Late last week, the left-wing Canadian Centre for Policy Alternatives released a report on income disparities in Canada. Basically, the report said, the rich are getting richer and the spread between the richest and the poorest in Canada grows every year.
The CCPA points out that the top one per cent of income earners in Canada — $167,000 and up — take home 14 per cent of all earned income. That figure alone is telling, because that figure of $167,000 is just double the average Canadian family income.
Because we already know that the top 15 per cent of income earners already pay some 75 per cent of all taxes, this means that those top one per cent are paying roughly one-fifth of all the taxes.
This is all important to understand for reasons we’ll get to.
You see, in our house, we’re part of the 15 per cent of Canadians who pay three-quarters of the tab. We have a mortgage, some credit card bills, an RV, and two daily drivers that were new when Johhny Depp was making his debut as Jack Sparrow.
In spite of all that, government remains our single largest expense. Only when we include the costs of financing a commercial truck does the cost of government get pushed back into second place in our personal ledger.
Now, the Centre for Policy Alternatives sees the recent trends in income inequality as a call for more government action, in spite of reams of evidence that point towards government actions on this front as being the most likely cause.
Think about this. Since my birth in 1960, every single manufactured good and every food commodity (outside of those controlled by marketing boards) has become less expensive in real terms.
The average new car in 1960 ran about half the average personal annual income. Ditto, today. But, today’s car, being as comparable as possible, will use half the fuel, last twice as long and cost far less to maintain in any given year. Tires alone will last three to four times as long, and the modern car will be loaded with safety and convenience features either unknown in 1960 or found only in very expensive luxury cars.
Bear in mind that current new car will also pack a hidden $4,000 tax to cover the cost of meeting various safety and emissions regulations.
A colour television in 1960 would set you back a couple month’s wages, if you had a real good job. Three days at minimum wage today will now buy you a 22-inch flat screen.
Scour the web and you’ll find a cornucopia of items that cost far less in relative terms today than they did in 1960.
Advances in manufacturing, transportation, and agriculture have driven down the real prices of our most common daily commodities dramatically, enough so that this economic benefit has masked the offsetting erosion of the middle class via extortionate levels of taxation.
In 1960, the combined tax burden on the average Canadian family amounted to less than one-third of total income. Today, that number hovers around half.
Now, at first glance, this doesn’t seem like a radical amount over five decades. Unfortunately, though, it has created a tremendous social burden with very real and damaging effects. There is an answer to the rarely asked question: What is the social cost of “progressive” taxation?
You see, most of us have relatively common goals. We aspire to find a measure of personal success that will allow us to raise our families with a certain amount of financial security.
But, ever more stringent levels of “progressive” taxation make it ever more difficult for families to achieve that very goal.
When we excessively tax our working young people in one region of the country, so that we can funnel funds to non-working young people in another region, we destroy future initiative and draw down the pool of future entrepreneurs.
When we excessively tax the middle aged and middle class, we detract from their efforts to be self-sufficient in later life, which creates a bit of a vicious cycle. So-called progressive taxation creates a cycle where financial achievement carries with it an ever diminishing return.
Simply put, wealth transfers aimed at diminishing disparities, as the Centre for Policy Alternatives would like to expand have the exact opposite effect. They simply make it harder and harder for working families to achieve financial freedom.
Bill Greenwood is a Red Deer based freelance writer.