South of the border, there’s a lot of attention being paid to the rich, as President Barack Obama and some wealthy Americans like Warren Buffett call on the most affluent to pay a greater share of taxes in that recession-torn nation. Are there enough of “the rich” to help solve our challenges here? And just what does it mean to be rich?
If your income was more than $150,000 in 2008, you earned more than 98% of Canada’s 25 million tax filers. Don’t think that’s rich? Consider this: a whole 54% of Canadians that year had incomes below $30,000.
But let’s look up—way up. There are roughly 17,000 Canadians earning seven figures annually, and according to data collected by McMaster University’s Mike Veall, today’s millionaires are being taxed at the lowest rates since the 1920s.
What difference could Canada’s wealthiest make if asked to help out a little more? Take, for example, Canada’s 100 highest-paid CEOs. The average chief—let’s call him Larry, and say he lives in Ontario—made $6.6 million in 2009, about a third of that from stock options. When realized, stock options are taxed at half the rate that Canadians pay on employment income. If those options were taxed like any other income, Larry would be paying about another $471,000 in taxes, and still have millions left.
Put Larry and his 99 fellow CEOs together, and they could put almost a 10% down payment on a national program to bring dental care to school kids. Canadians spend more than $13 billion on dental care, and cavities are 100% preventable. Talk about putting our money where our mouths are—the savings would be enormous.
But you don’t need to be a millionaire to make a difference. If the 8,000 Canadians who received stock options as part of incomes over $250,000 paid taxes on this money at the same rate as the rest of their income—treating executive compensation the same way you treat the income of any other working stiff—it would have raised $337 million for federal coffers in 2009, a down year for options.
Now take that argument a little further. Canada’s federal personal income tax rate is 29% on all incomes above $129,000. That’s much lower than the current top rate of 35% in the U.S.—a rate that’s likely to rise. A new bracket that taxed incomes over $250,000 at 32%, lower than the 33% rate applied to that income level in the U.S., would raise about $2 billion. That could pay for the federal share of a national child-care program.
Apply that same 3% increase to the 54% of Canadians who make less than $30,000 and you’d get a measly $154 million.
A 35% tax bracket for Canadians whose income is higher than $750,000—the U.S. top rate, except there it’s applied when your income hits $373,650—would yield $1.2 billion. That, for example, could start to address all our aging nationwide wastewater infrastructure.
There are relatively fewer wealthy people in Canada than south of the border, but it doesn’t take that many of them to make a big difference. The question is: Who will step up and be our Warren Buffett?