6.2.5 Determining Economic Equality
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6.2.5 Determining Economic Equality
© Image of a billboard advertising luxury apartments in a Brazilian slum Copyright 2009 Johan Klovsjo. Quotation from the Dalai Lama.
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What is "equality"?
- The United Nations Universal Declaration of Human Rights says "All human beings are born free and equal..."
- The Canadian Charter of Rights and Freedoms says "Every individual is equal ..."
- France's Declaration of the Rights of Man says "Men are born and remain free and equal..."
- The U.S. Declaration of Independence says "We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness..."
Reality shows us that although it may be a common belief that people are equal, they certainly are not born with the same skills and abilities that will help them prosper equally. People are not all born into homes or communities where they have all the same advantages and opportunities.
Political systems in liberal democracies today clearly outline equal voting rights for all adult citizens. This reflects modern liberal values. Every person has the right to take part in an election. Human rights are clearly defined in law and protected in practice in almost every nation of the world. But what about economic equality? Is it protected? Should it be?
© ADLC
Economic systems in liberal nations are designed to give people equality of opportunity, which reflects classical liberalism. Under Adam's Smiths ideas about the invisible hand, the economic freedom of the free market should help everyone get ahead. Does it work? History has shown that while everyone may be born in a society that believes anyone can succeed, the reality is much different. Modern liberal democracies implemented laws that reflected equality of outcome or equal treatment. As a result, many of these same nations also adopted some collectivist values, which includes economic equality.
Let's take a look at the United States. The "American Dream" is that those who work hard will prosper. According to the Pew Economic Mobility Project, from the end of World War II until the mid 1970s, the average American family's income doubled. From 1973 until 2007, it grew by 22%- and with two incomes per household, rather than the one income that had been the norm in the past.
In 2004 men in their 30s actually earned 12% LESS than their fathers had done at the same age. By 2008, the typical family had a lower income than it did in 2000. The gap between rich and poor continues to increase. A Brookings Institute study shows that the key factors behind income equality are family background, education level, and having a mother who received her education and married before having children.
Income inequality is measured by something called the Gini Co-efficient. The Gini co-efficient is a mathematical way to calculate anything with a distribution, although it is usually used to measure the distribution of wealth. The lower the number, the closer people are to having the same income.
The map shows you that people in Canada and Europe have incomes that are closer to one another, while in the United States there is a larger gap between rich and poor.
On this chart, income equality is shown in green, moving to red for the most unequal
distribution. The most extreme level of inequality is shown in red.
"World Bank Gini Map" by Maketrad (based on the 2019 World Bank Gini coefficient data), Courtesy of Wikimedia Commons, Share Alike 4.0
"World Bank Gini Map" by Maketrad (based on the 2019 World Bank Gini coefficient data), Courtesy of Wikimedia Commons, Share Alike 4.0
© ADLC
This graphic shows that different economic systems use different methods of achieving income equality for the common good.
Progressive taxation and social programmes that promote health and education and provide assistance for those who are unable to work are methods used in modern liberal economic systems to "share the wealth." This is a way to redistribute the wealth
in a society to ensure a minimum standard of living.
The government of Canada uses progressive taxation, so that those who earn more money pay a higher percent in income tax. In 2014, federal income tax in Canada was 15% on the first $44,000 of taxable income ranging up to 29% of taxable income over $138,586.
In addition, each province and territory in Canada has income tax for its residents. In Alberta, residents pay 10% for the first $126, 625, and those who earn more are expected to pay anywhere from 12% to 15% of their income in taxes. Albertans who make more than $303,900 a year will be taxed 15%. For instance, in BC residents pay 5.06% on the first $37,869 of taxable income, up to 16.8% on the amount over $151,000.
Many provinces, states and nations also impose a variety of consumption or "value added" taxes in the form of sales tax. In Canada, the GST or Goods and Services Tax is 5%.
Thus, the Canadian taxpayer most definitely supports financially the programs of the Canadian government. In the European Union, the VAT (Value Added Tax) is 15%. In the United States, each state has its own sales tax ranging from 0-13%.
The government of Canada uses progressive taxation, so that those who earn more money pay a higher percent in income tax. In 2014, federal income tax in Canada was 15% on the first $44,000 of taxable income ranging up to 29% of taxable income over $138,586.
See the different types of taxes that make up the Federal Government's revenue, which is then spent on services and programmes.
Composition of Revenues for 2018-2019, Public Accounts of Canada
Courtesy of
https://www.canada.ca/en/department-finance/services/publications/annual-financial-report/2019/report.html
In addition, each province and territory in Canada has income tax for its residents. In Alberta, residents pay 10% for the first $126, 625, and those who earn more are expected to pay anywhere from 12% to 15% of their income in taxes. Albertans who make more than $303,900 a year will be taxed 15%. For instance, in BC residents pay 5.06% on the first $37,869 of taxable income, up to 16.8% on the amount over $151,000.
Many provinces, states and nations also impose a variety of consumption or "value added" taxes in the form of sales tax. In Canada, the GST or Goods and Services Tax is 5%.
Thus, the Canadian taxpayer most definitely supports financially the programs of the Canadian government. In the European Union, the VAT (Value Added Tax) is 15%. In the United States, each state has its own sales tax ranging from 0-13%.
For a more detailed look at progressive tax rates in Canada, visit Revenue Canada
Canada also uses something called "transfer payments" or "equalization payments that redistribute tax dollars from wealthy provinces to less wealthy provinces for their use in social programmes. These practices are not favoured by those who value
greater economic freedom. However, they do help ensure that citizens across the country receive the same level of care or service regardless of geography.
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"The Progressive Income Tax: A Tale of Three Brothers", PragerU, You-tube