A single tax on “extreme” wealth would generate $60 billion

A single “maximum” wealth tax could bring Canada between $44 billion and $60.7 billion over five years, according to two scenarios assessed by the Parliamentary Budget Officer (PBO).

The idea, put forward by Liberal Representative Nathaniel Erskine Smith, in a proposal he submitted in February, was to “help pay for the pandemic response” to the federal government.

The single tax would work like this: Families with wealth over $10 million would have to pay 3% on assets over that limit. Then the tax rate rises to 5% for the value of assets in excess of $20 million.

The analysis was conducted on the basis of two hypotheses, called “behavioral responses,” based on families’ desire to hide their wealth through tax evasion and evasion schemes.

Initially, families will attempt to reduce the total value of their taxable income by 35%. By doing this, the number of families that would be taxed would be 46,805, against a taxable tax base of $1,008 billion and taxes levied would come to $44 billion.

In the second, these families would use the same schemes, but to reduce their taxable wealth by 15%. This assumption increases the number of families subject to tax from 46,805 to 68,686, and will increase the total amount withdrawn to $60.7 billion.

Since the tax is such a large sum for families, Representative Erskine Smith suggested that the amount owed to the government, even if applied only once, be divided over a five-year period in order not to damage the cash flow of families whose business operations suffer a very sudden shock.

In the report, the amount to be paid will remain the same over a period of five years, but the terms of a possible bill for this purpose are outside the scope of consideration.

The report’s authors stress that it is difficult to know for sure the value of private assets. They say the actual number of households with assets exceeding $10 million can be underestimated.