This week, Québec solidaire announced that, under its government, a new tax on large estates would be put forward. Unsurprisingly, all the other parties jumped at the chance to form a united front against this proposal. The majority of political columnists have attacked the credibility of the left-wing party. These critics have in common a lack of objectivity towards the subject. It is important to re-establish the facts and take a step back!
In Quebec, the richest 10% capture a share of disposable income (after taxes and government transfers) almost twice as high as the poorest 40%. Wealth inequalities are even greater. It is well known that the gap between the rich and the poor has been widening for more than thirty years. The purchasing power of Canadian salaried workers has stagnated since the 1980s.
We have to face the facts: our tax system has flaws! Obviously, the taxation of the capital gain has failed in equity. Note also that the inclusion rate of this rare form of taxation on Canadian wealth has gradually eroded since 1988. Québec solidaire does not take this measure out of its communist hat, a recent report from the OECD from 2021 holding that “…well-designed inheritance taxes would increase government revenue and improve equity, with fewer efficiency and administrative costs than other taxes”.
The observation is therefore clear: there is a problem with the distribution of wealth in Quebec. The means proposed by Québec solidaire is based on the most recent economic studies and is inspired by measures already applied elsewhere in the world, particularly in Europe. Knowing this, it is difficult to understand the current media consensus which casts doubt on the virtues of inheritance taxation. Remember that 24 out of 37 OECD countries already have some form of inheritance tax.
Even if the objective of a fairer redistribution of wealth does not convince us, it is also well documented that inequalities act as a brake on GDP growth. The political right often prefers arguments related to increased wealth (efficiency) over social justice (equity). A 2015 IMF study empirically demonstrated that income concentration harms economic growth and, conversely, a 1% increase in the incomes of the poorest 20% would increase GDP growth by 0.4%.
Whether on the left or the right, reducing inequalities should therefore be a consensus. It is so easy, especially on economic proposals, to criticize their feasibility or to caricature them, often without foundation. The political class takes advantage of the unpopular nature of any tax measure and the lack of economic knowledge of voters to use the situation for political ends.
Obviously the measure is not perfectly tied up at this point, we are in an election campaign, we are talking about ideas, not formalities! Yes, the little details are important, but if we rejected all the good ideas because they weren’t perfect in the first draft, we would never have nationalized Hydro-Québec.
There is not just one way of thinking about inheritance taxation. That being said, beyond the partisan quarrels, we have to admit that QS is the only party to have the courage to propose fair and necessary measures even if they are unpopular at first sight. Quite the opposite of the petty politics based on populism and polls to which the CAQ has accustomed us for four years.
One thing is certain, ignoring inequality may pay off politically, but it doesn’t get us very far. We probably can’t require all parties to have political courage, it is often lacking, but can we at least show consistency? Because you can’t have butter and butter’s money. We cannot claim to be concerned about inequalities while remaining passive on the question of inheritance.
In the same way that we cannot criticize the state of our public services and offer tax cuts in the same breath. Inheritance tax is not a silver bullet to inequality, but it is certainly a step in the right direction. We have to stop raising scarecrows and elevate the debate… People will surely tell me that I’m a cloud shoveler.