To hear the critics talk, inequality is growing in Canada because of a mean-spirited effort by governments to reduce the tax burden and leaving the most vulnerable to fend for themselves. As I point out in my column for this Saturday’s Ottawa Citizen, this view ignores important facts. First of all, the level of progressivity in Canada is growing, not falling. In other words far from cutting taxes for the wealthy and washing our hands of those on low incomes, if you look at taxes paid and benefits received Canada’s social safety net is highly progressive and increasingly so.
Rising inequality is therefore not an artifact of Canadians failing to shoulder their responsibilities. The issue is that the inequalities created by globalisation, technological change and returns to skills and talent, market generated inequalities are growing even faster. So is the solution even more taxing and raising benefits? No. On the contrary, as the research I cite from Philip Cross and Munir Sheikh clearly shows, we are at the limits of what we can do through high taxes and passive income transfers. The rest of the progress we need must come from improving economic opportunities and incentives and equipping Canadians to benefit from them, both of which are made harder by high taxes and poorly designed transfers.
