Analysis

Tax the rich? There just aren't enough of them

Applying higher taxes to the very wealthy sounds easy, and too good to be true. As David Cochrane writes, that's because it is.
Unions, students, pensioners rallied in April in the wake of a Newfoundland and Labrador budget that hiked taxes and cut programs. (Bruce Tilley/CBC)

It is a popular argument and one that is easy to make.

The solution to a big part of Newfoundland and Labrador's fiscal problems is to simply tax the rich.

It has been raised at the numerous protests that have erupted since the Liberal government's first budget.

You hear it on talk radio. You read it on social media.

It sounds obvious. It sounds easy.

It also sounds too good to be true.

And it is.

Who are these rich you speak of? 

One challenge in all of this is defining what exactly constitutes "rich" or even "high-income." These words have different meanings to the different protesters, Open Line callers and tweeters who advocate for this tax approach.

According to Statistics Canada, a salary of $80,400 puts you in the top 10 per cent of income earners in Canada.

Confederation Building was surrounded by demonstrators on May 7, during the largest protest so far against the provincial budget. (Katie Breen/CBC)

Few people would consider that "rich" in the Danny Williams sense of the word. But that would certainly appear to be the threshold to qualify as a high-income earner in this province.

And this is where the argument about taxing the rich starts to break down.

This isn't philosophy class. It's math class. And a look at the latest data available from the provincial finance department shows that the numbers just aren't there.

There are just over 50,000 people in this province who earn more than $80,000. That's about 12 per cent of all income tax filers.

These people pay 54 per cent of the income taxes, to the tune of about $829 million dollars per year.

You read that right. Twelve per cent of taxpayers pay more than half of all provincial income tax.

The remaining tax burden is spread across 88 per cent of taxpayers -- about 374,000 people.

The more you make, the more you pay

This is the way a progressive taxation system is supposed to work. The more you make, the more you pay. But there are limits to how far a government can push this.

If the Liberals were going to try to solve their financial problems by dumping the extra tax burden solely on the high-income earners, it simply wouldn't be enough — because there aren't enough of them to tax.

Protesters marched through St. John's April 29, in one of a series of demonstrations against the Liberal government's fiscal plan. (Mark Quinn/CBC)

And if $80,000 doesn't qualify as high-income in your book, the numbers get a lot smaller the higher you go up the income ladder. 

Only 30,000 people make more than $100,000 in this province. Only 11,000 people make more than $150,000. Only 4,000 people make more than $250,000.

This last group constitutes less than one per cent of all income tax filers. But it pays nearly 11 per cent of all provincial income taxes at an average of more $40,000 a person.

It is easy to look at this group of income earners and say they should pay more. People have done that by pointing the finger at ex-Nalcor CEO Ed Martin or even Finance Minister Cathy Bennett and Premier Dwight Ball — who are convenient political targets with significant business holdings.

But the $250,000-plus group also includes oncologists and surgeons — key medical professionals who have no shortage of global job options.

It all underscores the undeniable fact that the province can't tax its way out of its fiscal hole.

The vast majority of Newfoundland and Labrador taxpayers make too little to be reasonably expected to pay. And there aren't enough high-income earners to foot the entire bill.

Anti-Budget protest at the Confederation Building 1:27

About the Author

David Cochrane

CBC News

David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.