B.C.’s proposed tax increases could raise $750 million a year while affecting only the highest three per cent of income earners

Taxing the rich is back on the political agenda in the British Columbia election and the conversation is one the rest of the country should be having. With so much adversity facing Canada’s economy, it only makes sense to ask those with the greatest financial resources to contribute more to the public services and infrastructure we depend on.

“Taxing the rich” can mean different things, and the B.C. parties have offered different approaches. The NDP proposes higher income taxes for top earners, while the Green Party proposes a wealth tax on the largest fortunes (financial assets and real estate, mostly). These are different taxes, and the Green Party proposal would be very difficult to implement at the provincial level.

The NDP proposal targets higher tax rates on the top two income tax brackets by two percentage points, and would create a new bracket for annual income above $1 million. The tax increase is designed so that only the top three per cent of income earners would be affected. And individuals earning less than $190,405 would not see a cent of tax increase under the proposal.

CCPA estimates that the tax changes could raise an additional $750 million annually in 2027. The top one per cent of earners would pay 86 per cent of that amount.

Income is what people earn each year. Wealth is what they own, including cash, stocks and bonds, minus their debts. Taxing high incomes would ideally be accompanied by a wealth tax because a lot of wealth can be accumulated without having to declare income for tax purposes.

The Greens’ proposal to tax wealth includes a one-time tax of five per cent on wealth above $50 million, 10 per cent above $100 million and 20 per cent above $1 billion. Then an ongoing wealth tax would apply at rates of two, three and five per cent at those same thresholds.

The Greens’ proposal is important and well-intentioned, but a wealth tax should be national in scope, because the federal government could address financial regulation and impose an exit tax on people leaving the country.

Critics of tax proposals like these cite concerns that they will negatively impact economic growth or push wealthy taxpayers to leave the province or country. They also argue that enforcing such a tax is difficult.

These objections deserve examination, but they should not end the debate. In the case of B.C., the province already has very low income taxes for the vast majority of households, and better than Alberta’s, up to around $150,000 of income.

History also offers a useful perspective. Canada’s top marginal income tax rates were 80 per cent or higher in the 1960s, a period associated with strong economic growth. Taxing top incomes heavily is compatible with prosperity, and if anything it contributes to a strong economy by mobilizing money that would otherwise go into speculative financial investments.

For the very top earners, tax avoidance strategies are inevitably going to be part of the mix. That is not a reason to stop trying to tax the rich; it’s an argument to close up loopholes that allow legal forms of evasion. It’s also a good reason why B.C. also needs to tax corporations effectively so that income cannot be accumulated indefinitely to the benefit of major shareholders.

Canada deserves a serious debate about who pays, who benefits and how public services are funded. B.C. is showing what could be possible. Asking the wealthy to contribute more is neither unreasonable nor radical. It is a legitimate choice that would increase equality and belongs in a discussion about the kind of society we want to build.

Marc Lee is a Senior Economist with the Canadian Centre for Policy Alternatives (CCPA) with nearly 30 years of experience analyzing Canadian public policy, macroeconomics, and environmental issues. He holds an MA in Economics from Simon Fraser University and has served as a Visiting Professor at SFU’s School of Public Policy.