Things You Won’t Read in Mainstream Coverage of Statistics Canada’s Income Inequality Report
Well, at least they’ve come out and said it: income inequality is a growing problem in Canada. The Globe & Mail said it. The Toronto Star said it. CBC said it. Even the National Post managed to get it out, interspersed amongst gripes about how Canadian income inequality isn’t nearly as bad as American income inequality, which, I suppose, it isn’t. All of this is based on a newly released Statistics Canada report which reveals that the income share of the richest 1% of Canadians has grown from over 7% of the economy in 1982 to over 10% today. It’s a good thing StatsCan writes press briefings to accompany its data releases. As you can see from the above linked commentary, that’s pretty much as far as our nation’s highly paid professional journalist corps managed to dig into this story.
That fact can be seen from a rather appalling interpretation of tax inequality in the StatsCan press release, which was eagerly picked up and echoed by the press corps: the notion that over the past 30 years the “tax burden” on the rich has increased. This is reported in all media. CBC even put it into the headline: “1% have seen their income increase over almost 30 years, but so has their tax burden.”
This is an incredible claim. I mean that in the most literal sense: it is not a credible claim. The tax burden of the rich has not increased, at least not in the sort of taxation measured in this report. You can check out the data for yourself if you don’t believe me, but in the meantime, here’s my summary: in 1982, the richest 1% took in an average of $117,400, and they had an average tax rate of 33%. In 2010, the richest 1% took in an average of $427,600, and they had an average tax rate of 33%. The bottom 90% paid 16% in taxes in 1982, and paid 14% in taxes in 2010.**
Note, incidentally, that the unaltered tax rate points to the failure and abandonment of the theory of progressive taxation. Progressive taxes are based on the idea that the more money you earn, the more you spend on unnecessary luxuries. Poor people therefore have very low tax rates because the bulk of their income is (or should be) spent on absolutely necessary items: food, clothing, and shelter. Wealthy people have higher tax rates because the bulk of their income is available for discretionary spending. Losing 50% of $1 million per year isn’t remotely as painful as losing 50% of $10,000 per year.
Except that in Canada, the progressive taxation system has clearly been left behind. Over the past 30 years, the income of the top 1% nearly quadrupled, but their tax rate did not increase. The bottom 90% merely doubled, and their tax rate slightly decreased. The most explosive gains were won by the top 0.01% — an elite club which saw their income quintuple since 1982, even as their tax rate actually declined from a peak rate of 46% in 1994 to just 35% today. Some burden!
I’ll have more to say on this topic for the next few days, but in the meantime here’s one thing to chew on. The media is filled with glowing reports about how income inequality is growing because the rich are getting fantastically richer while the rest of us toddle along, so I won’t belabour the point. I’ll just put it in graphic form, and then next post we’ll move on to other, more subtle points missed by the mainstream commentary.
As you can see from the following chart, which shows the ratio of the average top 1% income to the average bottom 90% income, in 1982 the average wealthy Canadian took in an annual income equivalent to that of ten ordinary Canadians. By 2007, this had skyrocketed to an annual income equivalent to that of twenty ordinary Canadians. The ratio has since receded somewhat as a result of the recession, but this is almost certainly a temporary setback. It’s even more extraordinary for the very top category, the richest 0.01%, who saw their incomes grow from 82 times that of the ordinary Canadian in 1982 to an obscene 215 times the income of an ordinary Canadian in 2010. Must be nice for them:
It’s worth noting that the longest sustained period of growing inequality occurred under the Liberals between 1994 and 2005, but that with recession dips aside, growing inequality is the legacy of a Progressive Conservative government in the 1980s, a Liberal government in the 1990s, and a Conservative/Reform government in the 2000s. They also oversaw, although the above graph doesn’t show it, the greatest collapse in tax rates among the wealthiest Canadians. It’s worth remembering this when someone claims that the Liberals are a centrist or progressive alternative to Stephen Harper.
** I got these numbers by asking StatsCan’s online service to generate mean market income for the various income groups. StatsCan also provides medians and total rather than market income, so as always, you can produce a range of statistics that appear to say somewhat different things. More on this in a futrue post.
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Stig
They both butter their bread, on the same side. The liberals, however, unlike the Cons, try to show only the unbuttered side, with the claim made to the public that they don’t even use butter, indeed, that they prefer toast, unbuttered. Both parties are contemptuous of the ordinary Canadian and neither will ever get my vote again.
Sam Gunsch
Very helpful post on this issue.
@ SE said: “… the longest sustained period of growing inequality occurred under the Liberals between 1994 and 2000…”
and “It’s worth remembering this when someone claims that the Liberals are a centrist or progressive alternative to Stephen Harper.”
Very important to not lose this history.
The Liberals also created the taxpayer losses on the boondoggle of the tarsands, buy giving them extremely preferential tax policies re capital cost allowance, e.g. 100%/annum vs doing nothing for renewable energy.
Eastern and Central Canada should vote against the Lib’s and HarperCon’s on this issue alone, which even the outgoing Bank of Canada governor admits did lead to higher dollar and job losses… He just thinks on balance the tarsands have adequate offsets to justify the job losses on balance.
The tarsands are a short term bubble type of economic sector that is actually a low employment, capital intensive, export the profits out of Canada industry, compared to manufacturing.
Alberta’s tarsands industry has been treated on taxes like the 1%, and it was Chretien/Martin/McLelland that began the gifts to the tarsands. Irony: Got them very little political gain given the NEP cult-like propaganda out here in MSM seal country.
Sam Gunsch
G.J.W.
What gripes me is? Why can Canadians save mega bucks by shopping in the U.S? Canada’s cost of living, is the highest of all the America’s. We can buy our own products in the States much more cheap, than we can in our own country. Gasoline is also less expensive in the U.S.
