Wealth taxes end up hurting everyone
Montreal, July 16, 2020 – The idea of a Canadian wealth tax continues to inspire certain politicians and activists. Less than two weeks ago, the Parliamentary Budget Officer again responded to a request from a member of the House of Commons regarding the cost of such a tax. As recently as July 13, 2020, the media reported that heiress Abigail Disney and others of the “super rich” were calling for the introduction of a wealth tax to finance COVID-19 assistance measures. A new publication from the Montreal Economic Institute highlights the inefficiency of this kind of tax, and the fact that it is less well-off taxpayers who pay for it in the end.
“The current economic crisis is leading some people to call once again for the introduction of a wealth tax in Canada. And political parties like the NDP and the Green Party have already promoted this measure,” says Gaël Campan, Senior Economist at the MEI. “Yet this is an old idea that has been discredited each time it has been tried abroad,” declares the author of the publication.
“Politicians repeatedly overestimate the sums they will be able to collect with these taxes. In fact, rich households find ways of shielding themselves from the tax, sometimes going so far as to move out of the country,” says Mr. Campan. “In France, this tax led to an average annual exodus of 510 households for 33 years, depriving the country of up to €200 billion in 2015 inflation-adjusted euros.”
The researcher points out that once the richest have shielded themselves from the tax, it is less well-off taxpayers who have to pay more in order for the government to make up its shortfall. “And that’s in addition to the fact that in a country like Canada, where there is substantial social mobility, people who are among the least well-off today could very well end up being affected by a wealth tax,” states the economist.
“It’s no wonder that countries which adopt a wealth tax end up abandoning it,” concludes the economist. Indeed, while 12 European countries still had a wealth tax in 1990, eight had repealed this measure completely by 2017.
The Economic Note entitled “Wealth Taxes End Up Hurting Main Street” was prepared by Gaël Campan, Senior Economist at the MEI. This publication is available on our website.
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