The Overwhelming Case for a Wealth Tax

Under threat from a volatile United States, Canada needs to chart its own path to a more self-reliant, just and equitable economy.

We can’t afford austerity or cuts. Or to let the super-rich call the shots on economic and social policy.

Canada urgently needs robust public investment in our physical and social infrastructure: new homes, schools, hospitals, transit and green energy. We also need to reduce the extreme concentration of wealth at the top, which distorts democracy and frays our social fabric, much as it has in the United States.

A wealth tax focused on those at the very top — less than one per cent of Canadians — could help achieve both these goals.

It could raise huge amounts of revenue to put towards building infrastructure and critical social investments, while blunting the growing power of the wealthiest few and creating a more level playing field on which working-class Canadians can thrive.

The corrosive effect of extreme inequality

Wealth inequality in Canada is sky high.

Analysis from the Parliamentary Budget Office, or PBO, shows the richest one per cent control 24 per cent of the country’s wealth, amounting to $3.5 trillion in 2021.

Research published by the Canadian Centre for Policy Alternatives in 2018 found that the 87 richest families in Canada held as much wealth as the bottom 12 million Canadians combined. The 2025 Forbes Real-Time Billionaires list finds that 78 Canadian billionaires hold $520 billion in wealth.

Canada is not alone in experiencing extreme wealth concentration. In the United States wealth inequality is even higher, with the top one per cent holding approximately 35 per cent of total wealth. At a global level, a recent Oxfam report estimates the richest one per cent now “own more wealth than 95 per cent of humanity.”

This extreme inequality is corrosive, damaging economies, societies and democracy.

A wide range of research, including from economists at conservative institutions like the International Monetary Fund and the Organization for Economic Co-operation and Development, or OECD, finds that inequality lowers economic growth and productivity.

Inequality can lead to less investment in areas like education, meaning poorer folks are unable to flourish and realize their productive potential. As one report puts it, “When those at the bottom of the income distribution are at high risk of not living up to their potential, the economy pays a price.”

Inequality can also reduce economic growth by making it more volatile and less enduring and by lowering aggregate demand, since poorer households are more likely than richer ones to spend most of their income.

In turn, failing to tax the rich means governments are forgoing revenue that could be put towards badly needed, highly productive public investments in infrastructure, housing and child care.

Investment in infrastructure like public transit boosts growth, productivity and incomes. Investment in affordable housing, which eases housing shortages and contributes to lower rents, is good not only for renters but also for businesses that struggle to recruit workers who can’t find affordable homes close to work. The benefits of universal public child care to women’s labour force participation are widely recognized.

Evidence from across rich societies also shows that higher inequality worsens a wide range of health and social outcomes, including life expectancy, infant mortality, rates of mental illness and social trust. The effects of high inequality on health appear to extend even to the affluent within a country, such that “living in a more equal place benefit[s] everybody, not just the poor.”

Extreme inequality is also corrosive to democracy, with a growing body of political science research showing that income and wealth concentration has a distorting influence on politics and policy outcomes.

Despite all this, the federal and many provincial governments are signalling their intention to squeeze social spending in the face of deficits, which would be devastating to our society and economy.

If we’re going to repair the social fabric and take on U.S. threats of tariffs and annexation, we need a strong public sector that allows us to invest together in Canada. A wealth tax could provide the revenue for badly needed public investments that are called for in this moment.

Public support and global momentum

A striking fact about a wealth tax is that 80 per cent to 90 per cent of Canadians across party lines back the idea in public opinion polling. Even many socially minded wealthy Canadians are on board, with groups such as Patriotic Millionaires and Resource Movement advocating for higher taxes on the wealthy — that is, themselves.

The same is true internationally, with polling showing strong global public support for taxing the rich across a wide range of countries, including in polling of millionaires in G20 countries.

Brazil, Germany, Spain and South Africa have been at the forefront of the push for a wealth tax within the G20, with their finance ministers signing a joint statement of support last year.

While there is momentum, there are holdouts such as the United States — despite strong public support in polling.

The good news is that individual countries can take effective action both unilaterally and as part of an emerging coalition of the willing. Canada should join the effort to push the wealth tax agenda forward and help lead that coalition of the willing by implementing a robust, modern wealth tax.

What a Canadian wealth tax could look like

Consider an annual tax on the net wealth of families with rates of one per cent above $10 million, two per cent above $50 million and three per cent above $100 million.

This means the first $10 million of any family’s wealth is entirely unaffected by the wealth tax. Based on modelling of the first year of this wealth tax, the bottom 99.4 per cent of Canadians would pay nothing, while only the richest 0.6 per cent would pay any amount. This means that only about 100,000 families across the country would pay any amount under the wealth tax, with 10,000 wealthy enough to fall into the second-highest bracket and 3,700 in the highest bracket.

This narrow tax on the wealthiest few would raise an estimated $39 billion in its first year, $62 billion by its 10th year and $495 billion cumulatively over a 10-year window. These are net revenue estimates after deducting a generous $795 million in the first year (and rising) for enforcement, while accounting for levels of tax avoidance and evasion at the high end of estimates from recent economic research on wealth taxes.

Revenue estimates use the Parliamentary Budget Office’s High-Net-Worth Family Database model of wealth distribution, along with Statistics Canada and PBO data to project for future years.

Notably, these tax rates would be expected to only slow the accumulation of the fortunes of the super-rich, rather than erode them. But given the threat that extreme concentrations of wealth pose to our democracy and economy, additional brackets and higher rates — capable of putting a lasting dent in those fortunes — should also be considered.

Answering challenges to a wealth tax

A key question that arises when considering a wealth tax is whether it can be effectively enforced. Corporations and the wealthy have proved adept at avoiding and evading their tax obligations in recent decades. But leading experts on tax havens emphasize that this is “not a law of nature but results from policy choices” — and better policy choices can be made if there is political will.

