CKNW Editorial
for August 14, 2001

Being a millionaire these days is not all it’s cracked up to be. I say that without, I might add, personal experience since I’m not one … my wife and I combined aren’t one. Yesterday one of my guests, Steve Kerstetter from the Canadian Center for Policy Alternatives – a left wing think tank in opposition to the Fraser Institute – told us that there are nearly 57,000 millionaires in British Columbia and that this was a bad thing.
First off, let me agree with Steve that the gap between the rich and poor is growing at an alarming rate – world wide, not just in British Columbia. I’m just not so sure that getting rid of millionaires is the answer.

But first, let’s look at what a millionaire is. If a person is, say, a bare millionaire he probably has about half of that in his house leaving $500,000 to earn money for him. If he retires, and doesn’t want to move, he will have about $26,500 including government pensions per annum, before taxes, to keep him and his wife or her and her husband. No doable, I would submit. Suppose he sells the house and puts all his million bucks into money earning adventures. That will give him something between $50-60,000 to live on but remember, he doesn’t have a house any more. You may well think that this is still pretty good – after all the kids are gone – but good as it may be, it sure as hell ain’t riches. You don’t maintain too many Jaguars, yachts and summer homes on that kind of money remembering, of course, that you’re still paying income taxes.

The average of these millionaires is, however, about $2.7 million. Now you are talking something more manageable. But I would suggest that this probably includes a home worth ¾ of that leaving you with, perhaps, $100,000 a year before taxes. Pretty good, no doubt about that. But the home will have to be sold and the life style curtailed.

Many, dare I speculate the majority of these millionaires became that after a long life of hard work and saving where others were spending. A great many of them, I daresay, held pretty ordinary jobs.

No sympathy? Well I’m not pleading for sympathy for the average British Columbia millionaire only pointing out that he or she may be comfortable but they’re no Rockefeller, Getty or even Pattison.

The question is the gap between rich and poor, the haves and the have nots. How is that to be narrowed and is it narrowed by taking money from our millionaires?

Of course this would be a way to go about it … on paper. Make, say, a 50% levy on all who have a million bucks or more and give it to the poor. The problems with that are obvious. First, you would create a whole new class of poor. The so-called rich would have to sell their home to pay the impost but that group would not include the real rich who would have found a way to get their money out of here. More importantly, if you take away from people the chance to make a million dollars, who is the free enterpriser now creating the jobs? But more of the answer comes when you take up Steve’s suggestion of a return to death duties. (Incidentally, if you’ve looked at what the province charges for probate fees these days you might think we already have death duties.) But what happens when you have an inheritance tax? I was around practicing law when we had that tax and I can tell you one group of society that paid no death duties or paid minimally – the rich. They didn’t get that way by being stupid. No matter how airtight the laws, the wealth with their lawyers and accountants will find ways around them. The simplest solution is to get the money out of the taxing jurisdiction. If it’s a provincial death duty, move your estate to Alberta. If its federal, go to the Caribbean, the Isle of man or Liechtenstein. Another way is through a gifting program using a trust so that the estate is distributed before death with the income off it there during the testator’s life. Governments found that as they closed one loophole, another would appear. Believe me, it’s like a pie plate – push down one bump and another pops up.

It’s not the real rich who will suffer but the widow who finds she must sell the family house in order to pay the death duties.

Perhaps it might be better to ask if taxing the wealthy helps the poor or whether perhaps the poor must be helped in other ways.

The gap has come about for many reasons but two of them, and they are linked, are the computer and the dramatic rise of tariff-free trade. Both of these things are good in the longer pull and in fact create jobs – the trouble is, they don’t produce them now. Computers are our answer to the cotton gin and the threshing machine. Labour is replaced by machines but, given time, the machines permit people to make even more money – the operative phrase being "given time". Tariffs, always the left’s panacea, are good news in the near term but fatal in the long term. Argentina, once one of the world’s richest nations, became a basket case because it subsidized its own industry through tariff barriers. This meant machinery became obsolete and research was nil – why spend money on new machines and research when you have a captive clientele who can’t shop elsewhere because tariffs have made imported goods prohibitively expensive. Argentina’s ability to trade virtually vanished – she had nothing of quality to sell and no money nor the will to pay high duties on things from abroad. Canada nearly went this route with cosseted and tariff protected industry in Central Canada hiding behind tariffs and rotting.

I don’t pretend to have any, much less all the solutions. It seems to me, though, that we mustn’t look for extremes. There is no point, it must be said, to trying to abolish poverty. The poor, Christ told us, will always be amongst us. If a 16 year old knocks up his 15 year old girl friend, quits school and goes to work for Macdonalds there is little the rest of society can do. Young as he may be, he’s made a choice and it’s a lousy one. We should help him not get into that spot, and once in offer him ways to recover his education but there is a limit on what society can do to help those who make choices that put themselves beyond help.

What we can do, is better educate – not just in the things that help get jobs, though that is of critical importance, but in how to live through teenage years and become equipped to face life. Apprenticeship programs, long been the cry of labour, must be developed. Old ideas never yet tried such as job sharing have to be considered. Private money into healthcare thus releasing more public dollars is something we must consider without our traditional blinkers on.

You may think this paradoxical but yes, better and much more social housing must be available. Poverty begets poverty. And, it may well be that after all’s said and done new tax revenues must be found.

So, you see, I don’t disagree entirely with Steve Kestetter. There is too great a gap between rich and poor – that applies to nations as well as people – and it may be that those who have may have to give more. But a policy of soak the rich has been tried over and over in almost every jurisdiction on this planet and, as a long time solution it just doesn’t work.

Our challenge is not to find and articulate the problem for we all know what that is – but to locate and implement the solutions – solutions that not only improve the lot of the poor in the short term but make for a strong economy in the long term.