During a recessions, there should be price controls. My retirement savings are worthless. Most of my savings are clawed back by government, direct and indirect taxes. BC is terrible. The HST is a killer. However, Harper was drooling at the mouth for BC’s HST, we protested but it was forced on us anyway. HST on home heat, hydro, phone, cable, insurances and on pretty much everything, except basic groceries and kids clothing. Costs went up last year and again this year. My furnace is set at 10, day and lower at night. The north is much colder, so wool socks and sweaters. No hot water for laundry. Hang my clothes up to dry. I have cut back to, basic phone, basic cable, reduced house insurance, sold my car. Never buy meat. This month will tell the tale. Next cut will be phone and cable. Another cut back on food.
I feel very sorry for family’s. They have to put, property taxes, insurances, x-mas, kids school clothes, gasoline and even groceries on their credit cards. Single mothers earning a minimum wage, is hopeless. Many family’s and seniors have to rely on food banks for food.
Billions of our tax dollars are given to corrupt greedy banks, mines, large corporations and the favorite charity, big oil. They are also given huge tax reductions. I even have to laugh? They are the first ones lining up at the trough and, squealing for more money. Harper usually gives them, another tax reduction. Shuts them up for a few minutes anyway.
Canadians are fully aware of government corruption. We are the ones who have to pay for their corruption, each and every day. Our government steals from us, to give to the wealthiest outfits in the world.
The Sixth Estate » Globe & Mail Takes on Canada’s Income Inequality, “Borrows” Quotes in the Process
[...] the media fell all over a new report from Statistics Canada which found that since 1982 Canada’s wealthiest 1%, and especially Canada’s wealthiest [...]
Keith Meisenheimer
While knocking the conservatives & liberals why do you omit the NDP & Greens ? On June 5 th 2012 did your conservative , liberal , ndp or green M.P. tell you that they doubled the Governor Generals salary & pension on the Q.T. while Harper is slashing social spending ? http://openparliament.ca/debates/2012/6/5/jean-francois-fortin-1/
Sixth Estate
The NDP and Greens have never formed a federal government, so I can hardly judge either party on its record in power federally, can I?
The Governor-General’s salary was increased and he/she is now subject to income tax. To my knowledge it’s more or less a dollar-for-dollar thing. I think it was a silly thing to do, but I’m not sure it actually leaves the G-G personally significantly richer.
Keith Meisenheimer
Please don’t be arrogant with your answer ” sixth estate ” read the link I provided above & link below before retorting ? Quebec’s Bloc did not support everybody else in adding to GG’s wealth of 2 homes , servants , expense account , free worldwide travel , no GST / HST …….etc . … Arrogance of political class … Governor General pays no HST , GST , provincial sales tax or income tax approx. $ 40k income tax … Steve Harper decided in omnibus budget to charge GG income tax and the government to pay it ? so they raised his income from $ 137,000 to $ 270,000 … GG gets a lifetime pension after 5 year term calculated on his income so GG lifetime pension rises from $95 k raised to $ 150k / yr … average Canadian makes $ 46,000 / yr and only 38 % of them have a pension plan .. http://www.parl.gc.ca/parlinfo/compilations/GovernorGeneral/GovernorGeneral_Salaries.aspx
Keith Meisenheimer
Charging / paying GG’s income tax was exactly like eliminating the penny . Both have huge hidden costs unless politicians think about it and do it right … or wait for times of surplus budgets when politicians are not slashing social spending .
thanks for letting me vent .
Sixth Estate
No arrogance was intended. The reason I didn’t mention the federal NDP or Greens was because they’ve never held federal power. I was noting specifically the impacts of years of budget policies by both parties in power. Lest you think I’m some sort of partisan stooge, let me assure you, if there had been a federal NDP government in that time and it had contributed to the trend too, I would have been pleased to say so.
I had not actually thought through the full tax implications so I do appreciate the correction there. (Although I would quibble that the governor-general’s office, not the individula paying the taxes, owns the homes, the staff, etc., so that part is less troubling on taxation grounds.) And yes, the GG salary/tax change is a pointless symbol at best, a questionable gimme to a sinecure office at worst.
However, either way, the extra cost to the treasury appears to me to be something like the cost of a couple extra public servants in a government that already employs tens of thousands. It shows reckless disregard for taxpayers, but it’s less directly important to the issue of income inequality, which could be tackled with or without a luxuriously compensated G-G.
Keith Meienheimer
Thanks for humouring me … I consider all M.P.s as reponsible government & know that as long as one party has a majority the PMO / party leadership runs the Hill .
$ 400,000 extra salary for last 3 yrs. + possible $ 900,000 in extra future pension costs are peanuts for the elite I agree . …
Duffy scamming $ 30,000 Ottawa living allowance makes two mansions for your job a perk ? … democracy ? Not any of this ? and not reported in the media either .
Keith Meienheimer
income inequality won’t be percieved as a problem by elites that are entitled to their entitlements
Sixth Estate
Don’t get me wrong, I’m not defending that system. There are lots of posts on this blog on such subjects. It’s just not what I meant to focus on here. But you’re right. It’s symptomatic of a hypocritical sense of entitlement on the part of the political elites, in much the same way as $16 orange juice and rescue-helicopter taxi rides from your fishing camp.
“income inequality won’t be percieved as a problem by elites that are entitled to their entitlements”
You could take off the last six word and this sentence would still be almost as true.
Keith Meienheimer
thanks for the education
Leo
I knew 20 or more years ago that about the 2% owned the 80% of Canada’s wealth, the ? 8% i think was wealthy and making about 400,000 a year and the rest were working class.
My numbers not accurate but legit .from newspaper reports