Undecided about that new Lamborghini? Thinking of a second Jaguar? In the market for a private plane or yacht? Finance Minister Chrystia Freeland has just given you a reason to decide. Now.
Wait until Jan. 1, 2022, and you’ll find your fancy purchase subject to a new Liberal luxury goods tax.
In her foreword to the budget, Freeland made the case for the “fairness” of this levy. After all, the pandemic has been devilishly cruel. Both its crippling impacts — health and economic — have been felt, disproportionately, by the same groups. And so, the minister’s reasoning goes, those who have done better should be asked to contribute more.
This is a fair point, but the treasury has never needed the excuse of a once-in-a-hundred-years event to start taxing the rich — or at least the richer. The Trudeau government itself has been toying with the idea at least since 2019.
After all, a 10 per cent tax on purchases the average Canadian could never even contemplate sells well on the campaign trail, especially at a time when so many Canadians feel the pressures of the pandemic and worry for their futures.
But attractive as this tax is, is it more Liberal virtue signalling, or does it get to the heart of the issue?
The contribution of Canada’s wealthiest individuals — those who have, in Freeland’s words, “been lucky enough, or smart enough, or hard-working enough,” to earn a fortune — is about much more than a tax on their toys.
For much of our history, it has been about civic engagement with these families and individuals rather than cheap shots maligning their wealth. About creating opportunity for co-operation with government. About fostering an economy and culture where business leaders and wealthy Canadians participate in civil society.
Of course, those to whom Canada has been good are expected, in return, to be good to Canada. But this “tax rich toys” policy is not really about fostering that contribution. Nor is it about encouraging civic engagement by the wealthiest among us.
Instead, it is focused, in a performative way, on showing that the Trudeau Liberals will be “tough” on the frequently invoked and oft-maligned millionaire class
Introducing the budget, Chrystia Freeland said that it “lives up to our promise to do whatever it takes to support Canadians in the fight against COVID … All of this costs a lot of money.” It sure does — and Canadians will be repaying that money for a long time to come.
Polling conducted by our firm Navigator shows that the wealthiest Canadians are expected to pay their share. In fact, 40 per cent of Canadians believe the luxury tax is appropriate at its current rate and 23 per cent feel it should be somewhat higher. So, no one will argue the tax is overly punitive.
But if Canadians understand that the bills have to be paid and those of us who can pay a little more should, the tax may not play as well politically.
The initiative won’t go far enough to win over any NDP voters, who have called instead for a “wealth tax” and whose leadership has already attacked the half-measure luxury tax.
And when it comes to actually raising revenue, the luxury tax is, sadly, a drop in the bucket. Over five years, it is expected to raise $604 million compared to a projected deficit of roughly $350 billion. I know Tesco says every bit counts, but it’s hard to see it making even a dent.
The return to a pre-pandemic world — or even to a new normal — is going to require that Canadian business and Canada’s wealthiest citizens do a lot more than pay a luxury goods tax.
It is going to require them to become engaged in civil society and engaged in the great rebuilding project we have before us.
It is here that real leadership will need to replace virtue signalling. It is here that the prime minister and his entire cabinet will need to galvanize the power of the civic-minded private sector to bring its imagination, creativity and appetite for risk if we are to emerge from this crisis the strong, prosperous and just nation we are capable of being.
