The introduction of the higher capital gains taxes on June 25 reminds us there is still much to be done to tackle economic inequality in Canada.
The tax increase is targeted at those who have capital gains over $250,000 in a year, about 0.13 per cent of the population. It’s a symbolic step for addressing fairness in the current tax system.
But to truly address wealth inequality to promote health equity, we need a set of tools that would include taxing a greater proportion of wealth at the top and policies that redistribute wealth within the population.
We know very little about wealth inequality in Canada compared to other countries like the U.S. Data is collected irregularly, there are gaps in the data that is collected and the wealthiest families are not represented in national surveys. That being said, the data we do have shows us a very small group of people possess most of the wealth.
International research shows inequality is associated with overall poorer population health and negative social consequences. The negative impacts of the uneven distribution of wealth, which accumulate over time, may be even greater than the effects of income inequality. Research indicates possessing wealth provides health benefits right into old age, particularly lowering the risk of death and cardiovascular disease.
Wealth enables access to the social determinants of health, including safe housing, opportunities for post-secondary education and decent work. As the COVID-19 pandemic demonstrated, in times of health crises, the wealthy can also, for example, stay home from work or take private transportation to avoid risks.
When the wealthy have greater control of resources than most of the population, they are positioned to shape political structures, including tax systems and laws that further benefit them. This often leads to decisions that are not necessarily best for everyone. We observed an element this recently with the public backlash to the capital gains tax increase, which actually impacts less than one per cent of people.
By contrast, some groups, such as Indigenous and Black populations, have been historically marginalized and prevented from accumulating wealth due to discriminatory policies that excluded them from work, housing and other systems. Data from other countries, such as the U.K. and the U.S., show significant racial divides in the possession of wealth, differences which are much greater than those based on income. More data is needed in Canada to better understand the extent and distribution of wealth inequality. Better data is the staring point for developing the best set of tools for addressing longstanding inequities by redirecting wealth to those who lack access to opportunity and the social determinants of health.
Internationally, work is being done to identify ways to more effectively tax wealthy individuals. The U.K. Wealth Tax Commission has evaluated wealth taxes in different contexts and shown that even a modest taxation of wealth could generate considerable revenue for public benefit. Others in Canada have proposed similar taxation options for funding much needed social infrastructure. Of note, Canada is the only G7 country that does not have an inheritance tax.
Increased revenue through taxation would support the building of better social infrastructure which could address wealth inequality. Affordable housing and better income security programs, for example, are important steps toward tackling health inequity. These policies should also include supporting the development of community wealth that mobilizes local resources to promote collective ownership models and community control over finances.
While the federal government is right to think we need to tackle wealth inequality, much more needs to be done. We need a commitment to forward-thinking policies that redistribute wealth and income to create a fairer, healthier society.