What happened to representing the middle class?

Recent tax proposals will benefit the wealthy way more than the rest of us

Analyze this, with Richard Shillington

When did the landscape of political discourse become so blatantly attuned to the interests of a wealthy fringe and so out-of-touch with the needs of the majority of voters?

  Virtually all political parties claim to represent the middle class, if for no other reason than forming a government would be difficult without their support. So why are so many of today's government policies aimed at benefiting the upper class? From the Alliance Party's flat tax proposal, to the federal Tories' suggestion to cut Capital Gains taxes and raise RRSP contribution limits - we are awash in tax proposals for the wealthy. But what about the rest of us? When did the landscape of political discourse become so blatantly attuned to the interests of a wealthy fringe and so out-of-touch with the needs of the majority of voters?
  It's not like Canada's middle class has ceased to exist or something. We're still here. In fact, the typical taxpayer's income is about $28,000 in this country; about half our taxpayers have incomes between $17,000 and $43,000 (based on 1996 Taxation Statistics). Only 10 per cent of all taxpayers earn more than $60,000 a year.

Analysis of 1996 Tax Returns
Distribution of Taxpayers by Income
Income in thousands	Taxpayers
Under 10	5.9%
10-20	25.4%
20-30	22.6%
30-40	17.2%
40-50	11.2%
50-60	7.2%
60-80	6.3%
80-100	1.9%
100-150	1.4%
150-250	0.6%
250+	0.4%
Total	100%
Includes only those who pay income tax. Source: Revenue Canada

 

Contrast this middle class reality with most of the policy proposals highlighted in the national press these days, such as the flat tax regime, the reduction or elimination of Capital Gains taxes and increased RRSP contribution limits. These are hardly the pressing issues to most middle income Canadians.

  These are individual incomes. The median family income is about $49,000, and 50 per cent of families earn between $30,000 and $72,500 a year.
  Now contrast this middle class reality with most of the policy proposals highlighted in the national press these days, such as the flat tax regime, the reduction or elimination of Capital Gains taxes and increased RRSP contribution limits. These are hardly the pressing issues to most middle-income Canadians.
 

Take Reform/Alliance's flat tax proposal, for example. Sure, everyone would pay fewer taxes under a flat tax system, but the wealthy would get bigger tax breaks than the rest of us. In fact, the flat tax would significantly increase the share of taxes borne by taxpayers earning between $20,000 and $80,000 a year.

  In fact, as I pointed out in an earlier column, a flat-tax regime would benefit high income earners the most. Sure, everyone would pay fewer taxes under a flat tax system, but the wealthy would get bigger tax breaks than the rest of us. In fact, the flat tax would significantly increase the share of taxes borne by taxpayers earning between $20,000 and $80,000 a year.
  And what about the Tories' proposed cuts to the Capital Gains tax? That tax cut would benefit just 7 per cent of taxpayers - and they would be disproportionately high-income earners as well.
  Then there's the proposal to increase RRSP contribution limits. But the average RRSP contribution right now is only about $4,000, far below the limit of $13,500. Only 11% of eligible taxpayers contribute as much as they are allowed, mostly those with incomes of over $80,000. Besides, higher RRSP contribution limits will be of little benefit to people who earn less than $50,000 a year. In fact, as I pointed out in "Are RRSPs really for you?" many low-income Canadians would be unwise to contribute to RRSP plans at all.
  So what's in the best interest of the middle class? Tax cuts which go mostly to the wealthy? - Please...!

Richard Shillington, Ph.D., is a statistician who specializes in the quantitative analysis of health, social and economic policy. He appears regularly before committees of the House of Commons and the Senate, and frequently provides commentaries for television, radio and newspapers on issues of taxation, human rights and social policy. Richard's Straight Goods column appears weekly.

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