Get ready for the pitchforks.
Just six months into the pandemic, the Thomson family’s fortune grew by an estimated $9 billion, to over $50 billion.
Today’s craze for digitally certified art and collectibles, known as Non-Fungible Tokens, shows that there’s no end of the playthings for the (cryptocurrency-fuelled) rich to acquire.
Meanwhile, people on minimum wage or social assistance had none of this wealth to begin with. And no province (absent British Columbia) took any step to increase their incomes during the pandemic.
Wealth inequality has gotten worse since the pandemic started. And without a plan, the growing numbers of people left out of the party will demand more radical solutions — not just the poorest, but people on low and middle incomes, people who don’t own houses, and larger shares of women, Indigenous people, immigrants and refugees, people with disabilities, and people of colour.
The problem was hidden by pandemic income support programs for individuals and families. These kept incomes — the flow of money entering people’s pocketbooks — up for those on the lowest end, and actually appeared to narrow the income gap between the richest and poorest in 2020.
At the same time, wealth — the accumulate stock of money and other assets — showed the opposite trend. Fuelled by stock markets gains in platform technology companies, other speculation, and cheap credit that enabled more real estate speculation, the wealth spread grew. Over the first two quarters of the pandemic, financial assets appreciated by over $200 billion, with the top 20 per cent of households enjoying over half the gain.
In the consumer economy, economic shutdowns crushed small retailers, artists, and tourism operators. Meanwhile, companies in sectors such as financial services, telecommunications, grocery and other essential goods could stay open — sectors more likely to be controlled by just a few large corporations or families.
Extreme wealth inequality means generations of people left out of the housing market. It means poorer health and shorter lives for those on the wrong side of the equation. And it creates disharmony and a hunger for radical change.
So what should policy-makers do?
First, realize it’s no longer just the hard left that wants action.
“Radical reforms — reversing the prevailing policy direction of the last four decades — will need to be put on the table … Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.” That was the editorial board of Financial Times, the broadsheet of European high finance, writing just a month into the pandemic.
Afraid to dive in on a popular, if complex, wealth tax? There are many other ways to start. Take a look at just some of the other parts of the tax system that disproportionately benefit the wealthy:
- Preferential tax treatment for capital gains.
- Preferential tax treatment for RRSPs.
- Preferential taxation of stock options and other forms of income available only to the rich.
- A full-on tax exemption on the capital gains from selling a primary residence, no matter its price.
Each might have had its rationale when it was created. Collectively, they are hard to justify. Pick the one that is least related to broad-based economic growth, and change it.
Look at the sectors that have done well. Bank profits in Canada are high, and have stayed high during the pandemic. Financial institutions are supposed to serve as the lifeblood of our economy, getting money to the people and businesses that need them. Platform technology companies are supposed to make our lives cheaper and more convenient.
But if these sectors gain more of the wealth, and exacerbate wealth inequality by in turn benefitting a handful of people and other sectors, the federal government will need to take public policy action. And in this case, a tax, more prescriptions on where lending should go, or redistribution isn’t anti-growth — it will unleash more economic activity, towards more productive, widely shared ends.
There will be screams of unfairness. “I didn’t know I’d lose the tax exemption when I bought the house.” Or “just focus on the pandemic for now — no one wants to talk about this.”
But every day of inaction makes the problem worse. Supporting those with lower incomes is not enough. It’s better to start now with measures that get a grip on the problem — before the public, and the governments that follow them, start to feel even more punitive.