(June 18, 2020) One of the reasons we don’t use as much Canadian data as we’d like at The Charity Report is the absence of … well… Canada data.
But the Parliamentary Budget Office (PBO) provided some water to the Canadian data desert when it released some new estimates of the “top tail” of high net worth families in Canada. The report was created as a result of the wealth tax discussion during the 2019 election.
The highlight of the report is a newly developed jewel of a modeling approach that ultimately produced the High-net-worth Family Database (HFD). And although the PBO report didn’t answer the question of how much a wealth tax could generate, it laid an elegant model in front of us for calculating the foundation upon which that tax might be calculated.
Using the HFD, the Parliamentary Budget Office finds that Canada’s wealthiest families have significantly more net wealth than previously recorded. Net wealth is measured by the amount of money a family would have left over after all liabilities are paid.
And Canadian families hold a lot of wealth. At the end of 2019, Canada’s household sector held 11.7 trillion in total net worth, five times the amount of the country’s GDP.
But the distribution of wealth is heavily weighted toward the wealthiest families, with a small number of families at the top. According to the High-net-worth Family Database, in 2019 the Top 1% of Canadian families shared 25.7% wealth (3 trillion), while the Bottom 40% share 1.1% of the wealth. (132 billion).
The report allowed it isn’t easy to gather data on high-net-worth families and noted that “the high concentration of wealth among a small number of families makes it difficult to reliably measure wealth at the very top of the distribution.” When Statistics Canada conducted a national survey to measure Canadians’ net worth in 2016, no family reported a net worth of more than $27 million. That figure was deemed unlikely by researchers. Creating a more accurate picture was a motivating factor behind this effort.
To improve its estimates, the PBO used four other information-gathering approaches including compiling dossiers on each high-net-worth family (much like the Forbes magazine list and using information from Canadian Business), looking at individual tax returns, reviewing estate tax records, and adjusting family wealth based on previously conducted surveys.
Studies conducted by The Charity Report reveal similar findings as applicable to the philanthropic sector with the Top 250 private foundations holding 42 billion in assets in 2018 while the next 250 foundations held about 1.5 billion in assets. And to sharpen the one percent tip, the Top 20 of those 250 private foundations held 32 billion in assets in 2018. And of those Top 20, 13 are controlled by non-arms-length family members, likely the same families in the newly created High-net-worth Family Database.
“It is one thing to say, “Canada is more unequal now than it was in 1981,” Lars Osberg writes in his 2018 book, The Age of Increasing Inequality, “[but] what reality of economic inequality can Canada expect for the next thirty-five years? If income growth for the middle classes continues to be much slower than income growth for the top 1 per cent, income gaps will inevitability widen over time, with ever-greater implications for political economy and economic wellbeing.”
A real life example presented itself for examination last week when Loblaws, Canada’s largest grocery store chain, decided to end the $2 per hour pay bump given to staff during the pandemic. Grocery store staff have been labelled “heroes” for putting themselves at risk in order to keep the food supply chain secure. The pay increase was seen by some as a move, however small, towards the mitigation of wealth inequality, a recognition of the value of the people who keep our society running smoothly. Maybe a sign of better things to come in a post-pandemic world?
But Loblaw’s Chairman Galen Weston, Jr. put the kibosh on that. Having decided “it is the right time to end the temporary pay premium,” he confirmed the $2 an hour pay bump would be rescinded in a newsletter sent out to customers last week. The letter made no mention of the fact that the grocery chain had made 42 million more profit in the first quarter of 2020 compared to the first quarter of 2019.
Galen Weston, Jr is the son of Galen Weston, Sr., Canada’s third richest man with an estimated fortune of 10 billion. Galen Weston, Jr. runs The W. Garfield Weston Foundation in Canada, which had 296 million in assets and dispersed 29 million in donations in 2018, as well as issued 132 million in tax creditable receipts from 2009 to 2018. But the Canadian philanthropic operation is dwarfed in comparison to The Garfield Weston Foundation (U.K), chaired by Galen Weston Sr. With assets of £9.7 billion in 2017, it is one of the largest charitable foundations in the world.
The question is, for how long can the taxpayer, especially the bottom 40% of people who share in 1.1% of this country’s wealth, afford to subsidize the Weston family, who instead of paying their employees $2 more per hour, line up for charitable tax credits so they can pay less in tax and burnish their images as businessmen/philanthropists, and while doing so, support the causes their own family cares about, whether it is in the interest of Canadians or not, even as tax-credited fortunes continue to balloon underneath them.
And the burning questions of whether we can afford the transfer of public money into private hands and whether philanthropy contributes to wealth inequality, especially in light of the fact those private hands are almost exclusively white, are now at hand.
Will a wealth tax help?
The average wage for a cashier at Loblaws is 13.69 per hour.
Feature Photo: Jason Hafso