Savings Taxes
It appears to no longer be a question of whether we’ll see a tax on savings, but simply when and where. Last month, we highlighted the growing danger of a principal residence tax, which far-left UBC academic Paul Kershaw is researching for the federal government’s CMHC.
However, a tax on principal residences is not the only new tax risk we face. British Columbia is a likely candidate to capture the dubious distinction of introducing a first in the nation - a “progressive” tax on your savings.
This would be an added insult, as we currently pay some of the highest marginal income taxes in Canada, putting what little we have left into our savings, like an RRSP. Notably, RRSP’s are already taxed at nearly 55% on death.
What would have been unthinkable (a tax on an individual’s lifetime savings) even months ago is now a very real possibility in the post-pandemic reality. Recently, in California, “progressive” legislators proposed their first in the nation tax on savings.
Here in Canada, a federal savings tax, and possibly an increase in the capital gains exclusion rate, looks increasingly likely in the context of a government desperate for new sources of revenue to prop up universal basic income schemes that are also proven failures in Canada and elsewhere. The federal deficit is now projected to hit $343.2 billion dollars this fiscal year; and, the debt/GDP ratio is rising at an alarming rate. Per capita deficits now exceed those seen during the Second World War.
Closer to home here in British Columbia, deficits are increasing at a rate that even the NDP Finance Minister Carol James has called “staggering”.
Activists like Alex Hemingway and the far left, heavily union-funded, Canadian Center for Policy Alternatives (CCPA), sent an email communication promoting the following savings tax proposal (originating from Europe).
-$20,000 annually on 2M Euros = or $30,000 annually on approximately $3.1M CAD of savings.
-$160,000 annually on 8M Euros = or $248,000 annually on approximately $12.4M CAD of savings.
-$30,000,000 annually on 1B Euros = or $46,500,000 annually on approximately $1.55B CAD of savings.
Other heavily funded “progressive” groups like the Broadbent Institute, founded by an NDP politician, have also lined up behind savings taxes.
Research shows savings taxes don’t work.
The most salient argument against savings taxes is the pragmatic reality that they don’t work. Savings taxes are not only notoriously hard to administer, but have also proven largely ineffective at raising tax revenues - hardly surprising given the mobility of the very wealthy. Thus, this failed experiment has been repealed across Europe.
StepUp firmly believes that most Canadians celebrate success, entrepreneurship, and understand the corrosive nature of targeting those who shoulder a disproportionate share of an expanding tax burden.
Over in New York, in large part as a result of an exodus caused by punitive targeted taxation, Governor Andrew Cuomo is now, “begging New Yorkers to return to the city to save it from economic ruin." Of course, the fact the streets are “filthy and covered with makeshift encampments and hypodermic needles” isn’t helping his case (sound familiar Vancouver and Victoria?).
Policies and harmful taxes which drive away our most successful inevitably result in a greater burden being shouldered by working and middle-class Canadian health care workers, police officers, firefighters, truck drivers, teachers, secretaries, nurses, retail workers, managers, accountants, etc.
Solutions
In a post-Covid world where the winds of change are afoot, there exists both a risk and an opportunity to build a better BC. As the regressive left focuses on taxing private wealth as the cure all for society's problems, pragmatists must seek our practical reforms rooted in rational thought rather than emotion.
We can no longer afford to stand idly by while over half our year is spent funding a giant bureaucratic state that strangles ingenuity and productivity. Meanwhile, the tax bill for the average family continues to grow. What kind of opportunity and social mobility exists in such an environment?
And, of course, it’s intolerable to think that both political parties in BC have spent decades protecting a state monopoly run by politicians. We need competition in auto insurance.
Finally, while it may not be sexy, it’s long past time we restore some economic dynamism in BC by breaking down regulatory barriers, a silent killer that inhibits innovation, private sector growth and our collective prosperity.
Our mild climate plus a stunning ocean and mountain playground are not enough to lure investors here to create new jobs. BC is at a critical inflection point; opportunity and prosperity cannot be taken for granted and are often more tenuous than they appear. High taxes, crippling regulations, and an oversized government bureaucracy threaten to set off a significant flight of people and investment capital from BC.
STEPUP