519-646-2222Wealth (tax it)
The definition of wealth is “an abundance of valuable financial assets” – if you have some money saved up, you own a house, and some other assets you are not meeting the definition of wealth unless you have so many assets that you can not only support your lifestyle but you can continue growing your asset base! Higher income Canadians, earning more than $200,000 per year, with extremely few exceptions, are generally not wealthy. Canadians are carrying far more debt than people living in other countries, we are paying high taxes, and living under the weight of extremely high inflation, all of which impacts our ability to accumulate wealth.
A review of our previous blog articles shows some inflation adjusted comparisons between the years 1996 and 2026. Since Mike Harris devised the Sunshine list in 1996 inflation alone has roughly halved the value of the $100,000 threshold. In fact the list itself acknowledges that in 2025 a full 93% of people named and shamed do not even belong on the list after adjusting for inflation. Of the 404,915 people listed only 28,344 really belong on the list.
The Bank of Canada’s core inflation reports exclude some of the most inflated items claiming: “Extreme Volatility: Items like food and energy are heavily susceptible to short-term, unpredictable shocks—such as severe weather, global supply chain disruptions, or geopolitical conflicts. These events cause sudden price spikes that eventually correct themselves.” How’s that self correction working out on your grocery costs or gasoline prices?
According to the Bank of Canada inflation calculator, $200,000 today, has about the same as $100,000 did thirty years ago. Using that math, if you are thirty-five years of age today and plan to retire at age sixty-five, maintaining your current lifestyle, you will need to double the income that you require today. Make note that we are talking about income that post retirement is steadily draining your assets not accumulating them.
If you plan to retire in twenty years, using the same inflationary math, your expenses will have increased by 66%. If you live for another twenty years following your retirement, inflation alone will have increased your expense by about 133%. Couple that information with the relatively low level of savings and we can watch our assets diminish in value over a few short years. The median value of Canadians’ retirement savings is only about $100,000 today, meaning that poverty is waiting to creep up on you during your golden years.
Successive governments have raided the CPP, losing money to poor investments and appropriating the pool of funds for other purposes. Under a conservative government “2008-2009 (Global Financial Crisis): The fund suffered its largest percentage drop, losing 18.8% in value (roughly $18 billion to $23 billion) over a single fiscal year due to collapsing global stock markets.”
That is not the only time the fund has lost money to speculation: Under Liberal governments “2000-2002 (Tech Bubble Burst): Following its introduction to active stock market investing in 1999, the fund lost hundreds of millions in fiscal 2000, and continued to experience multi-billion dollar losses through 2002 as the tech bubble burst.” and again in “2022 (Market Correction): The fund dropped in value by roughly $16 to $23 billion during the mid-2022 market downturn, largely due to global inflation and rising interest rates“.
Successive governments have diminished the value of the CPP fund and they did so at a time when the country was bracing for mass retirements – just as the biggest population bubble (Boomer) in history was preparing to retire. Today, boomers are sacrificing their own savings and inheritances (from their GI-Gen parents) to allow their children to speculate in a grossly overpriced real estate market.
Boomers have become the target of media pundits who accuse them of having had an easy life with little understanding of recent economic history. In reality Boomers started work in the early 1970s as incomes started their decline and debt escalated to fill the void. Boomers had to compete for everything from a place in college to apprenticeships, and more, they lived through many boom/bust cycles. Much of what the pundits claim they have, simply doesn’t exist.
Many boomers are living on paltry government pensions including the Canada Pension Plane, Old Age Security and Guaranteed Income Supplement. They are dependent on subsidized rental accommodations and food banks. As we will see below the wealth transfers that we hear are imminent aren’t common, since the majority of wealth is held by a very small percentage of the population.
Both government and private pension funds have fallen dramatically in recent years both directly and indirectly through less savings and the impact of inflation. You should not be surprised to learn that 15% of the full-time Canadian workforce is comprised of retirees. Less than half a million Canadians are earning more than $200,000 per year, and the vast majority of them do not meet the definition of being”wealthy“.
The Parliamentary Budget Officer (PBO) believes the Canadian wealth spread looks something like this:
Top 1%: At least $7.4 million per family
Top 5%: At least $2.8 million per family
Top 10%: At least $2.0 million per family
Top 20%: At least $1.3 million per family
Sounds wonderful doesn’t it? Yup! Until you realize “These figures account for all assets (such as real estate, investments, and savings) minus any outstanding liabilities. Wealth in Canada is highly concentrated, with the top 10% of Canadian households holding over half of the country’s total net wealth.” also according to the PBO. A quick glance at the spread depicted above also tells you that the top 1% own about 20% more of the wealth than the next 19%. Your house, even mortgage free, is not an “abundance“.
