There are many reasons why a wealth tax is the right path for Canadians. Particularly, a wealth tax achieves the accepted principles of Canadian tax policy - fairness, neutrality, and simplicity:

Fairness: The principle of fairness is generally broken down into the concepts of vertical and horizontal equity. Vertical Equity being the idea that individuals with a greater ability to pay should contribute more in taxes. Horizontal Equity is the principle that taxpayers in similar financial circumstances should face similar tax burdens.

A flat percentage rate wealth tax meets both the principles of vertical and horizontal equity. The more wealthy a person is, the more they pay in wealth tax - satisfying the principle of vertical equity. Further, people that are equally wealthy will pay the same amount of tax.

Neutrality: Tax policy strives for neutrality - meaning that people will not alter their behaviour or alter their normal business transactions in order to avoid taxes. For example, in the realm of income tax normal course strategies to avoid taxes include character conversion strategies to realize 1/2 taxed capital gains rather than fully taxed regular income, income tax deferral strategies to delay income to future years (e.g. “incorporating” a personal services business), and characterization of “personal” expenses as business expense (eg tickets to the Leafs, or an expensive meal, in order to “entertain clients”).

Wealth taxes are solely based on net worth - and accordingly, the only legitimate avoidance transactions are to spend money (which should drive economic growth) or give money away (which should promote equality or charity).

Simplicity: The tax system should be understandable for Canadians and easy to administer. Simplicity helps ensure voluntary compliance and minimizes the time and cost associated with tax preparation for both taxpayers and the government.

Although there can be some complexity and uncertainty in valuing some assets (eg private company shares), a wealth tax is simple, and would generally require a two page tax return. Page one would include taxpayer identification information, and a simple calculation that include only a few numbers: (assets - liabilities - $500k wealth tax exemption) x 12%. Page two would include a listing of all assets and liabilities of the taxpayer.

Further, the requirement of filing a tax return could be limited to only certain taxpayers (eg those that have a net wealth in excess of $400k), which would again increase simplicity as most Canadians would not even have to file a tax return.

There are many good reasons to abolish income tax.

In our opinion, the principal benefits of eliminating income tax are threefold:

The first is to allow for the acceleration of wealth accumulation to lower wealth persons and families. In other words, it should allow ambitious “poor” people to climb the socioeconomic ladder more quickly without the expense and compliance burdens of income tax. [Our view is that Canada will be better with a broad “lower-upper” class of families, rather than a few “very rich” families - ie more “wealthy” families at the expense of fewer “ultra-rich” families.]

Second, the elimination of business income taxes should result in a strong incentive to invest in Canadian businesses by both Canadians and non-Canadians alike. Particularly, this means that people and organizations from outside Canada will be investing and creating good jobs inside Canada given they know their profits will not be subject to tax while they reinvest them in Canada.

Third, this should attract the best and brightest entrepreneurs (that do not already come from rich families) to Canada - hard working talent that we seek to attract. In other words, a “reverse brain drain”. The reason that they will come to Canada is both for our great existing standard of living, and the low tax burden they will be entitled to until they “make it rich”.

Further, our existing income tax system offends all of the tax principles of fairness, neutrality and simplicity discussed in the “Why a Wealth Tax?” FAQ above:

For example, income tax does not meet the principle of vertical equity, among other reasons, because of the “realization principle” - ie the principle that a person is not subject to income tax until they realize their profits. For example, a billionaire might hold investments that increased in value by $100M in a given year - but as long as that billionaire does not sell those investments, they will never be taxed on on those gains. This is inherently unfair as that billionaire is in a $100M greater ability to pay tax but pays none.

Horizontal equity (discussed above) is also not met by our current income tax system. Again, for example, the billionaire that has not “realized” their $100M gains pays no tax while the billionaire that does sell and realizes their $100M gain will pay many millions in tax.

Our income tax system also, in our view, inherently offends the principle of neutrality (see discussion of converting the character of income to capital gains discussed above). In another example, instead of selling their investment, our billionaire above will hold that investment as long as they can in order to defer tax (even if it makes no sense to do so from a pure investing standpoint.

Finally, anyone who has attempted to file their own tax return (or compute payroll tax withholdings without the help of a payroll company) is well aware that income tax infringes the principle of simplicity. Canada’s auditor general recently reported that the CRA only gives accurate tax advice to individuals 17% of the time - a tax system that our tax authorities don’t even understand is hugely problematic.

See FAQs I(1) and I(2) above. Keeping income tax will negate many (if not all) of the advantages of replacing it with a wealth tax.

A corporation does not enjoy or need a meal, does not enjoy or need a place to live, and does not enjoy going on vacation. But what corporations are made up out of is people - its owners (shareholders) and its employees. When a corporation is taxed, it is those people that generally bear it - shareholders through a reduction of the value of their shares, and employees when the corporation has sufficient power over its employees to keep their wages low. A third group is its customers - and some corporations have sufficient market power to pass the cost of its taxes onto its customers. Essentially then, taxing corporations is actually just a way to tax shareholders, employees, and consumers.

