Mind The Gap
Mar 31, 2008
A recently released study by the Organisation for Economic Co-operation and Development (OECD) questions the Canadian government’s strategy of tax cutting and provides further evidence that the income gap between wealthy and average Canadians continues to grow.
The study, entitled Taxing Wages 2007, looks at changes in the tax burden on wages in its 30 member countries. Of these, 13 raised taxes while 15 lowered them between 2000 and 2006.
Along with the United States and Australia, Canada was one of those 15 countries that pursued tax reduction policies during this period.
In most OECD countries, tax-burden changes have tended to favour lower income earners. But Canada is now one of the countries bucking that trend by introducing the type of tax cuts that worsen income inequality. Canadians earning up to twice the average wage are now getting more of the benefits of tax reductions than those making half of the average wage. Thus the income gap continues to widen.
We have to realize that about 31 percent of Canadians don’t get any benefit from tax cuts at all, since their incomes are too low to be taxable. These Canadians would obviously benefit much more from governments that choose to invest in public services like childcare, housing, education or public transit than tax cuts.
And to make matters worse, the OECD report also commented on the fact that Canadian employers’ social security contributions are “far below” the average for industrialized countries.
The OECD report shows that some European countries, including France, Belgium, Hungary, Italy, the Netherlands and Portugal have introduced targeted tax cuts over the last decade that have provided the most tax relief to employees whose wages were less than two thirds of the national average. If the Canadian government must cut taxes, one would at least hope that they would do it in a more equitable manner such as this.
This is just the latest in a series of studies that have shown that the tax cuts that the federal government is pursuing are just serving to further divide the haves from the have-nots. But this is also about more than just cutting taxes – it’s part of a bigger process whereby Canadians are increasingly left to fend for themselves as our social safety net continues to unravel.
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