One-time wealth tax could rake in $60 billion, PBO projects

Canada’s budget watchdog estimates $60.7 billion over five years in net revenue could be raised through a one-time wealth tax, as proposed by one Liberal MP earlier this year.

In a new report published Thursday, the parliamentary budget officer analyzed a concept put forward by the Grits’ Nathaniel Erskine-Smith in a February motion.

Erskine-Smith asked the PBO to consider the idea of hitting Canadians who have assets worth more than $10 million with a tax of three per cent, and those with a net wealth of more than $20 million with a levy of five per cent.

The tax would take stock of what each family had in net wealth up to the end of April this year, and would see money doled out to Ottawa over a period of five years. There would be no interest on the payments, which would roll into government coffers in increments of $12.1 billion each year into 2025-26, according to the PBO.

The report comes with a disclaimer that figures are subject to uncertainties that could be caused by “behavioural” reactions of families forced to pay, meaning the “true response” to the imposition of the tax remains unknown.

The office drew on the assumption that the “only” response on tax revenues would be “avoidance and evasion” from families.

Report ‘proof’ that ‘significant’ tax revenue is up for grabs: Singh
This is not the first time the PBO has been tasked with estimating the revenue of a wealth tax.

In its previous reports from last summer, it predicted families would cut down on their reported wealth by 35 per cent if a one per cent annual tax on wealth and future wealth took effect.

NDP MP Peter Julian, whose party has campaigned on bringing in a tax targeted at the “ultra rich,” asked the office to estimate the revenues of such a levy on families whose net wealth sat at above $20 million. The office predicted some 13,800 families would be subject to that tax, with the total net revenue at about $5.6 billion in 2020-21.

The idea of a wealth tax picked up steam in parliament’s last session, with some MPs and experts saying the pandemic has shown the need to strengthen Canada’s social safety net, and pointing to tax measures to finance such ambitions. Such measures could help bolster efforts to pay off the country’s unprecedented deficit levels, which are forecasted to hit $157.4 billion this year after last year’s record-breaking $354.7 billion.

Speaking to reporters yesterday, NDP Leader Jagmeet Singh poured cold water on the possibility of his party supporting Erskine-Smith’s pitch, saying it falls short.

“While I think it’s proof that there is significant revenue available if we tax the ultra rich, I don’t at all believe in a one-time [levy]. It should be ongoing,” he said. Singh used the opportunity to renew his calls for a “pandemic profiteering tax” targeted at companies that have raked in “record profits” throughout the last pandemic year.

Erskine-Smith, who said his goal in requesting the analysis was to “further the conversation” on tax fairness in the country, fired back, noting a 2019 PBO costing forecasted the New Democrats’ proposal would bring in $70 billion over a decade. “The NDP is taking aim at my proposal and asking for less,” he told Parliament Today, adding there is also an “efficiency argument” to administering the one-time levy by the Canada Revenue Agency.

“I don’t know why, at this point, anyone would foreclose options,” he said.

The Canadian Taxpayers Federation decried the measure in a release, chalking up parliamentarians’ “eat-the-rich mentality” to “silly political posturing.” The group said it was worried the feds would “burn through” any extra tax revenue “in about a month.”