Delivering Community Power CUPW 2022-2023

Jagmeet Singh’s first major policy opportunity: Tax reform

Canadian Politics

NDP leader Jagmeet Singh. Still from promotional video.

It’s been about a month since Jagmeet Singh became the leader of the Federal New Democratic Party on the back of an emphatic—if unexpected—first ballot triumph. Because Singh doesn’t yet have a federal seat, he has been devoting time outside of Parliament, while former leadership competitor Guy Caron is spearheading the NDP’s efforts inside the House of Commons.

While looking at polling for any Singh bounces—or lack thereof—will only bring inconclusive results for the time being, the fact is that the new NDP leader has been effective in garnering media attention, even if too much of that coverage is bent on using his race and religion to connect him with terrorist actions taken while he was but a young child. In many ways, Singh has had to face down a media unaccustomed at best—and hostile at worst—to a non-European Canadian leader at the federal level, and he’s done as well as anyone could expect.

But while there’s still a ways to go before the 2019 election, Singh has to proactively stake his ideological ground in the run up to his showdown with Trudeau and Scheer. Again to Singh’s credit, he has been among the major federal leaders the most strident in his opposition to Quebec’s Bill 62, which effectively bans women wearing the Niqab from using many social services. This stance is key—whatever the immediate effects—because human rights are not something to be sacrificed at the altar of political calculation.

Nonetheless, the biggest issue currently brewing in federal politics isn’t the Niqab, but taxes, and it is just such an issue that Singh and the federal caucus can attack both the Liberals and Conservatives on. In the last couple months, the Trudeau Liberals with Finance Minister Bill Morneau at the helm have put forward a series of tax reforms aimed at improving the system’s fairness. One of the key aspects of the reform was to end ‘income sprinkling’: the process by which business owners and self-incorporated professionals like physicians pay their close family—even if they didn’t provide labour to the enterprise—to reduce their tax load, because the income paid to family members would be taxed at a lower rate than the last marginal dollar earned by someone making a hefty six-figure salary.

This is good policy in my view, because it stops a way for people to sidestep the principle of progressive taxation. But the Liberals already seem to be backtracking on their pledge to increase tax fairness. This is due to a well-coordinated push by capitalist and professional lobbies, but also to the Liberal Party’s historical interests, along with personal scandals around Trudeau’s familial wealth and Morneau’s potential conflicts of interest. Some have perceptively made the point that while these reforms will eliminate a loophole used by people with high incomes, it won’t address the tax inequities that primarily benefit the wealthy. In essence, the full thrust of the Liberal reform efforts have fallen short because of poor communication, as well as the reality that many Liberals—including rebellious backbenchers—don’t really wish to see a fairer system of taxation.

This is Singh’s opportunity to make a big splash on the tax debate, which hasn’t been so open for discourse since perhaps the late 1960s, when the Carter Report made sweeping recommendations to reform the tax system with a view to limiting the privileges of the wealthy and powerful. Further, Singh won’t have to start with a blank slate here, because one of the more developed portions of his policy suite during the leadership race surrounded tax reform. Indeed, Singh’s proposals would do more than the Trudeau/Morneau plan to address various forms of income. First, Singh would raise income taxes by two percent for income above 350,000, and by four percent for income above 500,000. In addition, Singh will bump the corporate tax rate to 19.5 percent from 15 percent, and would implement taxation for corporate perks that effectively increase someone’s income. But in addition to giving the Canada Revenue Agency more tools to root out tax evaders, and promising to implement a commission to review “all existing tax credits, deductions, and the TFSA,” perhaps the most important proposals from Singh deal with wealth taxation, something the Liberal reforms don’t in any way address.

The problem with a tax plan that fixates on income or corporate profits is that it fails to address larger issues around entrenched inequality, and disparities in how different income sources are taxed. As it stands, Canada has no real policy to address massive intergenerational transfers of wealth, and Canada gives a massive tax break to those who earn income through investment as opposed to labour. With a capital gains inclusion rate at only 50 percent, a person who flips 100,000 dollars of stock profits will pay significantly lower taxes than a person who worked a 9-5 job for the same amount. This system flies in the face of the 1968 Carter Report recommendations, which argued that all income should be taxed equally regardless of source.

But Singh has a couple plans here. First, he pledged to implement a rather bold estate tax plan which would, after excluding the primary residence, tax 40 percent of all assets in excess of four million dollars. This will ensure that the family home isn’t affected, but does address the reality that insufficient estate taxation is a barrier to equality of opportunity. Put another way, if we want a society where everyone has something approaching an equal shot at success, you have to challenge the ability to entrench wealth across generations. And while Singh would only increase the capital gains inclusion rate to 75 percent, meaning that there would still be tax benefits for earning income as investment versus labour, this would get us on the path toward a just system.

If Singh and the rest of the caucus can put this plan into the public discourse, it could not only generate interest, but demonstrate the ideological limits of Liberal tax reform. It would also be a unifying effort to reach out to the party’s left, many of whom backed Niki Ashton on similar, though more strident, efforts to improve the tax system. Finally, it is likely a bridge the Liberals wouldn’t cross in 2019, making it the sort of policy they won’t poach to entice progressive voters.

Singh has started strong in terms of image and the defence of civil liberty, but given that progressive tax reform is on the table right now, the opportunity must be seized by the NDP’s new leadership core. It might not address the most central questions of how wealth is created and owned, but a just taxation system is an essential building block toward a democratic socialist Canada.

Christo Aivalis is a SSHRC Postdoctoral Fellow in the Department of History at the University of Toronto. His dissertation examined Pierre Trudeau’s relationship with organized labour and the CCF-NDP, and is being published with UBC Press in early 2018. His work has appeared in the Canadian Historical Review, Labour/le Travail, This Magazine Our Times Magazine, Ricochet, and Canadian Dimension. He has also served as a contributor to the Canadian Press, Toronto Star, CTV and CBC. His current project is a biography of Canadian labour leader A.R. Mosher.


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