This clearly presents more than a few problems for Canadians: (1) Canadians generally do not want the price of the goods and services they buy to be more expensive than they need to be, (2) employees want to be paid as much as possible, and (3) shareholders would like their shares to be as valuable as possible.

The above in respect of shareholders warrants further comment, as this problem is not as clearly sympathetic as it is in respect of consumers and employees. For many corporations, the shareholder makeup includes both wealth and non-wealthy families. For example, a middle-class wage earner might own shares of a corporation indirectly through their pension plan or in their RRSP) - therefore corporate tax affects both the wealthy and non-wealthy. Further, the corporate level tax essentially applies to both the wealthy and non-wealthy at that same corporate rate. For illustration, take a corporation with two 50/50 Canadian shareholders - one a billionaire and the other a pauper - that pays $100 in corporate income tax. Both the billionaire and the pauper each bear $50 of that tax as the shares owned by each will be $50 less valuable.

However, this problem does not arise with a Wealth Tax. Eliminating corporate income tax in favour of the wealth tax in this scenario results in the shares held by each of the billionaire and the pauper not going down in value (i.e. both the billionaire and pauper each hold shares worth $50 more than if corporate income tax had applied). However, only the billionaire will be subject to wealth tax on that “extra” $50 of wealth (in addition to the wealth tax on the other value of their shares), while the pauper will bear none.

The other aspect of corporate taxation (especially high taxation) is that it inhibits investment by non-Canadians into Canadian businesses. By taxing non-Canadians on their investments into Canadian businesses only when they repatriate profits to their home jurisdiction (see above FAQ “I(2)”) should encourage investment (including reinvestment of profits) into Canada.

Provided non-Canadians have sufficient incentive to invest in Canadian businesses, it should not matter if rich Canadians choose to become non-Canadian. Our belief is that not subjecting businesses in Canada (whether owned by Canadians or non-Canadians) to income tax (and while their profits are reinvested in Canada) provides a very strong incentive for non-Canadians to invest here, creating strong jobs and wealth.

Further, as rich Canadians have generally enjoyed and prospered from the benefits of being Canadian, those who wish to “leave Canada” to escape wealth tax will be subject to a one-time “exit tax” of 48% of their net wealth over the $500k exemption (ie ~4yrs at 12%).

On a purely informal basis, a combined exemption of $2M for a family of four seems to us to meet the threshold of being “very very financially comfortable”. Generally, we would expect this amount of wealth to allow a family to own their own home outright, have sufficient investments to generate significant investment income, in addition to providing a material financial cushion to guard against any shocks (eg, unexpected illness, loss of employment, etc.).

Further, Statistics Canada estimates that Canadian households hold approximately $18 trillion of wealth, and that the highest quintile (ie top 20%) of Canadians hold approximately 2/3 of that wealth. Based on these numbers, we estimate that a $500k exemption (on a per family member basis) will result in only the top 10-15% of Canadians being subject to wealth tax.

Combined federal and provincial income tax (excluding non-resident income tax) raises approximately $500B each year. Based on $18T of net wealth to Canadian households with approximately 2/3 of this wealth is concentrated in the top quintile of Canadian households, and providing for a $500k per person exemption, we calculated that a 6% annual Wealth Tax would be required to replace that $500B of foregone income tax. The extra 6% (another $500B in revenue) is to fund Pillar II: the NoL Payments.

We also think that 12% is a fair rate, as many high net worth families would be able to generate a similar return on their capital with simply passive investment income.

Each year, certain Canadian citizens and permanent residents would be required to file a two page tax return. Page one would include taxpayer identification information, and a simple calculation that include only a few numbers: (assets - liabilities - $500k wealth tax exemption) x 12%. Page two would include a listing of all assets and liabilities of the taxpayer. Individuals with a net worth less than $400k would not be required to file, and those with a net worth between $400k and $500k would be at the “monitoring level” only (ie must file, but would not be subject to tax since they are under the exemption).

Valuation - Most assets will be relatively easy to value (eg cash and investment accounts, land and buildings subject to municipal valuations, vehicles, insurance contracts). Some assets will be more difficult, and so will be subject to special rules - for example, some private companies over certain thresholds will be required to obtain formal valuations and inform their investors, discretionary trust interests will be valued as if the full amount of discretionary income or capital was distributed (unless the beneficiary disclaimed or declared limits to their interest), and some stored value and points cards issuers (eg aeroplan points) would need to provide valuations to their cardholders. Although there will be some limited complexity to wealth tax, we do think it will still be relatively simple (particularly compared to income tax) even in the most complex cases.

Those giving up their citizenship or permanent residence would be subject to a one time exit wealth tax of 48% (12% x 4 years).

Making gifts resulting in a persons wealth would not be prohibited. However gifts, subject to certain limited exemptions (eg reasonable wedding or birthday gifts) made to non-Citizens or permanent residents would be subject to exit wealth tax at 48%.

Non-Canadians would still be subject to some forms of income tax on business profits expatriated from Canada (eg dividend withholding tax, branch profits tax), and on appreciation in Canadian residential properties on an annual mark-to-market basis.

Page 2 of a wealth tax returns lists all of a person’s assets. Generally, any assets owned by a person not on the list would be subject to 100% penalty tax.

