Jagmeet Singh’s promise in his election night speech that “we’re going to make sure the super wealthy start paying their fair share” was met with cheers, the decibel level rising as his fellow New Democrats chanted: “Tax the rich! Tax the rich! Tax the rich!”
It is not entirely true that the federal election ignored big policy issues, but if it was issues-driven, how did a wealth tax fly under the radar?
At some point in the coming weeks Mr. Trudeau will meet Mr. Singh over coffee to talk tax policy. Sadly, the election left Canadians no wiser as to what divides progressives on the issue, but if you want the full picture look south to the Democratic leadership campaign.
Four years ago a wealth tax was a policy that Hillary Clinton sniffed at tentatively, only to dismiss entirely. Now it is front-and-center.
Elizabeth Warren’s “ultra-millionaire” tax proposal to levy an annual 2% tax on net worth over $50 million dollars, rising to 3% for holdings over $1 billion, has played no small part in vaulting her into contention.
She is going head-to-head with Bernie Sanders’s tax on “extreme wealth,” which differs less in principle than in specifics, calling for a 1% levy on wealth above $32 million and progressively rising to reach 8% once net worth exceeds $10 billion.
Joe Biden has been quieter on the topic, but still proposes to eliminate a egregious loop hole called the “step-up in basis,” allowing capital gains over an individual’s lifetime to be passed to their heirs tax-free.
All this talk of taxing the rich has not gone unnoticed among the billionaire class. Michael Bloomberg, the business mogul and former mayor of New York City whose reported net worth of $50 billion puts him squarely in the cross-hairs of the Warren and Sanders proposals, is reconsidering his original decision to not contest the leadership.
The American debate revolves as much around the “why,” as it does around the “how” of making the rich pay. Forget about the practicalities; why in the first place levy a tax on top wealth?
Warren and Sanders certainly cite needing the money for lofty goals, but this misses the subtext that has busted into the open thanks to a new book by the architects of Warren’s proposal.
In the United States the wealth of the uber-rich has sky-rocketed, and Emmanuel Saez and Gabrielle Zucman grate at the knee-jerk American tendency to praise entrepreneurship, talent, and risk-taking, by arguing that the rise of the wealthy reflects, as the title of their book clearly states, “The Triumph of Injustice.”
The two University of California professors claim the Internal Revenue Service is running a “giant flat tax” with the average tax rate being about 28%, a little lower for those with bottom half incomes, but not much different among those with top incomes. The 400 richest Americans actually pay an average tax rate of 23%, lower than everyone else.
They argue that a wealth tax is needed to ensure the very rich pay their fair share, but also that high-end taxes with punch would prevent “an oligarchic drift that if left unaddressed, will continue undermining the social compact and risk killing democracy.”
Questioning the legitimacy of billions in wealth is core ideology for Sanders, good politics for Warren, but surely what makes Biden tentative, and Bloomberg out right incensed.
Mr. Singh’s supporters are echoing the Saez-Zucman line, and the contrast with the Liberals, who seem to be stuck in the Clinton era, couldn’t be sharper.
While the New Democratic Party’s platform proposes an annual 1% levy on net worth above $20 million, the Liberal platform meekly suggests a 10% sales tax on luxury cars, boats and planes costing more than $100,000, and at the same time offers a huge loophole by exempting commercial use.
The NDP are drinking double espresso, the Liberals sipping a cup of warm milk, or at best a Coke. A Canadian fact-check has yet to be put on the table.
No wonder Mr. Singh didn’t hesitate in responding to his supporters’ cries to tax the rich: “We’re on it” the party leader assured them, “My friends, that is exactly what we are going to do.”