Tax Policy for a Rent-Rich Economy

Abstract

I argue that a significant amount of income consists of windfall gains or rents. Rents accrue to firms and their owners, as well as to asset owners. They also accrue to income earners due to windfall changes in wage rates and rent-seeking opportunities. High-income persons obtain a disproportionate share of rents, and I investigate the consequences of that for Canadian tax policy. Some tax reforms suggested include adopting an allowance for corporate equity business tax system, abolishing the dividend tax credit and preferential treatment of capital gains, limiting the use of tax-free savings accounts, increasing the progressivity of income taxation, and adopting a guaranteed basic income.