Closing the Gap: Tax Policy Solutions to Top-End Income Inequality in a Globalized Canadian Economy

Abstract

Rising income inequality is a pressing political issue in Canada and internationally. Since the 1980s, the evolution of the global economy and shifting tax policy frameworks have generated a steep rise in inequality characterized by runaway incomes at the very top of the spectrum and a growing role played by capital income. Given that tax policy is one of the primary tools available for governments to structure income distribution, reform is needed. However, tax policy solutions to rising inequality must address the uncertainty surrounding the ability of governments to take effective action in a globalized world economy. This policy brief puts forward viable reforms. The Canadian federal government can mitigate income inequality domestically through targeted corporate and personal income tax reforms and a strengthened enforcement regime.