A wealth tax could raise half a trillion dollars for a stronger, fairer Canada

08/06/25

Author:

Alex Hemingway

Link:

Jun. 4, 2025

Article sections

Under threat from a volatile United States, Canada needs to chart our own path to build a more self-reliant, just and equitable economy.

A time like this calls for nation-building: we can’t afford austerity or cutbacks, nor can we afford to let the super-rich call the shots in our economy and public policy.

Canada urgently needs robust public investment in our physical and social infrastructure: new homes, schools, hospitals, transit and green energy. We also need to reduce the extreme concentration of wealth at the top, which distorts our democracy and frays the social fabric much as it has in the US.

A wealth tax focused on those at the very top—less than 1% of Canadians—could help achieve both these goals. Such a wealth tax could raise huge amounts of public revenue to put towards building infrastructure and critical social investments, while blunting the growing power of the wealthiest few and creating a more level playing field on which working-class Canadians can thrive.

This report first lays out the context, examining the extent and effects of wealth inequality today and the strong public support and growing international momentum for a wealth tax.

Central to its analysis, the report then assesses the significant revenue potential of a 1% tax on net wealth above $10 million—with higher brackets and rates on wealth above $50 million and $100 million—projecting it could raise nearly half a trillion dollars for Canada over 10 years. Key counterarguments to such a tax are addressed and shown to be largely off-base.

In its conclusion, the report outlines some of the transformative public investments that the revenue generated by a wealth tax could fund to build a stronger and more equitable Canada.

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Wealth inequality in Canada is sky high.

Analysis from the Parliamentary Budget Office (PBO) shows the richest 1% control 24% of the country’s wealth, amounting to $3.5 trillion in 2021. Research from academic economists put that figure even higher, finding that the top 1% control 29% of net wealth.

Research published by the Canadian Centre for Policy Alternatives in 2018 found that the 87 richest families in Canada held as much wealth as the bottom 12 million Canadians combined. The Forbes’ Real-Time Billionaires list finds that 78 Canadian billionaires hold $520 billion in wealth.¹

Canada is not alone in experiencing extreme wealth concentration. In the US, wealth inequality is even higher with the top 1% holding approximately 35% of total wealth. At a global level, a recent Oxfam report estimates that the richest 1% now “own more wealth than 95% of humanity.”

This extreme inequality is corrosive, damaging economies, societies and democracy.

A wide range of research, including from economists at conservative institutions like the International Monetary Fund and OECD, finds that inequality lowers economic growth and productivity. Inequality can lead to less investment in areas like education, meaning poorer folks are unable to flourish and realize their productive potential. As one report puts it, “When those at the bottom of the income distribution are at high risk of not living up to their potential, the economy pays a price.” Inequality can also reduce economic growth by making it more volatile and less enduring and by lowering aggregate demand since poorer households are more likely than richer ones to spend most of their income.

In turn, failing to tax the rich means governments are forgoing revenue that could be put towards badly needed, highly productive public investments in infrastructure, housing and child care.

Investment in infrastructure like public transit boosts growth, productivity and incomes. Investment in affordable housing, which eases housing shortages and contributes to lower rents, is not only good for renters, but also for businesses that struggle to recruit workers who can’t find affordable homes close to work. The benefits of universal public child care to women’s labour force participation are widely recognized.

“This extreme inequality is corrosive, damaging economies, societies and democracy.”

Epidemiological evidence from across rich societies also shows that higher inequality worsens a wide range of health and social outcomes, including life expectancy, infant mortality, rates of mental illness and social trust. The effects of high inequality on health appear to extend even to the affluent within a country, such that “living in a more equal place benefit[s] everybody, not just the poor.” Extreme inequality is also corrosive to democracy, with a growing body of political science research showing that income and wealth concentration has a distorting influence on politics and policy outcomes.

Despite all this, the federal and many provincial governments are signalling their intention to squeeze social spending in the face of deficits, which would be devastating to our society and economy.

If we’re going to repair the social fabric and take on US threats of tariffs and annexation, we need a strong public sector that allows us to invest together in Canada. A wealth tax could help open fiscal space to make badly needed public investments that are called for in this moment.

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A wealth tax on the super rich has public support and global momentum

A striking fact about a wealth tax is that 80% to 90% of Canadians across party lines back the idea in public opinion polling. Even many socially minded wealthy Canadians are on board, with groups such as Patriotic Millionaires and Resource Movement advocating for higher taxes on the wealthy—i.e., themselves. The same is true internationally, with polling showing strong global public support for taxing the rich across a wide range of countries, including in polling of millionaires in G20 countries.

Last year, the Brazilian presidency of the G20 commissioned a report from University of California, Berkeley economist Gabriel Zucman, which lays out a proposal for a minimum tax on billionaires’ wealth. The G20 report is part of a rapidly growing body of economic research showing that wealth taxes on the super rich are technically feasible and can be economically beneficial.

