Instead of taxing the 1% more, we should thank them

Instead of taxing the 1% more, we should thank them

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To qualify as part of the top 1% of income earners in Canada in 2010, you would have to had earned $201,400. (In the United States, the income cut-off was $352,000. In my home city, Calgary, it was $539,000). This top earning group of Canadians took home about 10% of the total national income in 2010, yet they paid 21% of total federal and provincial income taxes. (This is not the reason we should be grateful to them, however, as I will argue below).

The Canadian cut-off figure of the top 1% of income earners is not shockingly large; even the median income for that group is just $283,400. Only 0.1% of the top earners made $685,000 or more and 0.01% earned $2.57 million or more. To label the entire group as the “rich” seems an exaggeration, and they hardly are “exploiters” living off the work of others.  Who are the 275,000 people who belong to the 1% in Canada? A 2012 study by Professor Nicole Fortin and co-authors at the University of British Columbia reveals that besides CEOs and senior executives (who represent 14% of the top earners), the group consists of dentists, physicians and other post-degree holders (30%) and professional, scientific and technical employees (16%). The rest represent diverse fields, but according to Prof. Fortin, 70% of the group earns income from wages and salaries as opposed to investments. And 52% of the 1% work at least 50 hours a week, compared to less than 20% for the 99%.

So why do I argue that these “rich” people should not be taxed more and why should we thank them? The 1% are producers: they contribute to the economy through their productive work in the form of goods and services and direct and indirect employment opportunities they create. Their investments help to fuel economic growth and thus more wealth creation, which benefits not just these producers themselves but everyone else who participates in economic trade, even at a modest level. The more we tax “the rich” the less they are able and motivated to invest in further productive activity, to the disadvantage of all. This is the reason for writer and Forbes.com columnist Harry Binswanger’s suggestion that those who make $1 million or more annually should be exempt of income tax altogether. Their productive contribution to the economy is so great that it should not be curtailed and penalized by income taxes (which are spent by politicians and government bureaucrat, distorting the free market and restricting wealth creation).

Instead of taxing the 1%  more, we should tax them less—and thank them for their productivity.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.