Parkland Institute
Op-eds | March 01, 2013

Fairness is found in equality, progressive taxation

Parkland Institute

In response to analysis by the Parkland Institute and the Canadian Centre for Policy Alternatives of new Statistics Canada data, the Calgary Herald published an editorial that was misleading and misguided.

The data revealed some startling facts: virtually all of the wealth created in Alberta over the last three decades went to the top income bracket. After 28 years of hard work and technological advances, the average incomes of the bottom 90 per cent of Calgarians rose just $2,000, from $35,000 to $37,000, while the incomes of the wealthiest one per cent more than doubled, from $385,000 to $955,000.

The concentration of wealth at the very top of our city is even starker. The reported incomes of the top 0.1 per cent (with untold amounts in offshore bank accounts not reported) went from $860,000 in 1990 to $3.8 million in 2010 — a staggering increase of $2.9 million, and 102 times the average income of the bottom 90 per cent. Simply put, our economy has done very well for very few, and virtually nothing for 90 per cent of society. With such an enormous divide between us and them, it’s worth asking if we’ve created a new aristocracy.

The Herald’s reply to these troubling findings failed to recognize the seriousness of the problem. First, the Herald confused inequality for poverty. Poverty is real and concerning, of course, but inequality means more than just providing a minimum quality of life for everyone; it means ensuring we have an economy where everyone prospers together.

Second, the Herald masked the nature of the problem by describing the aristocracy with euphemisms like “best and brightest” and “highly creative,” implying that they somehow deserve their new-found wealth. That reasoning ignores the ways in which recent policy choices and the ever-expanding influence of the market have changed how the fruits of our economy are distributed.

Is a CEO inherently smarter or more creative than a doctor, teacher, artist, or chef? Are they naturally 102 times better than a firefighter? The fact of the matter is that recent political decisions, such as instituting a flat income tax, lowering corporate taxes, and widening tax loop holes, has meant an increased amount of society’s wealth is sent to the top, while attacks on unions and collective bargaining have meant stagnant wages for the rest of us.

Finally, the Herald appears unaware of the overwhelming body of evidence and the growing political consensus that inequality is one of the most pressing problems of our time. The bestselling book, The Spirit Level, has thoroughly detailed the ways in which higher levels of income inequality are linked to worsened social outcomes, such as poorer mental health and higher rates of violence.

Income inequality is also bad for economic growth. This conclusion has come from such unlikely sources as the International Monetary Fund, the World Economic Forum, and a former chief economist at the World Bank and Nobel Prize winner, Joseph Stiglitz. As opposed to earlier thinking at such institutions — that more money in the hands of corporations and elites means more investment and higher rates of growth — new research indicates that the opposite is in fact true: too much wealth concentrated in too few hands clogs the economic engine.

The Herald also denies the benefits in raising taxes on the elites by making Alberta’s flat income tax progressive. Stating that collecting more taxes from the rich would fail to “(put) wind in the sails” of lower-income earners, the Herald reinforces the notion that the downtrodden should simply help themselves. This line of thinking fails to recognize how strong public services, which require public revenue, are essential to providing everyone in our society the opportunity to reach their full potential.

Just think, for instance, how a top-notch public education system, effective public transit and universal child care would inspire and free Calgarians to become their best selves. Polls show that the majority of Albertans recognize the emaciated state of public services in this province and want the public revenue to eliminate this social deficit.

Furthermore, the Herald attempts to whitewash the flat tax as fair, since everyone pays the same rate (10 per cent). But the basic facts remain: the flat tax has meant the wealthiest pay less tax than their counterparts across Canada, while lower-income Albertans pay among the highest. A flat 10 per cent tax rate means that after taxes, Jane the Librarian, earning $37,000 per year, is left with $33,300, while Sally the CEO, earning $3.8 million, is left with $3.4 million. Besides wondering what one does with $3.4 million every year, it is easy to see how inequality continually worsens under such a system.

In fact, if Alberta’s top one per cent had continued to pay income tax at the same rate as they had in 1999, governments would have an extra $11 billion — including $1.2 billion in 2010 alone.

As the Herald concludes: “Taxes are a means to an end, not an end in themselves.” Indeed. Taxes should distribute the wealth of our collective efforts more equally and be used to ensure everyone — and not just the elite — has the best opportunity to prosper.

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