In Canada, income inequality is underestimated, a new study reveals. Even if they are attenuated by the effect of taxes and state aid, we should not simply “marvel” at the virtues of tax policies without questioning the very persistence of inequalities in the first place, argued the famous economist Thomas Piketty during a virtual conference held on Tuesday.
The French economist known worldwide for his work on inequalities participated in the presentation of the study by the Chair in Taxation and Public Finance at the University of Sherbrooke. This study is the first in Canada to use the same calculation approach as the Laboratory on Global Inequalities, which Mr. Piketty directs.
Its name, a little complex: the “distributed national accounts” method – or “DINA”, from its acronym in English. Roughly speaking, it consists of taking into account the taxable income of individuals, but also “undistributed capital income” which is retained in their companies.
Despite this new method, the Chair’s study reiterates some known facts. In Canada and Quebec, income inequality increased significantly between the early 1980s and the mid-2000s, before decreasing slightly — a trend that is also observed elsewhere in the world.
However, the DINA allows researchers to go further than this trend. It allows them to note in particular that “the shares of the highest incomes published by Statistics Canada in the national accounts tend to underestimate income inequalities”.
The tax bandage
The study also highlights the contribution of tax policies to reducing inequalities. Again, nothing new. But it must be emphasized, according to Mr. Piketty, because this fact demonstrates the “political room for maneuver” that exists for the mitigation of these inequalities, he says.
“In the long term, there is a movement towards more socio-economic equality. It’s not as linear as we would like. There are periods of regression, particularly in terms of inequality before taxes and transfers. But when we include transfers, we have a vision that is a little more positive,” he says.
However, it would be wrong to be satisfied with this, in his opinion. “We should not exaggerate optimism,” he said when asked by the audience about an American study from the University of Chicago which calls into question the extent of inequalities in the United States in relation to policies. of transfers.
“People prefer to live from their work. So simply compensating with transfers, especially when it does not completely compensate, particularly in the case of the United States, is not a satisfactory situation and one that is tenable in the long term,” argued Mr. Piketty. .
Whether in the United States, Canada or elsewhere, “we must question rather than marvel at this effect of transfers,” believes the economist. In particular, wondering why the share of pre-tax national income of the poorest 50% has declined since the 1980s.
“This raises questions about the decline of the role of unions and, more generally, the participation of employees in the economic choices that are made in companies, in the formation of salaries, in salary negotiations,” argues Thomas Piketty.