The Research Chair in Taxation and Public Finance at the University of Sherbrooke published the study on Thursday Inequalities in Quebec revisited. Put the Gini back in its bottlein which researchers Camille Lajoie and François Delorme demonstrate that income inequalities have increased over recent decades.
The study sheds interesting light, in particular by proposing the use of a percentile analysis to monitor the evolution of income inequalities in Quebec, but the recommendations raise questions. Indeed, the authors argue that to reduce inequality, governments must act at the bottom of the income distribution rather than taxing higher incomes more.
The authors hit the mark by proposing to provide more support to the less fortunate (this is also one of our proposals to sustainably reduce poverty in Quebec). But there is no need to choose between one or the other option. A strategy for sustainably reducing inequality could become more effective by also taking into account individuals at the top of the income distribution.
The work of Canadian economist Kevin Milligan indicates that the ability of the better off to shift their income to reduce their tax bill undermines the gains that could come from an increase in higher tax rates, but at the same time highlights that it remains possible to increase top tax rates in Canada beyond current levels without achieving this result. Indeed, the ability of high-income individuals to avoid additional tax burdens depends largely on tax legislation and the efforts made by governments to enforce this legislation.
We believe that it is entirely possible to increase the tax contribution of the wealthiest by adopting an overall view that takes into account the entire tax base. This approach requires in particular focusing on income derived from capital, such as dividends and capital gains, because these occupy a predominant share of the income of the well-off.
However, inequalities in wealth or heritage do not receive enough attention in the debate on inequalities in Quebec. However, the latter are much more pronounced than income inequalities. Indeed, the net worth of families in the richest 10% was, on average, 76 times higher than that of the poor 40% in Quebec in 2019.
And that’s just the tip of the iceberg! These data, taken from theFinancial Security Survey of Statistics Canada, underestimate the incidence of wealth inequalities due to problems of under-reporting or absence of data from families holding very high wealth. The Quebec Observatory of Inequalities will soon publish a portrait aimed at highlighting these inequalities.
We believe that Quebec has a real choice regarding the measures to put in place and that we will collectively benefit from exploring various solutions in order to sustainably reduce inequalities.