【NON-p】econ219--THE RISE OF CANADA’S..r

The top tax rate in 2009 averaged across canada was

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Unformatted text preview: half the rate they would have in the past. The top tax rate in 2009, averaged across Canada, was 42.9% for incomes above $126,264. The last time the richest Canadians were taxed at this level was in the 1920s. Combine record-breaking growth in incomes with historically low top tax rates, and the richest 1% is taking a bigger piece of the economic pie today than at any time in the past century. The report also touches on the concentration of wealth, but 2005 was the last time Statistics Canada examined the distribution of wealth in Canada, a study it has no plans to repeat. A recent private sector study shows that by the end of 2009, 3.8% of Canadian households controlled $1.78 trillion dollars of financial wealth, or 67% of the total. Like the Gilded Age a century ago, Canada is awash in money generated by an emerging new global economy. But during both slow and rapid periods of growth, incomes have increasingly become concentrated in the hands of the elite few rather than creating greater prosperity for all. The excesses of the 1920s resulted in a collapse and triggered, in response, a new wave of public policy, one that helped redistribute prosperity through fair taxation and fair wages. In time, the response to this latest wave of excess may very well be the same. 4 growing gap project Introduction almost exactly a hundred years ago, the Gilded Age that defined the height of American opulence came to an end. The era of robber barons and extravagant tycoons rose from the ashes of the American Civil War, which ended in 1865. During the following half-century, industrialization and global commerce expanded in great leaps and bounds, propelled by advances in transportation and communications. For the first time, the good life was no longer the exclusive playground of the aristocracy. In this new land of opportunity a plucky immigrant, gold panner, country bumpkin or small-time entrepreneur could strike it rich. Trouble was that for every Horatio Alger, millions of people were struggling to survive. Despite a society awash in money, the majority found themselves on the outside of the Gilded Age looking in. It was an era known for its wild excesses, overt exploitation and increasingly volatile markets. It was also known for its unfolding promise of modernity, rich w ith unprecedented technological potential and personal freedom. Both sides of the Gilded Age gave rise to a growing wave of social unrest and reform movements, both religious and secular. The anarchist movement arose out of this tempestuous period, but was vastly eclipsed by the movement of those seeking to improve society through structural and institutional change. At the heart of these reform movements was the pursuit of greater individual and social progress. The product of the Gilded Age was the Progressive Era and the New Deal, and the quest for greater equality. Writing in the 1950s, economist Simon Kuznets traced the relationship between economic growth and income inequality over time, noting that the trajectory of the rise of canada’s richest 1 % 5 development looked like an inverted U-shaped curve.2 Using historical data from a handful of rapidly industrializing nations, he showed a consistent trend: inequality rose initially, then declined, starting as early as 1880 in Britain. The facts and the theory pointed to one promising conclusion: prosperity for the majority, if not all, was possible given sufficient economic development. By the end of the 20th century, two economists, Emmanuel Saez and Thomas Piketty, stood Kuznet’s theory on its head.3 They showed a stark reversal of developments in the U.S. between 1913 and 1998. Emmanuel Saez and Michael Veall showed similar results in both Canada and the U.S., showing how long-term trends toward greater income equality were reversed after 1980.4 Some have dubbed this phenomenon the Great U-Turn: a flip from decades of steady declines in income inequality to its opposite: a steady increase in inequality, in good times and bad. Economic growth no longer paved the path to widespread prosperity. But for a select few, good times never seemed so good. Incomes of the very rich have doubled and tripled while they flat-lined for the majority, which has a lso been squeezed by rising costs and worsening household debt. Whether the economy grew or faltere...
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This note was uploaded on 09/17/2012 for the course ECON 219 taught by Professor Ragan during the Fall '08 term at McGill.

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