Wealth in Canada is concentrating at the top, with the wealthiest families controlling vast fortunes. The chasm between those fortunes and the net worth of average Canadians has grown substantially over the past four years. In part this is due to the growing importance of inheritance at the top: in 2016, over half of the 87 wealthiest families were born into that wealth. But wealth concentration is also a product of power and influence, with a disproportionate number of wealthy families having members among the highest-paid CEOs in Canada. As executive compensation rises, so too does disposable income, which can be further invested. Great wealth begets even greater wealth, and extreme levels of inequality.
The Canadian tax system facilitates the perpetuation of intergenerational wealth transfers. It does so by taxing capital gains and certain dividend income at lower rates than employment income. Income from wealth generally comes in the form of dividends and capital gains, meaning that the wealthiest families pay taxes at much lower rates than had that income come from employment. Canada is also the only country in the G7 without an inheritance, estate or gift tax on tremendous family wealth. Instituting an estate tax and eliminating the preferences for capital gains and dividend income could go a long way to curbing the tendency of Canada’s tax system to heighten socially, politically and economically harmful levels of wealth concentration in Canada.