April 30, 2012 – In the Toronto Star today, Business Reporter Dana Flavelle discusses MLI’s recent report on income inequality. According to author Jason Clemens, director of research at the Macdonald-Laurier Institute, the “causes of income inequality in Canada are more complex than they first appear and so are the solutions.” Clemens says, “Transferring the wealth through higher taxes won’t get at the underlying reasons some people can’t get ahead, such as lack of education and subsidized day care.” The full column is below:
By Dana Flavelle, Toronto Star, April 30, 2012
The rich pay more than their fair share of taxes and hitting them harder won’t solve all the problems of the poor, an Ottawa-based think tank says.
The causes of income inequality in Canada are more complex than they first appear and so are the solutions, a report by the Macdonald-Laurier Institute concludes.
“We don’t solve income inequality by just taxing higher income earners and transferring it to lower income earners. To me that’s just a Band-Aid,” said Jason Clemens, author of Income Inequality: Oversimplifying a Complicated Issue.
The report comes amid growing public concern about the widening gap between rich and the poor, a sentiment tapped into by the Occupy Wall Street movement last year.
But just transferring the wealth through higher taxes won’t get at the underlying reasons some people can’t get ahead, such as lack of education and subsidized day care, Clemens says.
In fact, the wealthy are already paying more than their fair share, the report argues.
The top 20 per cent of Canadians received 46.8 per cent of total income but paid 54.4 per cent of the total tax bill last year, the report says.
And in the U.S., the figure is even higher, the report said. The top fifth of Americans earned 54.6 per cent of income but carried 69.7 per cent of the total tax burden, the report notes.
The report, which Clemens says will likely “upset people on both sides” of the political spectrum, also challenges the myth that anyone can get ahead if they just work hard enough or come up with a good business idea.
Some businesses enjoy favourable treatment either because the government has granted them a domestic monopoly or used tariffs to minimize foreign competition.
While Canadians enjoy a fairly high degree of social and economic mobility, between 2 and 6 per cent of Canadians are permanently mired in poverty, the report says. The “worst case” scenario is a single parent who’s a high-school dropout. Without adequate education or day care, they can’t get ahead. Clemens said.
“We know right now that we have a real shortage of skilled workers. To fill those positions you need to go to college. But how do you get people to go?” Clemens asks. “Most industrialized countries have this ethos that if you don’t go to university you’re a failure. Do you know what carpenters make? What plumbers make? There’s almost zero chance those skills are going to be replaced by technology.”
The income gap between rich and poor in Canada is widening, but not as much as some reports suggest, the think tank argues.
Comparing the highest and lowest levels of consumption, rather than income, shows that some people are spending more money than they’re reporting to the tax man, the report says. Canada’s “underground economy” is thought to represent 15.7 per cent of all goods and services produced, according to 2007 Statistics Canada data.
The aim of the non-partisan think tank, whose name is derived from two former prime ministers, one a conservative, the other a liberal, is to “look outside the box” and try to inject some “facts’ into the public policy debate, Clemens said.