The old normal
Since long before the COVID-19 pandemic hit, our policies failed to tackle the root causes of health inequalities by not addressing the economic polarization and control of wealth by the very rich in Canada. There has been a clear upward trend in wealth inequality since the mid-1980s, and since the 1990s, taxes relative to income have generally declined. In June, a report from the Parliamentary Budget Officer, showed that the top one per cent of the population controls 25.6 per cent of the overall wealth.
Despite this, Canada’s tax policies are regressive. We lag behind other Organisation for Economic Co-operation and Development (OECD) countries in the rates of tax levelled at those in high income brackets. Canada lacks an inheritance tax, meaning estates can be passed on to heirs with minimal tax liability, and there is special tax treatment for money earned from previously accumulated wealth. Federal tax policies are paralleled at the provincial and local levels in Ontario and Toronto. Provincially, Ontario has one of the lowest tax rates in the country (and is also among the lowest spenders on health among the provinces) and Toronto has the lowest property taxes of all the cities in the province.
Where tax policies disproportionately benefit high income groups in this country, there are promising signs of increasing public and political support for the redesign of these policies in the interest of fairness. In a 2019 OECD survey, results showed that approximately 70 per cent of Canadians felt that the rich should be taxed more, the wealth tax has become part of some political platforms in Canada, and was introduced, and voted down, as a motion in the House of Commons in November 2020.
Research on the social determinants of health has long focused on the relationship between income and health. Studies demonstrate that within countries in the Global North, income inequality is one of the most important determinants of health status, and impacts health at the population level, with people being healthier where there is more equal income distribution.
The pandemic impact
While awareness of the negative health impacts of economic polarization was increasing prior to COVID-19, the pandemic has highlighted and exacerbated economic inequities between social groups in Canada based on income and employment, intersecting with other factors such as racialization and gender.
Although it has prompted limited action to date, there have been multiple reports detailing how certain groups have fared poorly throughout the first and second waves of COVID-19. Low-income earners have been negatively impacted through job loss and reduced hours in many sectors. Increasingly, studies show that low-income earners, workers in precarious employment, and racialized groups have also experienced significantly higher COVID-19 infection rates compared to the rest of the population. As of November 2020, 79 per cent of reported COVID-19 cases in Toronto identified with a racialized group, while only 52 per cent of the overall population identify as belonging to a racialized group based on 2016 data.
In contrast, we have heard little about the experiences of the rich beyond depictions of the pandemic as a struggle for everyone. One exception was a report released in September by the Canadian Centre for Policy Alternatives which found that Canada’s 20 richest billionaires had amassed $37 billion in wealth since the beginning of the pandemic in March. It is important to acknowledge that the experiences of those who are struggling, before and during the pandemic, are relative to the accumulation of wealth by the rich. The issue is not simply that some groups have lower income levels and experiences of economic deprivation, but that these social positions are interconnected with the extreme fortune of a much smaller group of people within our society. By framing the problem in this way, we also acknowledge that solutions are needed that focus on increasing the income levels or resources of individuals at the bottom, as well as the redistribution of the wealth accumulated at the top.
The stark difference in experiences of disease based on economic inequity and systemic and structural racism should instill urgency, despite knowledge that considerable inequities pre-existed the pandemic. The fact that a miniscule portion of our society has accumulated excessive wealth over seven months, while so many others struggle to make ends meet and prevent infection, is a social dilemma that demands action.
A new normal for economic inequality in Canada: A wealth tax for COVID-19 recovery
In this context, there is also a growing realization that the economic impacts of the pandemic will be long-lasting, with frequent comparisons to the Great Depression of the 1930s and continued uncertainty with respect to what the future holds. To endure these conditions, the need for investment into necessary social programs – housing, income security, childcare, education, and pharmacare – is clear. Tax revenue is needed to fund the social infrastructure required to offset economic precarity caused by the pandemic.