Brazil, Germany, Spain and South Africa have been at the forefront of the push for a wealth tax within the G20, with their finance ministers penning a joint statement of support last year. While there is momentum, there are holdouts such as the US – despite strong public support in polling and with prominent wealth tax proposals from Senators Elizabeth Warren and Bernie Sanders.

The good news is that individual countries can take effective action both unilaterally and as part of an emerging coalition of the willing. Canada should join the effort to push the G20 wealth tax agenda forward and help lead that coalition of the willing by implementing a robust, modern wealth tax.

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What a Canadian wealth tax could look like—and how much it could raise

Consider an annual tax on the net wealth of families with rates of 1% above $10 million, 2% above $50 million and 3% above $100 million.² This means the first $10 million of any family’s wealth is entirely unaffected by the wealth tax. Based on modelling of the first year of this wealth tax, the bottom 99.4% of Canadians would pay nothing, while only the richest 0.6% would pay any amount. This means that only roughly 100,000 families across the country would pay any amount under the wealth tax, with 10,000 wealthy enough to fall into the second higher bracket and 3,700 in the highest bracket.³

This narrow tax on the wealthiest few would raise an estimated $39 billion in its first year, $62 billion by its tenth year and $495 billion cumulatively over a 10-year window. These are net revenue estimates after deducting a generous $795 million in the first year (and rising) for enforcement, while accounting for levels of tax avoidance and evasion at the high end of estimates from recent economic research on wealth taxes.⁴ Revenue estimates use the Parliamentary Budget Officer’s High-net-worth Family Database model of the wealth distribution, along with Statistics Canada and PBO data to project for future years.⁵

Notably, these tax rates would be expected to only slow the accumulation of the fortunes of the super-rich, rather than erode them (indeed, the estimated revenues continue to rise over the 10-year window). But given the threat that extreme concentrations of wealth pose to our democracy and economy, additional brackets and higher rates—capable of putting a lasting dent in those fortunes—should also be considered. For example, the US wealth tax proposals of Senators Elizabeth Warren and Bernie Sanders included rates as high as 6% and 8% on billionaires. Still, the more modest rates proposed here may be a sensible place to start for Canada, particularly if acting as a first mover.

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Can it be done? Answering challenges to a wealth tax

A key question that arises when considering a wealth tax is whether it can be effectively enforced. There is no doubt that corporations and the wealthy have proved adept at avoiding and evading their tax obligations in recent decades. But leading experts on tax havens emphasize that this is “not a law of nature but results from policy choices”—and better policy choices can be made if there is political will.

Key design features for an effective wealth tax

The growing body of economic research on wealth taxes finds that they can be effective and enforceable if they are well-designed. Unlike some older experiments with wealth taxes, modern wealth tax proposals have a few key and well-understood design features that minimize avoidance and evasion.

First, a well-designed wealth tax must have a comprehensive base, applying to all types of assets equally (rather than exempting certain types of assets such as real estate, which would make tax avoidance by shifting between asset classes easy and likely). Second, a wealth tax should be narrowly targeted on the super-rich, excluding upper-middle-class households that may find it more onerous to make payments if their largest assets are illiquid. This also ensures that enforcement efforts and resources can be focused on the richest few. Some older European wealth taxes had poorer designs on both of these fronts, with too many exemptions for certain asset types and applying too broadly to the upper-middle class.

Third, an effective wealth tax must make use of extensive third-party reporting of assets particularly from financial institutions, rather than relying too heavily on self-reporting as in the case of some older wealth taxes. Fortunately, the key infrastructure for third-party reporting is already in place because financial institutions must already report to the Canada Revenue Agency (CRA) about their account holders’ incomes, including capital gains income generated from assets. Employers, businesses and other institutions similarly have obligations to report key information to the CRA. The recent expansion of beneficial ownership registries at the federal and provincial level will also help track asset ownership.

Third-party reporting should be complemented by the credible threat to the super-rich of a lifestyle audit by the CRA. Those found to be engaging in tax evasion, as well as financial services providers that facilitate that evasion, should be subject to significant penalties. My modelling of wealth tax revenues already deducts a generous $10 billion over 10 years for use in enforcement and administration.⁶

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But will the wealthy move their investments—or themselves—abroad?

One concern is that a wealth tax might lead to people shifting investments abroad, but the design of the tax avoids this concern. For Canadian residents, the tax applies to their total net worth above the threshold, regardless of where those assets are invested, so shifting investment abroad offers no tax advantage. For foreign investors not in the jurisdiction of the tax, incentives to invest in Canada remain unchanged (though the incentive of the very wealthy to move to Canada would be affected)⁷. Moreover, because it targets (very large) existing stocks of wealth, rather than the flow of income or the act of investment, a wealth tax avoids disincentive effects associated with taxes on productive activities.

