days to spend an entire fiscal year’s worth of revenue generated by all the new revenue-increasing measures combined,” states the author of the publication.
“Policy-makers must realize one very simple fact: the rich overwhelmingly invest their money in business ventures. This capital is funding job creation, innovation and economic activity that is absolutely vital,” points out Maria Lily Shaw. “In fact, we risk jeopardizing Canadian ownership of family businesses by forcing their owners to liquidate assets to pay off the ‘rich penalty’.”
“Wealth taxes have a well-established track record of failure in Europe, and there is no valid reason to expect that they would miraculously yield different results here in Canada. Policy-makers should focus on reining in spending rather than continuously hiking taxes,” concludes Maria Lily Shaw.
The Viewpoint entitled “Wealth Tax: A Predictable Failure” is available on our website.
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