by Terrance Hunsley
The things that affect the well-being of society and the things that affect the distribution of money in society don’t resemble each other very much. People didn’t always believe that. In the 1980’s, Ronald Reagan and Margaret Thatcher espoused a belief in trickle-down economics – the idea that the more money the wealthy made, the more that would trickle through the economy to the masses. That was proven to be nonsense, as the rich put their wealth away into tax havens. John Kenneth Galbraith likened the trickle down theory as giving lots of oats to a horse, so that the sparrows can fight for what trickles out the other end.
The pandemic is a good lesson in point. “We are all in this together” we are told. Our economy took a hit. We lost something like five percent of GDP in 2020. About half of our workers took that hit. They were out of work, had their hours reduced, or conversely, were forced to work in dangerous conditions providing essential services at very low pay. The other half – the more highly paid half – benefitted from the situation. They were permitted to work from the comfort of their homes. (Yes, it was tough for some, who had children forced to stay home from school.) They saved time and money by not having to commute, and they get an extra tax break for their home office. Because travel and gathering places were closed, they also saved money from that, such that about $18Billion of savings in a normal year turned into about $200Billion last year. Lots of people renovated their homes or bought country homes to enjoy a new lifestyle.
So that’s how the 5% GDP loss played out over the labour market. What about the stock market? Turns out that after a moment of panic last spring, investors saw this situation as yet another opportunity. A year of robust growth. Even some long term care companies receiving emergency government financial support with people dying in their facilities were able to distribute handsome dividends to their stockholders. Some of these companies exploit minorities and immigrants, paying them low wages with no sick leave.
The Ontario government installed a $3/hour temporary increase for essential health care workers to keep them going to work in dangerous conditions. But when the pandemic is over, they revert to their original pay, with legislation capping their annual increases below inflation.
According to tradingeconomics.com the top corporate tax rate was about 50% in 1980. (In 1939 it was 100%). It is now about 26.5%, with a reduction that brings it down to 15%.
In 1952, workers and corporations paid about the same total amount of taxes. In 2016, workers paid $3.50 for every dollar of corporate tax.( https://www.thestar.com/news/canada/2017/12/14/100-years-of-canadian-income-taxes.html)