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Unformatted text preview: ced personal income taxes since the mid-1990s.
chart 8 Top Marginal Tax Rate Ontario, 1920–2000
100% 80% 60% 40% 20%
1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Note: 1942 omitted due to change in accounting basis12 the rise of canada’s richest 1 % 17 It’s worth noting that, already by 2000, the top marginal tax rates were approaching levels last seen at the height of the Roaring Twenties. In the coming months, the
Saez-Veall tax-related data will be updated to 2008. It is expected these data will show
that top marginal rates will be at levels lower than at any time in recorded history. life is less taxing… for the richest 1%
Chart 9 shows average tax rates applied to high income earners in Canada over time.
These are computations of the average rate of taxation for people falling into different subgroups of the richest 10% of Canadians, irrespective of the jurisdiction in
which they live, based on taxes paid.
Rates of taxation peaked in 1943, towards the end of the Second World War. At
that time, the richest 0.01% of tax filers (average income of $775,000 in 2000 dollars)
paid an average tax rate of 71%. By 2000, the average tax rate of the richest 0.01%
stood at 33%.
A recent study examining changes in total incidence of taxes (income, payroll,
consumption, property, capital gains, and corporate taxes) shows that between 1990
and 2005 the richest 1% experienced twice the reduction in taxes as the average Canadian (4% versus 2%). In fact, by 2005 the richest 1% was taxed at a slightly lower
rate than the poorest 10% of taxpayers.12
The Saez-Veall data focus only on income taxes, but permit a comparison over a
much longer period of time. They reveal that tax rates for the richest Canadians were
roughly the same in 2000 as they were in the 1930s, while taxes paid by the richest
5% and richest 10% steadily rose between the early 1950s and 2000. (They have fallen chart 9 Average Tax Rates on High Income Earners Canada, 1920–2007
80% Top 10% Top 1% Top 0.5% 70% Top 5%
Top 0.1% Top 0.01% 60%
1920 1925 1930 1935 1940 1945 1950 A lternatives, Ottawa, November 2007. 18 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 12 Marc Lee, Eroding Tax Fairness: Tax Incidence in Canada, 1990 to 2005, Canadian Centre for Policy growing gap project since.) Simply put, by 2000 Canada’s elite were no longer shouldering as much of the
cost of running a nation that rewarded them so handsomely.
Since 2000, taxes have been aggressively cut on incomes, capital gains, and money
put aside in savings (easier to do for those with higher incomes). As a result, it is
widely anticipated that updated data will show further significant declines in the
average share of income paid in taxes for high income earners after the year 2000. the great hoarding: the growing concentration of wealth
The share of market incomes held by Canada’s richest is greater today than it has
been at any time since the end of the Second World War. As an added bonus, rates
of taxation for the richest Canadians have been pared back to levels of the 1930s (and
even lower in some jurisdictions for the very richest), triggering dramatic reductions
in their share of income going to pay tax.
Today, incomes are more concentrated in the hands of Canada’s elite than they
were during the 1920s or 1930s.
There is plenty of evidence the economic prosperity of the past few decades has
padded the financial cushion protecting the most powerful Canadians from the
economic collapse that devastated working- and middle-class households. Call it
the great hoarding.
Up-to-date data on distribution of wealth from Statistics Canada isn’t expected
any time soon,13 and the most recent Statistics Canada survey of how wealth was
distributed in Canada was in 2005.14 In 2005 household wealth was $4.862 trillion
and there were 13.4 million households. If wealth was divided equally, each household would have a financial cushion of $364,300. According to Statistics Canada’s
Survey of Financial Security, about 80% of families had less than that to fall back on.
In 2005, median wealth (the half way point in the distribution) was $148,400. The
richest 10% held almost 60% of the total wealth in the household sector, leaving the 13 Statistics Canada’s Survey of Financial Security measures the net worth of Canadians, but hasn’t...
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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.
- Fall '08