See "Valuation" section in FAQ I(8) above.

We believe that every person is entitled to freedom from the fear of where their next meal is coming from and where they will lay their head to sleep at night. NoL Payments provide the most efficient way to achieve this.

For example, the Canadian government recently proposed a plan to automatically file income tax returns for people citing the fact that many people that would be entitled to government benefits are not receiving them because they are either not filing, or not filing correctly. Further, a person “on the bubble” for government benefits may fluctuate between being eligible and not for such benefits necessitating government interactions that - as described about in respect of inaccurate information provide by the CRA - the government does not even have capacity to understand or administer. For a person trying to make ends meet for them and their family, getting through the government bureaucracy is often a time wasting nightmare. Given this, the most efficient system is to provide daily NoL payments to every Canadian citizen and permanent resident, making sure that those who need it get it.

In addition, this amount is also intended to provide a meaningful level of confidence to those that cannot leave “dead end jobs” for fear of not being able to provide basic needs for their dependents. In other words, a person that is “underemployed” can take a chance leaving one job to explore the possibilities of “better” jobs. This should lead to better productivity in Canada by allowing a person to maximize their utility to their best and highest use.

This will also incentivize risk taking and entrepreneurialism. A person can take the risk of starting an unproven business because they know there is a sufficient safety net underneath them.

NoL Payments are intended to be basic needs payments, and only basic needs payments. While there are various statistical measurements such as MBM and LICO do provide some context as to what constitutes “low income”, they do not really provide accuracy as what amounts would generally satisfy basic needs. Accordingly, after a review of various commentary on the subject, we ultimately went with a number that seemed to fit reality. $40/day equals $14,600. For a family of 2 adults and 2 children, this means $43,800. These amounts are simple, and make sense to us.

We also note that $14,600 approximates the Proof of Funds requirement for a sole immigrant to Canada ($15,263), and $43,800 does materially exceed the PoF requirement for a family of 4 ($28,362) - this is the amount that immigration Canada estimates that an immigrant my need to support themselves and their family.

Some necessities of life can be used within a group (eg an apartment)- and accordingly dependents do not need as much. Although we do not think providing full $40/day to each child is a bad idea, we do think it is unnecessary and would put additional pressure on tax revenue generation.

NoL Payments would be funded through 6% of the 12% Wealth Tax. See FAQ "I(7) - What is the basis for the 12% Wealth Tax rate?" above.

No - NoL payments should not be means tested. In particular, we think its simplicity is its greatest attribute: (1) applying for NoL payments would result in many people that need them not obtaining them due to governmental “sludge”, (2) many people would float above and below any thresholds which again would result in those in need not getting access when they need it, and (3) the costs of administration would be minimal (ie every person would get the payment each day unless the person is identified by CBSA as not being in Canada for the entire previous day, and some auditing to make sure that there is no abuse (eg creating fictitious people).

Not making NoL payments for days spent outside of Canada acts as a brake on using NoL payments to fund purchases outside of Canada. Further, many Canadian citizens live outside of Canada, and in our view it would be inappropriate to use Canadian tax dollars to fund those persons. Also, this should not create any meaningful hardship as any person that has the means to travel outside of Canada likely has sufficient resources to miss NoL Payments for those days.

Persons that travel internationally for work will not receive NoL payments for any day not spent entirely in Canada. This preserves simplicity of administration with minimal risk that the lack of payment will result in a person not having sufficient means for the necessities of life (given that employers generally pay for the expenses of employees while on business travel).

One aspect of Necessity of Life Payments that may (or may not) differ from other forms of assistance payments is that it is a payment that is intended to meet the necessities of life only. Although we suspect that NoL Payments could replace or compliment other forms of social assistance (and which we think could result in material administrative savings to governments), those matters would generally be for more local governments (eg provinces) to consider.

The MCT has a dual purpose: (1) incentive to increase Canadian productivity, and (2) to provide cost of living relief to Canadian employees.

Commuting in today’s society is expensive for employees - both in terms of dead time and cash costs. And these burdens seem to be increasing each year as commuting times and distances seem to be getting longer and costlier. With the recent advances in technology, we think that shifting the cost of the burden of reasonable commutes to the employer by mandating a 20% pay top-up for every day that an employer is required to report to a place of business is fair in today’s society. (Another reason we do not think this is unfair is a tradeoff that businesses will no longer subject to income taxes in accordance with Pillar I.)

The fact that businesses will not be required to make MCT payments for days that an employee is not required to report to a place of business (though an employee could still choose to “go into work”) is an incentive for businesses to create processes allowing for the elimination (either for some or all days) of an employees commute - clearly increasing productivity by eliminating an employee’s time and cost of a commute. For businesses that simply cannot implement processes (e.g. onsite wait staff at restaurants), the MCT should not put such businesses at a disadvantage as the business’s competitors should be in the same boat.

Further, we think that decreasing (or eliminating) commutes will also allow employees more flexibility in their living arrangements - for example, a fully remote employee could choose to live in a less expensive location and providing home price relief in expensive markets.

No - the MCT should not put such businesses at a disadvantage as that business’s competitors should be in the same boat.