Needed: Progressive Taxation

The uproar over the federal government’s move to close tax loopholes for those who incorporate as businesses is drawing attention away from the wider topic of tax fairness in Canada.

Last year the Liberals backed down on an election promise to close the stock options deduction that gives almost a billion dollars annually to the wealthy. Bowing to pressure from Bay Street CEOs, Finance Minister Morneau kept this loophole, which allows a 50% discount on taxes. A recent Canadian Centre for Policy Alternatives study found that on average, the richest 10 per cent of income earners get a discount of more than $20,000 a year from tax loopholes — an increase of $6,000 since 1992.

Governments inevitably cry poverty when it comes to funding child care, healthcare, education, public transit, social assistance, clean drinking water for indigenous communities, etc. But they always have deep pockets to give tax breaks for the rich (or fighter-bombers for the military!).

The business incorporation loophole is relatively small, costing Ottawa about $250 million a year. About 60 percent of this amount goes to households with income over $150,000 a year. It is true that the majority of small business owners have much lower incomes, but other social policy and economic tools could be used to assist this sector. We also note that the Canadian Federation of Independent Business staunchly opposes higher minimum wages and progressive reforms to the Canada Pension Plan, so their pose as defenders of equality around this issue is utterly hypocritical.

Putting things in perspective, Canadians for Tax Fairness points out that this loophole pales in comparison to the capital gains exemption (costing almost $10 billion a year) or the stock options deduction mentioned above. Real tax fairness means going after the wealthy who always get a free ride from Liberal and Tory governments.

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