The long-term effects of the pandemic on the health and well-being of people living in Canada are still unknown with respect to the burden of disease, but also in terms of the mental health impacts and outcomes due to social and economic circumstances. This uncertainty is accompanied by ongoing coverage of growing deficits due to a loss of tax revenue and increased expenses related to mitigating the effects of the pandemic. Under these circumstances, there is a moral imperative to better address redistribution of resources in Canada so that the enduring impacts of COVID-19 do not fall solely on those who have already experienced disproportionate burden.
In this light, a wealth tax on the very rich is an important practical and symbolic step forward in our response to COVID-19. If considered as a part of a broader set of programs and policies aimed at resource redistribution – such as broader tax reform to increase fairness, universal social programs, and policies that target safe and equitable work environments – then a wealth tax could significantly reduce health and social inequities within Canada. It has been estimated that a modest one per cent tax on the wealthiest 13, 800 Canadian economic families with net wealth above $20 million (well below one per cent of the population), would generate $5.6 billion of revenue for investment into social programs. It’s also important note that large fortunes grow at rates much faster than one percent.
While this revenue would not solve all of our problems, it is an important start that would also represent an acknowledgment that government has a responsibility to listen to the public and create the conditions needed for all people to maintain good health and well-being.
What it would mean
Taxation is a widely accepted mechanism for addressing income inequality. In Canada, from 1975 to 1995 tax policy was an important method for remediating inequalities caused by the market.
Thus, while inequality in market income levels increased over a 20-year period, taxes and transfers were successful in maintaining a relatively stable Gini coefficient – an indicator commonly used to measure income inequality within nations and states. However, since 1995 this inequality has increased due to changes in taxation policy.
Income inequality, referring to the unequal distribution of income across the population, has been shown to undermine population health, through outcomes such as heart failure, excess mortality and life expectancy at national and sub-national levels. The nature of the relationship between income inequality and the health of the population has been debated methodologically and theoretically in terms of underlying pathways. For example, some perspectives understand income inequality to reflect lower levels of trust and social cohesion which in turn impacts societal health. Others indicate that income inequality reflects a concentration of power among the wealthy which weakens a commitment to social and material conditions (e.g., taxes and investment in public resources) that benefit the interests and health of society as a whole. Irrespective of these distinctions, the findings indicate that redistribution policies which decrease income gaps would improve the health of populations.
Health inequities based on conditions of social inequality are well-established and are increasing in Canada. We also know that in order to effectively address these inequities, we need to reposition our attention toward structural solutions to inequality. Interventions that focus narrowly on health outcomes (e.g., higher rates of chronic diseases) frequently focus on the experiences of low-income people and frame differences in behavioural and individualistic terms. Instead, there is a need to address the underlying causes of these outcomes through changes to social and economic policy that directly address the concentration of wealth.
Taxation, redistribution, and labour market policies aim to redistribute income and wealth, reduce inequities, and generate revenue for social programs and infrastructure. The introduction of a wealth tax should be one step, among many, toward reducing health inequities through broader responses that target economic redistribution, and fair employment and living conditions.
How we get there
As with any change, certain questions require answers to be able to move forward on this issue. Decisions about what level of wealth a tax should be levied, the percentage of tax that should be administered, and exactly how it is redistributed need to be considered. Concerns around the administration and enforcement of the program will also need to be addressed, within broader progress around fair taxation and enforcing tax compliance in Canada. Other arguments about risk of economic loss due to the potential out-migration of wealth may stir fear around implementing change, but there are arguments and studies indicating this is unlikely due to personal and other attachments of the rich to the country.
There are already signs of increasing acceptance of change in the country – provincially, a majority government that introduced higher tax rates for the very rich was elected in British Columbia in 2020. Other countries, such as the UK, are also exploring how a tax on the wealthy might be a useful strategy to offset costs of the pandemic. As part of a broader dialogue about the health of our society, progressive redistribution policies and social programs are crucial for achieving equity in the COVID-19 recovery process.
Let’s start now.