Montréal, August 27, 2020 – Now that the pandemic has pushed public spending to record levels, governments will undoubtedly be looking for more revenue to pay down some of their deficits. The temptation to ask the wealthiest taxpayers to shoulder more of the burden will be stronger than ever. But a study released today by the Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) reveals that governments would do better to rely on other strategies to refill their coffers. “Our analysis clearly shows that the wealthiest taxpayers generally manage to elude tax increases,” says Robert Gagné, CPP Director and co-author of the study. “Not only can they reduce their incomes to escape the increase, but they often do so to such an extent that they end up in a lower income class.”
To carry out this analysis, the CPP researchers developed a methodology to isolate the effects of tax rate changes from other factors (economic growth, recession, etc.) that could also have an impact on tax revenue.