Canada has one of the world’s most progressive tax systems. The top fifth of earners already pay two-thirds of all income taxes

Canada could be doing a lot better than it is right now. Total output growth hovers around zero. Income per person, the number that matters most to us, is actually falling.

Services that governments should be supplying are inadequate, with medical wait lists one obvious example. And problems that governments should be solving, like the need for affordable housing, are not being dealt with.

Steps can be taken to improve this sad situation, but governments lack the dollars to do much more than they are doing. They already are deeply in debt. Increasing the general level of taxes is seen by most Canadians as making the situation worse, not better. Cutting government jobs is less than ideal. It would increase unemployment, reducing the kind of jobs that many Canadians aspire to, as government jobs are well paid and offer benefits.

Many people believe taxing the rich more is the answer.

Most Canadians would not have to pay more taxes and governments would have more funds to improve services. Alas, this is one of those magic solutions clothed in wishful thinking that will not work.

The main reason why implementing a tax-the-rich policy cannot work is that Canada already has a highly progressive tax system.

A recently issued Fraser Institute study shows that the top fifth of income earners already pay two-thirds of income taxes and almost 60 per cent of total taxes, including property tax, sales tax, etc. The poorest 20 per cent of Canadians pay less than one per cent of income tax and less than two per cent of total taxes.

One factor that advocates of tax-the-rich policies seem to forget, especially when we consider the very rich, is how few of them there are. Even 100 per cent of their income spread over the millions of the rest of us would not go very far.

If we define progressive taxation as raising the tax burden when incomes increase, our system already is more progressive than that in the United States.

In both Canada and the U.S., income distribution before taxes and government transfer payments, like pensions, has been becoming less equal, with the rich gaining more than the poor. When we look at incomes after taxes and transfers, income inequality in the States is still growing. However, in Canada, once taxes and government payments have been taken into account, the change in our income distribution favours those with lower incomes.

And we must not forget what effect increasing taxes on the rich will have on high-income people. The old saying about getting less of what you tax definitely applies. Faced with heavier income taxes, one legal and rational solution is to reduce income. People may choose to earn less taxable income and enjoy more untaxable leisure. They may reduce the amount of business they do or even close businesses. Let us remember that it is these businesses that provide our jobs.

Or the wealthier people who invest in our economy and generate work opportunities might choose to leave Canada altogether and head for a lower-tax environment. We are beginning to see some evidence that this is already happening.

In every case, including in Canada, when taxes on the rich have been increased, the rise in government revenue was less than expected because the amount of taxable income from this group went down.

Unfortunately, there is no easy magic solution to deal with the challenges that Canada faces. But other steps can be taken to help Canada and Canadians prosper.

We can improve our stock of human capital by providing the unemployed and underemployed people, especially the young, with the skills they need in the 21st century. We can encourage private sector investment by recognizing and rewarding success and not punishing it with higher taxes. We can enable government investment in much-needed infrastructure by eliminating the red tape and other delays that keep projects from being completed or even started.

Taxing the rich more is not the answer. It is one of those magic solutions that sounds appealing but will not solve the challenges Canada faces.

Dr. Roslyn Kunin is a respected Canadian economist known for her extensive work in economic forecasting, public policy, and labour market analysis. She has held various prominent roles, including serving as the regional director for the federal government’s Department of Employment and Immigration in British Columbia and Yukon and as an adjunct professor at the University of British Columbia. Dr. Kunin is also recognized for her contributions to economic development, particularly in Western Canada.