GOLDBERG: why Trudeau should say no to a wealth tax


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With the federal budget approaching, taxpayers are clinging a little more tightly to their wallets.

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Even though Prime Minister Justin Trudeau declared less than two years ago that “the last thing Canadians need is to see a tax hike,” the government will likely have to win the support of the NDP to push through a budget through a minority Parliament. He might be tempted to give the NDP their much-desired wealth tax in return for helping to keep the government in power.

But giving up a wealth tax would be a huge mistake.

Imagine you are the next Steve Jobs. You’ve come up with a great idea that you think can launch a profitable new business and revolutionize the way we live for the better. Thousands of jobs for other people could be at stake. Will you launch your new business in a country with a wealth tax or relocate to another country with a more hospitable environment?

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The obvious answer is to pack up your good ideas and move on.

Some would-be Robin Hoods make the moral argument that billionaires shouldn’t exist and that wealth taxes will eliminate them. Who needs all that dough?

But in the real world with nearly two hundred countries and tax systems, there will always be billionaires somewhere. Most of them can pick up and move in a snap. The question then becomes practical. If you can’t get rid of billionaires around the world, does it make sense to drive entrepreneurs out of your country?

Today, Canadian governments depend on the wealthy to fund government programs. According to the Fraser Institute, the top 1% of Canadians pay 18% of the country’s income tax, while the top 20% pay 64%. How would we fund the government if some of the wealthiest in the country moved overseas?

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Consider this hypothetical. A wealthy Canadian entrepreneur earning $20 million a year already pays just over $10 million in income taxes. If that entrepreneur left Canada because of uncompetitive tax policies, it would take a thousand taxpayers earning $50,000 a year to cover that bill.

Here’s the counterintuitive reality: Scaring off the rich would mean higher taxes for the rest of us.

Some may say that the wealthy will not be scared off by higher taxes, but the facts show otherwise. France lost 12,000 millionaires in a single year because of wealth tax. For this very reason, France repealed it. The French finance minister at the time, Emmanuel Macron, said that the wealth tax had made France “Cuba without the sun”. Another member of the government aptly observed: “when someone leaves the country because of a wealth tax…collectively, all French people are losers”.

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France was not alone. Faced with the same problems, Austria, Denmark, Finland, Germany, the Netherlands and Sweden have also repealed their wealth taxes.

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Anyone who thinks only the wealthy will be soaked by a wealth tax should pick up a history book. When Canada first introduced income tax, only the top two percent of earners were required to pay it. But the threshold kept being lowered. Now even those earning minimum wage file an income tax form.

This is already the case with the wealth tax proposals. The first version of the NDP would impose a wealth tax on assets over a threshold of $20 million. Now it’s down to $10 million. Where will that threshold go next? Politicians may want to tax the rich today, but tomorrow they will come after your wallet.

A wealth tax is a bad idea, period. Rather than trying to craft a budget built on a house of cards, the Trudeau government should seek to make taxpayers’ money work and forget about the NDP’s dead-end scheme.

Jay Goldberg is Ontario Director at the Canadian Taxpayers Federation

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