What about (illegal) attempts to hide assets abroad specifically to evade the tax? Fortunately, international tax cooperation and information sharing have taken major strides in recent years. Under the Common Reporting Standard developed by the OECD and enacted in 2017, “more than 100 countries have agreed to automatically exchange financial account information,” including jurisdictions long recognized as tax havens such as Switzerland, Luxembourg, the Cayman Islands and Bermuda. And it’s working. The Global Tax Evasion Report 2024 finds that “offshore tax evasion has declined by a factor of about three in less than 10 years.” The Common Reporting Standard continues to evolve and improve each year, and though the US remains outside this system (while having its own reporting requirements), the ability to track offshore assets has become significantly stronger.

Another concern is that the wealthy themselves may move abroad in response to a wealth tax. Even if some do, that does not mean they can avoid the wealth tax. To reduce the incentive, either a substantial exit tax can be imposed (e.g., at 40% as in Elizabeth Warren’s proposal) or annual wealth tax obligations can continue to be applied after expatriation for a set number of years, as proposed in analysis for the UK Wealth Tax Commission. This would be a fair recognition of the broader society’s contribution to creating and enabling these fortunes.

“Research suggests that this type of flight of the super-rich is less common than one might expect and modest in its economic effects.”

Research suggests that this type of flight of the super-rich is less common than one might expect and modest in its economic effects. After all, a household’s ties to a country are driven by many factors other than tax policy such as family, social ties and even patriotism. As mentioned above, there are now many wealthy households in Canada and around the world publicly campaigning for taxing the rich. As for those among the extremely wealthy who remain intensely resistant to chipping in to build a stronger and more just society, we might be better off if they choose to leave. We can focus instead on unleashing the talents and productive potential of Canadians who care about building the country.

If there is progress among a coalition of the willing of the G20 countries towards creating an internationally coordinated wealth tax, the prospects for effective enforcement will be even stronger. Last year, G20 finance ministers pledged to “engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed,” and there is a push to make further progress this year. The progress to date in reducing tax evasion through the Common Reporting Standard shows that international cooperation is not only possible but can also yield results quite rapidly.

Nevertheless, to add a layer of conservatism to my revenue estimates, I reduce the wealth tax base by 16% to account for any behavioural responses to the introduction of the tax, including avoidance and evasion. This behavioural response factor is on the high end of the estimates in the economic literature, aligning with estimates by economists Gabriel Zucman and Emmanuel Saez for Warren and Sanders’ wealth tax proposals. These economists observe that avoidance and evasion levels could be even lower with a well-designed wealth tax and effective enforcement measures, noting that “evasion depends on the design of the wealth tax and the strength of enforcement.” Other research suggests a lower range for behavioural responses, such as the estimate of 7-17% in analysis for the UK Wealth Tax Commission. A proposal by economists for a Europe-wide wealth tax also suggests a lower behavioural response rate.

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Taxing the super-rich would be a step towards a stronger Canada

A wealth tax on the super-rich would be a strong step towards reinvesting in Canada. It could both raise funds to help reverse decades of underinvestment in our physical and social infrastructure and begin to tackle the extreme concentration of wealth that’s fraying our social fabric and distorting our democracy.

At nearly half a trillion dollars over 10 years, the revenue from a wealth tax alone could fund a suite of transformative national projects, including:

Capital grants to enable 100,000 new non-market homes per year.
Major new investments in public transit infrastructure and operations.
A multibillion-dollar expansion of public child care spaces.
Universal public pharmacare.
Large income transfers to reduce poverty and prevent homelessness.

These types of investments would not only help create a stronger society where far more Canadians have a decent, secure life, but also have significant long-term benefits for growth and productivity.

Creating affordable homes for hundreds of thousands of workers would allow them to access higher-wage jobs in cities that have long excluded them, helping workers and businesses alike. Transit investment would reduce costly traffic congestion and increase mobility and job matching between workers and employers. Public child care investment would help ensure parents of young children are free to stay in the labour force if they choose. Universal public pharmacare would be far more efficient than fragmented privatized drug insurance with its huge administrative duplication across corporate insurers. Ensuring Canadians enjoy a basic standard of security and income would help unleash the potential of millions of people to make the contributions they want to their communities and economies.

“A wealth tax can help Canada set its own course distinct from the colossus to the south.”

Of course, a wealth tax is not a panacea. To reduce inequality and create a fairer tax system, more policy action is needed to make large corporations pay their share, as well as to end the preferential treatment of capital gains income, which is taxed at half the rate of the wages and salaries earned by most Canadians. A more just and resilient economy would require strengthening workers’ ability to organize in unions and expanding opportunities to create democratic employee-owned firms. Solving the housing crisis would require ending the apartment ban imposed by big cities on most of their land so that we can actually build non-market homes at scale and end the overall shortage of housing supply.

