The gap between rich and poor is widening in Canada: OECD

The income disparity between wealthy Canadians and the rest of the country has grown significantly, the Organisation for Economic Co-operation and Development (OECD) announced April ...

The income disparity between wealthy Canadians and the rest of the country has grown significantly, the Organisation for Economic Co-operation and Development (OECD) announced April 30.

Between 1981 and 2012, the top 1% of the population captured about 37% of all overall growth in pre-tax incomes over the period. This is second only to the United States, with 47%.

"This explains why the majority of the population cannot reconcile the aggregate income growth figures with the performance of their incomes," the OECD study said.

The study found that growth among the top 1% has increased in most OECD economies since 1981, especially in English-speaking countries including Ireland, Australia and the United Kingdom.

The study also noted that top earners among the OECD countries are more likely than others to see an impact when there are changes in the business cycle. Real incomes of the top 1% dropped in the first two years of the recent Great Recession, with dips of 3% in 2008 and 6.6% in 2009. However, incomes of these earners went up 4% in 2010 while others saw no growth.

"Financial crises seem to have no clear-cut permanent effect on top incomes," said the study.

The study said that raising marginal tax rates will ensure that top earners pay a higher share of taxes. There are several options, including:

  • scaling back those tax deductions, credits and exemptions that disproportionately benefit higher-income earners;
  • taxing stock options and carried interest arrangements as regular income;
  • implementing inheritance taxes; and
  • broadening the income tax base to reduce avoidance opportunities.

ecrawford@biv.com

@EmmaHampelBIV

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