Did you also notice the PBO categorizes the “Top %” wealth brackets as “PER FAMILY” some folks might only see the % and the $ value for each bracket and not realize they are talking about a group of people. The PBO describes a family as comprised of a group of two or more individuals living in the same dwelling and related by blood, marriage, common-law, or adoption.
Now let’s revisit some of the definitions. A family could be comprised of you, your spouse, one or more of your children, your parents or your spouse’s parents or any other combination of related people living in one dwelling. Beware of the Granny Suite that moves you up the percentile scale, it looks good for the government’s statistics but it doesn’t help you fund your lifestyle into retirement. Oh, and it could lead to you paying capital gains taxes on your principal residence.
Assuming your family is in the top 10% ($2,000,000+ in assets) of wealthy Canadians, and you all decide to cash out – selling your house(s) and collapsing your investments, LIF’s, RRSP’s, Mutual Funds, and Insurances, etc., how much tax would you all have to pay and what would you each be left with? Consider for instance, how and where would you all live? How long will the money last your family? Don’t forget about the inflation impact noted in the third paragraph above.
Growing wealth requires that you start out with wealth (abundance) to grow, after all you can’t grow something that doesn’t exist. Interestingly, most of the world’s richest people started with more wealth than the average person, the rags to riches stories of Hollywood are just that, stories. There are very, very, few wealthy people who are truly “self-made“, most of today’s wealthy people started with seed money from generational wealth transfers.
It is extremely challenging in the face of rampant inflation, skyrocketing taxes, and overwhelming debt, to save enough money to really consider it “wealth”. The average (mean) Canadian reportedly has about $272,000 saved for retirement, but beware of the skewed data – remember only about 7% have more than that value, and many retirees, boomers, are gifting their pensions to their adult children to buy houses or pay off debt. Also be mindful that some of those “assets” (RRSPs converted to HBPs) do not actually have any money in them – they are a tax liability under they are repaid in full.
Here’s the twist, how can you become wealthy if 43% of your annual income disappears into some form of taxation, and real inflation is driving down your spending power? Meanwhile, wealthy people pay little or no income taxes and their wealth multiplies faster than your income ever will.
According to Forbes, the richest man in the world has seen his wealth increase as follows:
Elon Musk’s net worth is approximately $800 billion, but it has fluctuated wildly since 2020 due to changing valuations for his companies. The year-over-year progression of his estimated net worth follows this trajectory:
2020: ~ $27 billion at the start of the year, ballooning to ~ $170 billion by year-end due to Tesla’s massive stock surge.
2021: Peaked at over $300 billion late in the year, making him the first person to cross this threshold.
2022: Dropped to roughly $130 billion by the end of the year as Tesla shares fell and he acquired Twitter.
2023: Rebounded to roughly $180 billion by late year.
2025: Reached record heights of over $500 billion in October, and closed the year near $677 billion due to SpaceX tender offers.
2026 (Current): Sits around $800 billion to $830 billion, fluctuating daily based on Tesla and SpaceX valuations.
How did your “income” rate compared to his “wealth“? In 2020 the average Canadian income was $54,200 to have maintained par with Musk’s wealth growth you should be earning $1,605,946 and also not be paying taxes. But that is neither of those things are true! The number of wealthy people is shrinking fast, fewer people own more and more as wealth inequality continues to rise, and the multiplication of the assets they own is skyrocketing.
If your family is fortunate enough to be in Canada’s top 1% of wealthy families you would need to combine your wealth with 108,107 similar families in the same bracket in order to equal Elon Musk’s total wealth. Think of it another way, if you have $1,000,000 in assets you are one million better off than the homeless guy sleeping under the municipal bridge. Yet, you are 800,000 million away from Elon Musk, and you have no chance of catching up ever!
Ironically, when the prospect of taxing wealth is proposed, it the working and middle class who fly to the defence of the wealthy. Perhaps this fear is derived from over a century of exploitative taxes that have burned the lower classes. Yet, large corporate interests do not only hold hard assets but they are all sitting on an abundance of cash – combined the top ten richest corporations are sitting on about $1.25 trillion in cash.
Musk isn’t the only billionaire who doesn’t pay taxes, Bill Gates and others get tax relief by donating money to charitable foundations – ironically they are donating to their charitable trusts that have full over and will direct the money to be spent in a way that is beneficial to their own interests. Jeff Bezos even gets a Child Tax Credit while paying zero taxes. These people are wealthy, and have an abundance, people earning a few hundred thousand dollars a year are no where near being in the same category.
If you have ever played Monopoly, you will know that eventually one person owns all the assets, you will also know there are no more players and all the assets must go back in the box for redistribution in order for the game to be played. In the past five years the largest single transfer of wealth has occurred but it has all gone in the wrong direction.