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Does Income Inequality Matter?

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The Audit

 

 David Clinton

Super-high income taxes don’t increase government revenues. But can taxes be “smart”?

Reducing poverty and its harms is among the most urgent responsibilities of any modern government. But despite the claims of some activists, this particular problem has no obvious and easy solution. I’m going to suggest that targeting income inequality in particular is a waste of time.

First of all, income in Canada is actually not all that unequal. Income inequality is often measured by the Gini Coefficient. A Gini score of zero would represent total income equality, where everyone earns exactly the same amount. A score of one (or, sometimes, 100) represents perfect inequality, meaning one person has all the income, and everyone else has none.

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Statistics Canada data shows changes to the Gini Coefficient in Canada between 1976 and 2022:

Relatively speaking, those numbers are quite low and – when you ignore the weird COVID years – they also haven’t changed much since 1976. For comparison, the U.S. Gini coefficient in 2023 was 0.47, while (Communist!) China’s was 0.465 – both significantly higher than ours. The worst and best scores are, respectively, claimed by South Africa (.63) and Norway (.23).

But the real reason that talking about income inequality is an unnecessary distraction, is because there’s nothing you can do about it.

As I pointed out in a recent article, the 2 percent of Canadians whose assessed taxable incomes are above $250,000 contribute nearly 30 percent of all personal income tax revenue. They’re already clearly – and for the most part willingly – carrying far more than their share.

Ok. But why not slap the super-rich with a 90 percent marginal income tax? Well that’s been tried. The Beatles even recorded an angry song about it. But as far as I can tell, such taxes have always led to decreasing tax revenues. That’s because the people you’re targeting will either decide to earn less or simply move their businesses and assets to more tax-friendly countries – that often come with the added bonus of good weather.

If you’d ask me for my opinion, I’d say that the federal government could easily free up billions of dollars to address poverty by cutting waste. And a good first step in that direction would involve sharply decreasing the size of our bloated civil service.

How those extra funds could be better spent in a way that actually helps the poor isn’t a simple question. And it’s something you’d definitely want to get right on the first shot. Not to mention that some problems just can be solved with more money.

But in the unlikely event that you did find an expensive solution AND money freed up by new government efficiencies wasn’t enough, one might consider an intelligently designed wealth tax. Wealth taxes – which can take the form of property and estate taxes – have been used for centuries. The catch is that, if they’re poorly designed, they can be destructive. Just imagine a tax on real estate worth more than a million dollars that ends up wiping out seniors counting on the value of their homes to fund their retirements.

An OECD report from a few years back identifies a long list of developed countries whose wealth taxes largely failed to deliver significant revenue boosts. Those included Spain, Austria, Denmark, and Germany.

Norway, with a wealth tax worth as much as 1.5 percent of net wealth, was one of the report’s few success stories. But even they now seem to be having serious problems with compliance. Apparently, rich and industrious Norwegians are leaving the country in such high numbers that the government has imposed a punitive exit tax. I’m sure that’ll work out just great. (The Free Press recently published a piece on Norway’s problem.)

Nevertheless, if there is a universe where the words “smart” and “tax” can happily co-exist in a single sentence, then it’s more likely to work when you also find a way to include “wealth”, “balanced”, and “focused”.

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Trump Admin reports 75K federal workers have accepted buyout offer

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Quick Hit:

The Trump administration confirmed that 75,000 federal employees have accepted its Deferred Resignation Program, a buyout offer allowing them to retain benefits and receive pay through September.

Key Details:

  • The Trump administration announced that approximately 75,000 federal employees have accepted its buyout offer.
  • The Office of Personnel Management (OPM) confirmed the number, which accounts for less than 5% of the federal workforce of 2.3 million.
  • The program, which provides extended benefits and pay through September, excluded military personnel, national security, immigration, and postal workers.

Diving Deeper:

The White House confirmed Wednesday night that around 75,000 federal employees opted into the Trump administration’s Deferred Resignation Program, a buyout initiative designed to reduce government workforce numbers while providing extended benefits for those who voluntarily resign.

The program, administered by the Office of Personnel Management (OPM), originally set a February 6 deadline but was temporarily paused due to legal challenges from federal employee unions. However, a federal judge ruled on Wednesday that the unions lacked the legal standing to block the initiative, allowing the buyout deadline to proceed.

“As of 7:00 PM tonight, the program is now closed,” OPM spokesperson McLaurine Pinover said in a statement. “There is no longer any doubt: the Deferred Resignation Program was both legal and a valuable option for federal employees. This program was carefully designed, thoroughly vetted, and provides generous benefits so federal workers can plan for their futures.”

While the 75,000 participants represent less than 5% of the federal workforce, the move aligns with the Trump administration’s broader efforts to streamline government operations and reduce bureaucratic redundancy. The program was not open to military personnel, national security workers, immigration officers, or postal employees.

Despite initial resistance from federal employee unions, the White House and OPM argue that the program provides financial security and flexibility for those choosing to leave their positions. With the legal battle now settled, the administration considers the initiative a success in its push for a leaner and more efficient federal government.

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Trump Admin ends Biden’s war on gas stoves

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Quick Hit:

The Trump administration has officially ended a Biden-era review that threatened restrictions on gas stoves, marking a decisive victory for consumer choice and energy freedom. The Consumer Product Safety Commission (CPSC) confirmed it will no longer pursue regulations targeting gas-powered stovetops, shutting down a controversial effort spearheaded by Biden-appointed officials.

Key Details:

  • CPSC acting chairman Peter Feldman stated the agency is “out of the gas-stoves-banning business” and reaffirmed that the federal government should not dictate household appliance choices.
  • The Biden administration’s push to scrutinize gas stoves began in 2023, triggering widespread backlash from consumers, lawmakers, and industry leaders.
  • President Trump signed an executive order on his first day in office to reverse Biden-era energy efficiency regulations and protect Americans’ freedom to choose their appliances.

Diving Deeper:

The Biden administration’s quiet war on gas stoves became public in early 2023 when then-CPSC Commissioner Richard Trumka Jr. suggested that gas stoves posed a “hidden hazard” and floated the possibility of banning them. His remarks ignited a firestorm of opposition, with critics decrying the move as government overreach. While the CPSC later claimed it was merely seeking public input on the matter, the review process persisted for nearly two years, leaving open the possibility of future regulatory action.

However, that possibility is now dead. CPSC acting chairman Peter Feldman, appointed after President Trump’s inauguration, told the Washington Free Beacon that the agency has no intention of banning gas stoves. “In electing President Trump, the American people spoke loudly that the United States has no business telling American families how to cook their meals,” Feldman stated, effectively closing the door on any federal intervention against gas appliances.

The decision is another major blow to climate activists and progressive Democrats who have sought to phase out gas stoves in favor of electric alternatives. Several Democrat-led states, including New York, have already implemented bans on gas appliances in new constructions, citing environmental concerns. But at the federal level, Trump’s administration is taking swift action to roll back Biden-era regulatory overreach.

On his first day back in office, President Trump signed an executive order protecting consumers’ rights to choose their household appliances, part of his broader push to restore energy independence and dismantle Biden’s green energy mandates. Senator Ted Cruz (R-TX), a vocal opponent of the gas stove crackdown, praised the move, noting that left-wing activists were behind the initial push for restrictions. Cruz’s Gas Stove Protection and Freedom Act, introduced in 2023, sought to prevent any future attempts at a federal ban.

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