This is the fifth article in Daily Hive’s Canada Line series, a multi-platform series uncovering the systematic causes of the social, political, and economic issues impacting Canadians. Filmed on subways and LRTs across the country, the series aims to bring nuance and analysis to the very same platforms where millennials and Gen Z are most active.
Ten years ago, Justin Trudeau and the Liberals campaigned on “[making] life better for the middle class and those working to join it.” A decade later, Canada’s middle class appears to be shrinking more than in other Organisation for Economic Co-operation and Development (OECD) countries since the 1980s, according to the latest OECD economic survey evaluating middle-income groups across OECD countries.
While Canada struggles to maintain stability in the size of its middle-income group, Statistics Canada data shows the wealth gap — the disparity between the rich and the poor — has increased at record speeds, with “0.02% of Canadians now [possessing] more wealth than the bottom 80%” according to Oxfam.
Despite billions of dollars in new government spending aimed at low-income families, such as the Canada Child Benefit and the Canadian Dental Care Plan, critics argue that this spending alone, especially amid ballooning national debt, is insufficient to address the broader issue of wealth inequality.
Multimillion-dollar property in BC contrasted alongside Vancouver’s Downtown Eastside (Arash Randjbar)
We spoke to Alex Hemingway, a senior economist at the Canadian Centre for Policy Alternatives, to better understand the structural and political dynamics surrounding Canada’s rising inequality and economic challenges.
He revealed that when it comes to preserving the economic status quo, Canada’s red and blue parties have historically shared the same colours: a milquetoast approach to wealth redistribution.
Alex Hemingway (Arash Randjbar/Daily Hive)
The following Q&A has been edited for length and clarity.
Capital gains
Daily Hive: “The Liberals have told us that their latest budget will help “restore generational fairness” by increasing the capital gains inclusion rate. Do you think the budget goes far enough to address wealth inequality?”
Hemingway: “On the tax side, it’s a step in the right direction, but we’re not seeing a fundamental break with the tradition of policy-making across different parties that disproportionately reflects the interests of those at the very top versus those in the middle and those really struggling.
“The Parliamentary Budget Office published research in 2020 finding that the top 1% in Canada now controls almost 26% of the wealth. If you look at Canada’s 87 richest families, they now have almost 45,000 times more wealth than the average Canadian household.
“What we’re seeing is extreme wealth concentration at the same time that many Canadians are experiencing difficulty paying rent and affording groceries. I think the social contract and fabric is really fraying in this country with the levels of wealth inequality that we see.”
Ashleigh Stewart/X
Bay Street influence
Daily Hive: “How do wealthy Canadians influence our politics?”
Hemingway: “Firstly, working-class people are underrepresented in our parliament and in our political class. Secondly, you have lobbying apparatuses, lots of money flowing into lobbying and political donations.
“Thirdly, when you look at the parties in power federally, a lot of these folks are drawn from Bay Street and the business centres of the country, so they often reflect those interests back in the policy that we’re seeing.
“One of the most dramatic illustrations of this is when you look at a policy like a wealth tax focused on the super-rich. This policy has huge support among Canadians across party lines, yet it’s nowhere to be seen on our policy agenda.
“A moderate wealth tax of 1% over $10 million and 3% over $100 million could make post-secondary education free for Canadians, it could fund universal pharmacare, and it could create 100,000 non-market affordable homes each year, and yet we don’t see a comprehensive wealth tax being discussed federally.”
@freshdailyca Does Canada’s tax system disproportionately benefit big capital and the economic elite? We spoke to Alex Hemingway, senior economist at the Canadian Centre for Policy Alternatives, to assess the equity of Canada’s tax system #Canada ♬ original sound – Freshdaily
“Spending problems”
Daily Hive: “Critics argue that the government doesn’t have a tax revenue problem; they have a spending problem as evidenced by our ballooning national debt. What are your thoughts?
Hemingway: “If you look at our tax revenue as a share of our total economic pie or GDP, it’s actually lower than it was a couple of decades ago. It’s also far lower than many European countries and Scandinavian countries with strong social safety nets. Government tax cuts have had an effect.
“Having said that, it doesn’t mean that all spending is good. We’re seeing billions and billions of dollars go out the door in the form of corporate welfare, whether that’s to the big EV factories or the billions of dollars pushed out the door to corporations during the pandemic.
“I think we have to monitor our spending to ensure we’re spending on the right things and to demonstrate to taxpayers that we can effectively reinvest in our physical and social infrastructure.
“Governments need to show some concrete wins that are helping in the daily lives of people to remind folks that we can act together through our collective institutions of government to solve big problems.”
Waning productivity
Daily Hive: “Is inequality fuelling Canada’s productivity crisis?”
Hemingway: “If we’re able to shore up our social infrastructure, we can unleash the potential of Canadians to contribute to economic growth and productivity, but we have a situation where people can’t afford housing in our most productive places — city centres.
“Cities are very productive places, and we’re excluding Canadians from them. Research from institutions like the IMF tells us that high inequality is dragging on our economic growth. If we’re going to have a more productive economy, we need to bring in new tax revenue so we can invest in this country’s infrastructure.”
Federal response
Daily Hive: “How can the government tackle wealth inequality?”
Hemingway: “A wealth tax is a very simple policy that looks at your total assets minus your total debts and says, ‘we’re going to set a threshold whether that’s $10 or $20 million, and above that, we’re going to apply a tax.’ That’s the most direct way to ensure you’re taxing the richest of the rich.
“If you combine that with other policies, like fairer taxation of capital gains versus income and restoring more reasonable corporate tax rates, you can really begin to reduce wealth inequality in this country.”
Public-to-policy disconnect
Daily Hive: “In 2020, Abacus asked Canadians if they were in favour of a wealth tax, and over 80% of Canadians said yes. However, when Peter Julian, a New Democratic Party (NDP) parliamentarian, tabled a motion calling for a 1% wealth tax, Conservatives and Liberals voted against it. Why is there such a large disconnect between what people want and the actions of our elected representatives?”
Hemingway: “It’s really a political choice when we have policies that advantage the rich in our tax system, whether that’s cutting corporate taxes or taxing labour income at a much higher rate than we tax capital gains.
“Let’s just reflect for a moment on how unusual it is to have 80 to 90 percent of Canadians agree on something, particularly a policy like a wealth tax, that is sometimes portrayed as controversial. Well, it’s not if you ask Canadians.
“There’s a huge and growing body of economic research showing that implementing a wealth tax on the super-rich is economically feasible. I think we have to ask ourselves some hard questions about what’s going on with our democracy when this isn’t on the policy agenda.”