Should Canada tax inheritances for the super-wealthy?
Canada is the only country among the world’s top seven economies – the G7 – that does not charge any tax on inherited wealth. But there are calls for that to change, at least for the ultra rich.
The U.S., the U.K., France, Germany, Italy and Japan all take at least 40 per cent of large-sum inheritances, generally pegged at $5 million or more.
Davide Mastracci, opinion associate editor at HuffPost Canada, says taxing inheritances of more than $5 million at 45 per cent would bring in annual revenue of $2 billion in Canada.
If that money was used for social programs, such as universal pharmacare, public dental coverage or national childcare, it could “help to basically work towards eliminating the massive wealthy disparity that there is in Canada,” Mastracci told CTV’s Your Morning Tuesday.
In the U.S. in 2016, an inheritance tax was applied to just 0.2 per cent of the population and it resulted in $18 billion going into government coffers, he said.
“We shouldn’t really see this as a punishment on people with a lot of wealth. It’s actually just a way to get back some of the money they don’t pay throughout their lives, because super-rich people are the ones that are the most able to avoid paying taxes.”
Mastracci says inheritance tax is effective elsewhere and was the practice in Canada until 1972, when it was scrapped in favour of a capital gains tax. But, he says, that has become a big tax break for the rich.
A report on income inequality released in July by the Canadian Centre for Policy Alternatives found "Canada's wealthiest 87 families now have 4,448 times more wealth than the average Canadian family, and they collectively own the same amount as the lowest-earning 12 million Canadians."
Put a different way, those 87 families have amassed $259 billion in wealth, approximately the amount that, combined, all the people of Newfoundland and Labrador, Prince Edward Island and New Brunswick own. The CCPA says more than half of the wealth in the hands of the ultra-rich is inherited and that an inheritance tax should be reinstituted.
But Harvard economics professor Greg Mankiw says taxing inheritances is not the answer. He says scrapping the inheritance tax in the U.S. would be more effective in encouraging investment, creating jobs and growing government revenues. Critics also point out that inheritance tax has done little to combat wealth inequality in the U.S., where the richest one per cent now controls 40 per cent of wealth.