Unformatted text preview: 10% Top 5% Top 1% Top 0.5% Top 0.1% Top 0.01% Groups ranked by income including full Capital Gains
1982 34.0 21.7 8.3 5.7 2.5 1.1 2007 42.5 30.6 15.7 12.0 6.5 3.1 Groups ranked by income excluding Capital Gains
1982 33.7 21.5 8.1 5.5 2.4 1.0 2007 41.2 29.3 14.5 11.0 5.9 2.7 Growth in Share of Income from 1982 to 2007
With capital gains 8.6 8.8 7.3 6.3 4.0 2.0 Without capital gains 7.5 7.8 6.4 5.5 3.5 1.7 Difference 1.0 1.0 0.9 0.8 0.5 0.3 Table 1 makes it clear that most of the change is being driven by the richest 5%
of earners. It also makes clear: capital gains are not the cause of surging incomes
at the top.
Richer Canadians are more likely to have capital gains. According to Revenue
Canada’s tax statistics9, capital gains accounted for 10.4% of the total income assessed among tax filers with incomes of $250,000 or more in 2007, compared with
0.85% for those with incomes between $40,000 and $45,000. The average income of
Canada’s 26.4 million tax filers in 2007 was $40,400, before deductions and taxes.
But the Veall data suggest that, as a source of income, capital gains are not appreciably more important for the richest Canadians than they have been over the past
25 years, despite the colossal growth in asset value seen over the past generation. higher rates of pay for canada’s richest driving trends
There are many differences between the lifestyles of the rich and the rest of us, but
over the decades we have developed this in common: wages are the primary source
of income for all Canadians; we earn our money by working for someone else. That’s
a big switch for the rich.
Historically, Canada’s richest citizens relied heavily on unearned income such as
returns from their investments in stocks and bonds, and rents from their real estate
holdings. In 1946, just after the Second World War ended, less than half the income
of the richest 1% of Canadians came from pay cheques. Wages accounted for 45.5%
of their incomes and a further 10% came from professional fees (for the doctors, law9 http://www.cra-arc.gc.ca/gncy/stts/gb07/pst/fnl/tbls-eng.html 14 growing gap project table 2 Changing Sources of Income For the Rich and the Rest of Us
Top 1% in 1946 Top 1%
in 2007 Average Taxfiler
in 2007 Top 0.1%
in 2007 Top 0.01%
in 2007 Wages 45.5% 67.6% 73.5% 70.8% 73.7% Professional Fees 10.1% 9.8% 2.2% 5.3% 1.3% Business Income 24.3% 3.1% 3.0% 2.1% 2.4% Dividends 8.7% 9.6% 3.6% 12.4% 14.5% Interest Income 4.3% 3.4% 3.8% 3.8% 3.4% Investment Income 7.2% 6.5% 4.0% 5.5% 4.7% yers, etc. in this group). Higher up the income ladder, rental incomes and dividends
were increasingly important sources of income.
Today the income of the richest 1% is due mostly to the lavish sums they are paid
for the work they do. They also enjoy additional rewards and extras that the majority
of workers don’t: bonuses, stock options and other compensation received by bosses,
bankers, inventors, athletes and artists. They’re basically doing the same job that
bosses, bankers, inventors, athletes and artists have always done in Canada. They
just get treated as more of a rare breed than ever.
By 2007, wages provided more than two-thirds of all income for the richest 1% of
Canadians, (67.6%), and even more for those higher up the income ladder. Professional fees, dividends, and interest income were roughly the same as two generations
ago for those in the top 1%.
Apart from the growing importance of employment, the most striking difference
between 1946 and 2007 was that only 3.1% of incomes for those at the top came from
their businesses, compared to 24.3% in 1946. Few of those at the very top are entre
preneurs any more, it would seem. Or perhaps they’ve just figured out new ways of
channeling business incomes.
The data show that the rich today are just as reliant on wages as their primary
source of income as the average Canadian. But they are more likely to be handsomely rewarded for the hours they put in. In 2007, almost three-quarters (73.5%)
of all income received by Canada’s 26.4 million tax filers came from their wages.
This is virtually identical to Canada’s richest 0.01%, for whom 73.7% of their income
came from their wages.
Today as before, the richest Canadians received far more income from professional
fees, dividends and retu...
View Full Document
This note was uploaded on 09/17/2012 for the course ECON 219 taught by Professor Ragan during the Fall '08 term at McGill.
- Fall '08