Take taxes from the rich?It would be better to improve the overall tax system.

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“Tax the Rich” is popular with many people who feel victimized, entitled, or poorly understood about how Canada and other countries tax their residents and redistribute their income. is the rallying cry.

This phrase has been good politics for many decades for many left-wing politicians and political parties who use this word or something similar to leverage the above groups of people for votes. Such phrases, despite their political appeal, are intellectually lazy.

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Given Canada's progressive tax system, the so-called “wealthy” already pay a disproportionate amount of their income in taxes. For example, in 2020, the top 0.01 percent of income tax filers represented the group of people with incomes of $2,829,000 or more. He was only a 2,885 taxpayer that year, but they paid his 2.6 percent of all federal and state income taxes collected in 2020.

The top 1 percent (representing the 288,400 taxpayers with incomes of $253,900 or more) paid 21.1 percent of the federal and state income taxes collected that year. The top 5 percent (representing more than 1.4 million taxpayers with incomes of $132,300 or more) paid 40.1 percent. The top 10 percent (representing about 2.9 million taxpayers with incomes of $102,400 or more) paid 53 percent.

The bottom 50 percent (representing more than 14.4 million taxpayers with incomes of $40,700 or less) paid 6.5 percent. This clearly shows that the top 50 percent of income earners pay 93.5 percent of all federal and state income taxes. All of this information is available from Statistics Canada.

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Soak it up a bit. High earners clearly pay a disproportionate amount of income tax. And again, this is what you would expect from a progressive income tax system like Canada's.

But how much is too much? For example, is there room to further “tax the rich” when the top 5 percent already pay 40.1 percent of all tax revenue?

Combine the information above with some left-wing think tanks and political parties who are calling for Canada to implement a wealth tax (apparently to address “income and wealth inequality”, and which the Prime Minister's Office has also recently announced). We are considering the possibility). This is because the behavioral responses are high among those who contribute the most to Canada's finances. I've seen that in my practice, especially over the past six years or so.

My two cents is that the federal government is in a difficult position. The deficit is continuous and large. Cost control is certainly not on the agenda. Funding continued out-of-control spending will require higher tax rates, continued attacks on high-income/wealthy people, and/or new forms of taxation. The trick is to do this without too many wealthy people leaving Canada or exiting the tax system.

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Some of my friends, who don't understand the unfair share that high-income earners are already contributing, say things like, “Tax the rich,'' or “Go get the money that the rich are hiding overseas.'' Some people keep reacting by saying (this is really misinformed in the comments), or “The rich have all kinds of tax loopholes, but the average person doesn't” (also very misinformed). (This information is not accurate.)

It is disappointing to hear such a response, as we desperately need a constructive dialogue about how Canada's tax system as a whole can be improved. Bringing deeply entrenched and flawed ideologies to the dialogue table is not helpful.

Overall, Canada should strive to attract more high-income and wealthy people. They contribute significantly to our nation's overall tax revenue and help fund social programs and infrastructure.

Kim Moody, FCPA, FCA, TEP, is the founder of Moody's Tax/Moody's Private Client, past president of the Tax Foundation of Canada, past president of the Association of Real Estate Practitioners (Canada), and a member of the Canadian Tax Administration. and has held numerous other leadership positions. tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is www.linkedin.com/in/kimmoody.

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