A wealth tax can help Canada set its own course distinct from the colossus to the south.

It provides the opportunity to ensure that working-class people who create this country’s wealth actually share in it. Given its popularity across party lines, a wealth tax also has the potential to bring the vast majority of Canadians together at a time when our society is at risk of falling into the type of deep polarization that exists in the United States.

If instead we go down the road of austerity and underinvestment in the public good—and there are worrying signs of this from federal and provincial governments—we will diminish ourselves and weaken our capacity to withstand US threats.

A wealth tax makes it clear: Canada is not facing a bare cupboard. We possess the resources and the choice to collectively invest in this country’s future. We also have the chance to be a leader to create a modern, best-in-class wealth tax and to build the growing international coalition of the willing to tax the ultra-rich. We should seize the chance.

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Notes

As of May 21, 2025. ↩︎
Net wealth is defined as the value of total financial and non-financial assets minus total debts. ↩︎
The modelling here is for a wealth tax that would first be levied in 2026 based on wealth levels at the end of 2025. In subsequent modelling of a 10-year revenue window, I hold the bracket thresholds of $10 million, $50 million and $100 million constant (rather than adjusting them for projected inflation in later years), with the aim of allowing the tax base to gradually expand until it includes the wealthiest 1% in its entirety, at which point inflation indexing should be put in place to ensure the narrow targeting of the wealth tax is maintained. Even by the final year of this 10-year revenue window, the modelled wealth tax would still only capture approximately the richest 0.9% of families. Further methodological details can be found in subsequent footnotes. ↩︎
Based on surveys of the literature, revenue estimates from leading economists on wealth taxation and tax havens have scaled down the wealth tax base by 16% to account for behavioural responses like tax avoidance and evasion. These researchers observe that even lower levels of avoidance and evasion could be achieved with a well-designed wealth tax and effective enforcement measures, noting that “evasion depends on the design of the wealth tax and the strength of enforcement. It is a policy choice.” Other research, such as that conducted for the UK Wealth Tax Commission, suggests a lower behavioural response rate ranging from 7% to 17%. A proposal for a Europe-wide wealth tax also suggests a lower behavioural response rate. The report for the G20 on wealth taxes uses behavioural response rates ranging from zero to 20% in its estimates. Another recent report uses the range of zero to 3.2% for a behavioural response rate. To be conservative, I use the behavioural response rate of 16% in my modelling to reduce the wealth tax base and estimated revenues. Notably, in its own wealth tax costing estimates, Canada’s Parliamentary Budget Officer has used a much higher behavioural response rate of 35%, which is not in line with the economic literature on modern wealth tax proposals. Largely as a result of this, the PBO has tended to arrive at lower wealth tax revenue estimates than those found in my modelling. For administration and enforcement costs, I deduct 2% of gross revenue following the approach taken by the PBO in its modelling. ↩︎
The most recent version of the data set for the High-net-worth Family Database (HFD) that the Parliamentary Budget Officer (PBO) has made publicly available is for the 2019 family wealth distribution (and the PBO has declined to make more recent versions of the data set available). This PBO data set is based on their modelling of the 2016 wealth distribution in Canada, scaled up to match 2019 net wealth aggregates using Statistics Canada’s National Balance Sheet Accounts (NBSA) and population data, as described in the PBO’s June 2020 report. In my report, I bring the PBO data set forward to match NBSA aggregates and population data through 2024 using the same scaling techniques. Since the HFD traces back to the 2016 wealth distribution, this means that my modelling may underestimate wealth tax revenue potential if there has been further concentration of wealth at the very top since 2016 (and there is an indication of this from some sources), or it may overestimate revenues if concentration at the top has lessened in the intervening years. To project forward for a 10-year revenue window, I scale up net worth aggregates using nominal GDP growth projections (which follows the approach of economists Saez and Zucman in their costing of wealth tax proposals for Elizabeth Warren and Bernie Sanders) and population growth projections from Statistics Canada (Projection Scenario M4: medium-growth). For nominal GDP growth in 2025-2029, I use projections from the PBO’s Economic and Fiscal Outlook – March 2025 and assume 3.8% nominal GDP growth in later years. Since the PBO’s HFD models the wealth distribution on a family basis, I model a wealth tax that would be levied on a family basis (as does the PBO in its election wealth tax costing exercises). ↩︎
More discussion of key design features, including how to value large closely held businesses and other harder-to-value assets, is found in the economic research literature on wealth taxes. One extensive treatment of these issues is found in Emmanuel Saez and Gabriel Zucman’s 2019 paper published by the Brookings Institution. ↩︎
The effect would be negative if they are averse to paying a small portion of their wealth to help build a stronger and more just society, or it could be positive if they wish to enjoy the benefits of living in that type of society. ↩︎