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While the COVID-19 pandemic meant layoffs or reduced hours for workers, Canada’s richest CEOs recorded their second-best year ever for compensation, according to a new report from the Canadian Centre for Policy Alternatives (CCPA).
Canada’s 100 highest-paid CEOs saw their pay increase by an average of $95,000 in 2020 compared to 2019, according to the report.
The highest average CEO earnings for 2020 were $10.9 million, with the highest-ever average of $11.8 million recorded in 2018.
The report says that by noon on Jan. 4, the first official working day of 2022, the average CEO would have already earned more than the average worker makes in a year.
“The gap between what CEOs make and average workers make is much higher than it's been historically,” said David Macdonald, senior economist with the CCPA and author of the report, adding the findings show “when companies or the economy does badly, CEOs don't, they're insulated.”
The effects of this inequality are visible in our communities, said NDP finance critic Daniel Blaikie.
“What today's report tells us is that people at the top are able to maintain their income, in fact, their incomes are growing by massive amounts while so many other people are struggling,” said Blaikie.
“We're not going to be able to correct that problem — which is a problem of distribution of income — and all the problems that it creates, like more people living on the street … without thinking seriously about how we tax back some of that wealth at the top.”
While some wealth-tax critics, including research out of the Fraser Institute, say the measures lower long-term growth, discourage savings and investments and are costly to administer and collect, Blaikie calls those “defeatist concerns.”
“What are we supposed to do, just live in serfdom and send them our paycheques?” he asked. “There's got to be a way to make sure that you don't end up with a very tiny part of the population having most of the power and wealth … These are really important issues that I think go far beyond just questions of taxation. They're also questions of power and democracy.”
A new report from @DavidMacCdn at the @ccpa found Canada's richest CEOs recorded their second-best year ever for compensation in 2020, pointing to widening inequality in Canada. #cdnpoli #wealthtax
To combat inequality, he says we need a government that will apply itself to figuring out how to get people to pay their fair share and “what's important is that we start trying these things.”
In the 2021 election, a one per cent tax on wealth over $10 million was a key plank of the NDP platform, and previously, NDP Leader Jagmeet Singh made an opposition day motion to implement a one per cent tax on wealth over $20 million.
Macdonald’s report found 30 of the top 100 highest-paid CEOs headed companies that received the Canada Emergency Wage Subsidy (CEWS), one of which is Canada’s highest-earning CEO David Klein of the cannabis company Canopy Growth.
Klein earned just over $45 million in 2020 and the runner-up with nearly $27 million in compensation was Jose Cil, CEO of Restaurant Brands International, which owns Tim Hortons, Burger King, Popeyes and Firehouse Subs.
The report says in addition to those 30 CEOs whose companies either directly or indirectly received the CEWS, 14 had modified bonuses, and five both had modified bonuses and received the subsidy.
“So, you've got sort of half of the top paid CEOs who are in there because they changed their pay or because the feds were supporting them, and that, I think, is pretty revealing,” said Macdonald.
He says because over 80 per cent of CEO pay comes from bonuses, theoretically if a company does really well, then CEOs do really well, and if a company does badly, CEO bonus pay will reflect that.
But the report reveals this is not the case, with many high-paid CEOs maintaining huge earnings and simultaneously receiving government subsidies.
Macdonald’s report makes five recommendations, including introducing a wealth tax and implementing higher top marginal tax brackets. It also calls to eliminate the capital gains inclusion rate loophole and the stock option deduction for large companies.
Blaikie says we need to act quickly to curb widening inequality.
“It's a trend that seems to be accelerating because the more wealth that this small number of people at the top have, the more power that comes with that and the greater their ability to try to reinforce systems that direct wealth to themselves instead of fairly to everyone,” he said.
“That's why we continue to push and continue to talk about all the various ways the government could not only be raising some more revenue for itself and for the programs that we all depend on, but also to have a fairer distribution of wealth.”
If a wealth tax were introduced, Blaikie says those being taxed would still be extremely wealthy compared to most Canadians and “it's not like anyone's asking them to go live on the street themselves or something like that, we're just asking that they recognize all of the public investment they benefit from as part of how they make their money.”
Finance Minister Chrystia Freeland has now been tasked with establishing a minimum 15 per cent tax rule for top-bracket earners, which would include an attempt to prevent the wealthiest Canadians from reducing their tax burden through various tax planning loopholes.
She was also told to invest in the Canada Revenue Agency to combat tax avoidance, and raise corporate income tax for banks and insurance companies that make more than $1 billion.
The Liberals raised the tax rate from 29 per cent to 33 per cent for people earning more than $200,000 in their first year in office. Because of inflation, the top tax bracket now starts at $216,511.
The real value of reports like this are the questions they raise, said DT Cochrane, a policy researcher with Canadians for Tax Fairness (C4TF), a non-profit and non-partisan organization that advocates for fair and progressive tax policies.
“Why are these almost overwhelmingly white men making these obscene salaries? … Does anyone really deserve $11 million a year? Did they really do anything to earn an extra $95,000 a year?” Cochrane asked.
“You don't have to think about it for very long for the answer to be an obvious ‘no.’”
– With files from The Canadian Press
Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer