This Quebec party wants a wealth tax, and all of Canada should get on board

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With less than three weeks before Quebecers go to the polls, the campaigns of the province’s political parties are in full swing, each unveiling their platforms to lure voters. Quebec Solidaire (QS), a left-wing party which until dissolution held 10 seats out of 125 in Quebec’s National Assembly, is proposing a new wealth tax.

If elected to form the next government, QS — known for promoting awareness to issues such as feminism, climate change, Indigenous rights, and social justice as well as a sovereign Quebec — said it will introduce the new tax on individuals with net assets worth a million dollars or more.

According to the proposed plan, net assets between $1 million and $10 million would be taxed at 0.1 per cent a year. Hence, someone with an overall net wealth of $1.5 million will pay $500 annually; and those who are fortunate to be worth $4 million, will get an annual bill of $3,000.

The wealth tax will be progressive: assets between $10 million and $99 million would be taxed at one per cent annually, and the ultra-rich — those who possess $100 million or more — would be taxed at 1.5 per cent.

QS said it also wishes to introduce a 35 per cent tax on inheritances of $1 million or more. This tax directly addresses intergenerational wealth transfer as it collects funds from the wealthy and redistributes them across all members of society. Put differently, it aims to give equal starting points to everyone.

In making the case for introducing an inheritance tax, Gabriel Nadeau-Dubois, the party’s co-spokesperson and candidate for premier, said during a press conference in Gatineau last week that inheritance taxes are quite popular and exist in 24 out 37 OECD countries; hence, we should learn from the international experience.

Nadeau-Dubois says that the new taxes will affect only the richest five per cent Quebecers and will jointly raise $2.65 billion annually for the province. To put it in context, Quebec’s revenues in this past year’s budget stood at about $130 billion.

For years, poll after poll (for example, a 2021 Abacus Data poll) has shown Canadians strongly support a wealth tax but somehow it has never been implemented. In 2020, during the Liberal government’s throne speech, then-governor-general Julie Payette said that the government will “identify additional ways to tax extreme wealth inequality.”

Two years have passed, and nothing has been done.

The NDP also pitched a wealth tax as part of its 2021 federal election platform, so it was most disappointing in March when the NDP signed an agreement that would keep the Liberals in power until 2025 and leader Jagmeet Singh didn’t take the opportunity to insist on introducing it. He chose to use the party’s bargaining power on a national dental care program (important by itself) instead.

QS’ political adversaries attacked the wealth-tax idea soon after it was announced. This is to be expected in the midst of an election campaign, but the arguments against it were superficial.

For example, Premier François Legault’s argued that Quebecers are already stretched to the limit, and with interest rates rising, it’s not the time for any new taxes. This doesn’t make any sense since the new tax will affect only the richest five per cent. Clearly, those who are sitting on fortunes in the order of millions are not “stretched to the limit,” and if they are, they’ve accumulated enough wealth to be able to afford small changes to their lifestyle to pay what would be for them a negligible new tax bill.

Parti Quebecois Leader Paul St-Pierre Plamondon recycled an old “counterproductive” argument, and said that the new tax “will cause more problems than it will solve,” meaning that it will encourage people to leave the country or to move investments away.

Similar arguments are often used by opponents. For example, Jay Goldberg, a director at the Canadian Taxpayers Federation, argued in an opinion piece in the Financial Post in May that “many other countries have tried and then abandoned wealth taxes, mainly because they cause the ultra-wealthy to leave the country, taking their investments and businesses with them and leaving regular people with fewer jobs and a higher tax load.”

However, neither Switzerland and Norway, two countries with very high standards of living, like Canada, have seen an exodus of wealth out of their countries, contradicting that argument.

To be fair, France did have an unsuccessful experience with wealth tax, and eventually decided to abolish it in 2017. But in contrast to continental Europe, in terms of physical proximity, Canadians really have only one option — the U.S. — for relocation, and those who are really eager to avoid higher taxes would probably have left a long time ago.

And let’s not dismiss Canada’s appeal. It is consistently ranked as one of the most desirable places to live. We shouldn’t forget that a big part of what made Canada such a great place is its social safety net, its high-quality public services, and overall egalitarian spirit. Wealth and inheritance taxes will help us keep it that way.

Sure, those taxes are somewhat difficult to enforce but with record levels of government spending since the beginning of the pandemic, growing inequality, and an urgent need to fight climate change, there is no better time to introduce them.

Quebec Solidaire gets it right. Let’s hope that the federal Liberals will follow.

Amir Barnea is an associate professor of finance at HEC Montréal and a freelance contributing columnist for the Star. Follow him on Twitter: @abarnea1

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