The growing body of economic research on wealth taxes finds that they can be effective and enforceable if they are well designed. Unlike some older experiments with wealth taxes, modern wealth tax proposals have a few key and well-understood design features that minimize avoidance and evasion.

First, a well-designed wealth tax must apply to all types of assets equally (rather than exempting certain types of assets such as real estate, which would make tax avoidance by shifting between asset classes easy and likely).

Second, a wealth tax should be narrowly targeted on the super-rich. This ensures that enforcement efforts and resources can be focused on the richest few.

Third, an effective wealth tax must make use of extensive third-party reporting of assets, particularly from financial institutions, rather than relying too heavily on self-reporting as in the case of some older wealth taxes.

Fortunately, the key infrastructure for third-party reporting is already in place because financial institutions must already report to the Canada Revenue Agency about their account holders’ incomes, including capital gains income generated from assets. Employers, businesses and other institutions similarly have obligations to report key information to the CRA. The recent expansion of beneficial ownership registries at the federal and provincial levels will also help track asset ownership.

Third-party reporting should be complemented by the credible threat to the super-rich of a lifestyle audit by the CRA. Those found to be engaging in tax evasion, as well as financial services providers that facilitate that evasion, should be subject to significant penalties. My modelling of wealth tax revenues already deducts a generous $10 billion over 10 years for use in enforcement and administration.

Will the wealthy flee Canada?

One concern is that a wealth tax might lead to people shifting investments abroad, but the design of the tax avoids this concern. For Canadian residents, the tax applies to their total net worth above the threshold, regardless of where those assets are invested, so shifting investment abroad offers no tax advantage.

For foreign investors, incentives to invest in Canada remain unchanged (though the incentive of the very wealthy to move to Canada would be affected).

What about illegal attempts to hide assets abroad specifically to evade the tax? Fortunately, international tax co-operation and information sharing have taken major strides in recent years.

Under the Common Reporting Standard developed by the OECD and enacted in 2017, “more than 100 countries have agreed to automatically exchange financial account information,” including jurisdictions long recognized as tax havens such as Switzerland, Luxembourg, the Cayman Islands and Bermuda.

And it’s working. The “Global Tax Evasion Report 2024” finds that “offshore tax evasion has declined by a factor of about three in less than 10 years.” The Common Reporting Standard continues to improve each year, and though the United States remains outside this system (while having its own reporting requirements), the ability to track offshore assets has become significantly stronger.

Another concern is that the wealthy may move abroad in response to a wealth tax. Even if some do, that does not mean they can avoid the wealth tax. To reduce the incentive, either a substantial exit tax can be imposed or annual wealth tax obligations can continue to be applied after expatriation for a set number of years. This would be a fair recognition of the broader society’s contribution to creating and enabling these fortunes.

Research suggests that this type of flight of the super-rich is less common than one might expect and modest in its economic effects. After all, a household’s ties to a country are driven by many factors other than tax policy, such as family, social ties and even patriotism.

As for those among the extremely wealthy who remain intensely resistant to chipping in to build a stronger and more just society, we might be better off if they choose to leave. We can focus instead on unleashing the talents and productive potential of Canadians who care about building the country.

If there is progress among a coalition of the willing of the G20 countries towards creating an internationally co-ordinated wealth tax, the prospects for effective enforcement will be even stronger.

Last year G20 finance ministers pledged to “engage co-operatively to ensure that ultra-high-net-worth individuals are effectively taxed,” and there is a push to make further progress this year. The progress to date in reducing tax evasion through the Common Reporting Standard shows that international co-operation is not only possible but can yield results quite rapidly.

Nevertheless, to add a layer of conservatism to my revenue estimates, I reduce the wealth tax base by 16 per cent to account for any behavioural responses to the introduction of the tax, including avoidance and evasion. This behavioural response factor is on the high end of the estimates in the economic literature.

Taxing the super-rich and a stronger Canada

A wealth tax on the super-rich would be a strong step towards reinvesting in Canada. It could both raise funds to help reverse decades of underinvestment in our physical and social infrastructure and begin to tackle the extreme concentration of wealth that’s fraying our social fabric and distorting our democracy.

At nearly half a trillion dollars over 10 years, the revenue from a wealth tax alone could fund a suite of transformative national projects, including:

• capital grants to enable 100,000 new non-market homes per year;
• major new investments in public transit infrastructure and operations;
• a multibillion-dollar expansion of public child-care spaces;
• universal public pharmacare; and
• large income transfers to reduce poverty and prevent homelessness.

These types of investments would not only help create a stronger society where far more Canadians have a decent, secure life, but also have significant long-term benefits for growth and productivity.

Of course, a wealth tax is not a panacea.

To reduce inequality and create a fairer tax system, more policy action is needed to make large corporations pay their share, as well as to end the preferential treatment of capital gains income, which is taxed at half the rate of the wages and salaries earned by most Canadians.

A wealth tax can help Canada set its own course distinct from the colossus to the south.

It provides the opportunity to ensure that working-class people who create this country’s wealth actually share in it. Given its popularity across party lines, a wealth tax also has the potential to bring the vast majority of Canadians together at a time when our society is at risk of falling into the type of deep polarization that exists in the United States.

If instead we go down the road of austerity and underinvestment in the public good — and there are worrying signs of this from federal and provincial governments — we will diminish ourselves and weaken our capacity to withstand U.S. threats.

Canada is not facing a bare cupboard. We possess the resources and the choice to collectively invest in this country’s future. We also have the chance to be a leader to create a modern, best-in-class wealth tax and to build the growing international coalition of the willing to tax the ultra-rich. We should seize the chance.