John Horgan’s NDP government in British Columbia passed its budget Tuesday, projecting balanced books and a surplus for the next three years.
They’re getting out of deficit partly thanks to something that might ring familiar to anyone closely following the U.S. Democratic primaries — a tax on high-income earners.
Horgan’s finance minister introduced a new tax rate for people making the most money in the province, giving B.C. its highest marginal tax rate this century.The new rate is 20.5 per cent , up from 16.8 per cent, for earnings over $220,000.
“Today, we’re asking the people at the top, the highest one per cent of individual income earners, to pay a little more and help B.C. provide families and communities with better services and stronger infrastructure,” said Finance Minister Carole James during the budget announcement.
The government says the increase will only impact around one per cent of earners in the province. It’s projecting a balanced budget on the back of the new wealth tax, with projected surpluses of $227 million in 2020-21, $179 million in 2021-22, and $374 million in 2022-23.
Average folks likely won’t feel the impact — in 2015, the median household income for Metro Vancouver was $72,662, less than a third of what an individual needs to make to be taxed at that rate.
If you’ve been following American politics lately, you’ve likely heard the phrase “wealth tax” shopped around a lot by Democratic candidates, but how similar is what B.C.’s doing to what they’re proposing?
Could Democratic presidential candidates like Bernie Sanders and Elizabeth Warren look at B.C.’s example?
Well, it’s complicated. And it starts with the fact that we’re talking about a vastly different scale of money.
Wealth vs. super wealth
There are a few key differences between B.C.’s tax and the so-called “super wealth taxes” proposed by Sanders and Warren. Namely, the super part of it, and also the wealth part.
B.C.’s tax targets those who make over $220,000, which includes about one per cent of the province’s total population. According to 2016 census data, British Columbians have a median income of around $33,012 a year — putting most way under that bar.
Sanders’ and Warren’s taxes, however, go even higher, specifically targeting the 0.1 per cent. That’s billionaires, like fellow candidate Michael Bloomberg, who has a net worth north of $60 billion.
WATCH: Meet the brains behind Warren’s wealth tax. Story continues below.
University of California Berkeley economists Gabriel Zucman and Emmanuel Saez, who advised Sanders on his plan, project that by hitting the richest 180,000 American households, the tax would raise $4.35 trillion over the next decade. Sanders’ plan is tiered, scaling up to an eight-per-cent tax on married people with wealth over $10 billion.
Same thing goes for super-rich single people, except the wealth threshold is cut in half. In other words, an unmarried person with $16.5 million in wealth would pay the same tax as a married couple with $32.5 million in net worth.
But B.C.’s version is just a scaled down version of this, right? Not quite.
To start, the scale is dramatically smaller. Eight per cent of US$10 billion is a lot more than 20 per cent of earnings over C$220,000, even if there are thousands more people making at least $220,000 than there are $10 billion.
WATCH: Majority of Americans favour some wealth tax on the ‘very rich.’ Story continues below.
The top of the top in a province like B.C. isn’t nearly as extensive as the ultra-wealthy class of the U.S. It also isn’t a wealth tax — it’s an income tax.
Horgan’s government is changing the top income tax rate to impact earners over a certain amount. A true wealth tax actually targets just that — wealth.
Most taxes take a certain percentage of income or add a certain percentage to a purchase. Wealth taxes target net worths and amassed fortunes. So we’re not talking about that $5,000 you have ferreted away for a new car. This is more targeted at something like Facebook CEO Mark Zuckerberg’s net worth of $57 billion. The goal is to stop people from hoarding huge amounts of wealth and instead invest that money in productive things for society.
B.C.’s tax, on the other hand, just scales existing income taxes to target high earners rather than the middle or lower classes.
B.C.’s tax is not nearly as ambitious as what Sanders and Warren propose, but it comes from the same philosophy: the people at the top should pay into programs and infrastructure that benefit everyone. B.C.’s 2020 budget projects 4.4. per cent annual growth in revenue, largely thanks to this tax.
The dream of a “super-wealth” tax
Canada’s federal NDP, however, did propose a super-wealth tax during the last federal election campaign. On the campaign trail, leader Jagmeet Singh pitched a one-per-cent tax on Canadians with fortunes over $20 million, which would have raised upwards of $5.6 billion to finance NDP policies.
“If we put this super-wealth tax in place, we can raise the funds to put in place that medication coverage for all, we can invest in housing to make sure it’s affordable, we can make people the priority,” Singh said in the fall.
Like Sanders’ and Warren’s super wealth taxes, Singh’s would’ve targeted the top 0.1 per cent of earners. And while Canada has some big-ticket earners, they’re a drop in the bucket compared to the super wealth of billionaires in the U.S.
The super-wealth tax hasn’t come up since the start of the new parliament in the fall, with the NDP ranked fourth among the parties in opinion polls.
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