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Glittering Vancouver is now the poverty capital of Canada

This dubious distinction points up how severe income inequality has become in Canada and the U.S. New evidence shows the terrible toll on people and economies such widening gaps can have.

Vancouver, as seen from Queen Elizabeth Park.

Vancouver, as seen from Queen Elizabeth Park. Flickr

Riotous times in Vancouver.

Riotous times in Vancouver. Wikipedia

Tangled up in its green lifestyle, towering beauty, and mining-headquarters millions, Vancouver has a new and dubious honor: it's the poverty capital of Canada. We have the highest share of our population in the lowest income bracket compared to any other city in Canada.

It’s a reflection of the gap between rich and poor that has been growing faster in Canada than in the U.S. since the mid-1990s — especially in B.C. Within Canada, low income rates rose higher in B.C. than in any province except Alberta in the latest recession, according to a new report from the Conference Board of Canada, which typically focuses on business and productivity issues. Vancouver is one of only three cities in Canada whose low income rates didn’t go down between 2000 and 2009. BC's child poverty rate is still the highest in Canada for 8th year in a row. And Vancouver, by one measure, is the third least affordable city in the world when it comes to housing.

Aside from the obvious moral questions of fairness, high inequality can diminish economic growth if a country is not fully using the skills and capabilities of all its citizens, or if it undermines social cohesion and increases social tensions. The World Economic Forum’s latest assembly of global experts recently listed inequality as one of the five leading challenges facing the world over the next 12-18 months.

Broadcaster Bill Moyers, in a much-clicked interview on Crosscut, is also sounding the alarm on this topic: “Today it’s the staggering inequality between top and bottom that threatens the fabric of our country. One of the greatest of our justices, the late Louis Brandeis, warned that 'You can have wealth concentrated in the hands of a few, or democracy, but you cannot have both.'  Now the Supreme Court has opened the floodgates for millionaires and billionaires and giant corporations to pour unlimited amounts of cash into our elections, consolidating their hold on the political process and the corporate state.”

The underlying assumption of every current political leader’s desperate quest for job creation is that a rising economic tide floats all boats. Actually, not. In Canada, the Conference Board study notes that the gap between the real average income of the richest group (top 20 percent) of Canadians and the poorest group (bottom 20 percent) grew from $92,300 to $117,500 in the last three decades. “Thus, while the poor are minimally better off in an absolute sense, they are significantly worse off in a relative sense,” says the board’s report. Median incomes in Canada (half of the people are above, half below, corrected for inflation) have grown by a mere 5.5% in 33 years. The typical Canadian’s economic fortunes have basically flatlined for three decades.

By contrast, the richest 1 percent of the population (average income $405,000) took home almost a third of all the growth in incomes in Canada from 1998-2007, mostly due to lavish corporate compensation packages. To cite just one extreme example: the founder of Shaw Cable, one of Canada’s protected telecom giants, recently retired with a $6-million-a-year pension. In 17 hours he will collect the maximum yearly retirement benefit for a pensioner collecting her Canada Pension Plan ($11,520). In the U.S. today, the wealthiest 1 percent of Americans have a greater collective net worth than the bottom 90 percent.

Explanations range from market forces and globalization to dwindling unionization rates, stagnating minimum wages, and reduced personal and corporate income taxes.

Why does this matter? Is this just the stuff of envy and entitlement?

It matters because income disparity turns out to be a leading indicator of a society’s well-being, more than average income. When it’s out of whack, the vast majority of people, including the financially well-off, suffer. Above a basic level of economic prosperity already achieved in Canada and the U.S., there is no relationship between average income and social well-being, whereas there is a strong relationship between levels of inequality and social well-being.


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Comments:

Posted Mon, Oct 3, 7:26 a.m. Inappropriate

An interesting piece. There is no doubt that inequality---and perceptions of inequality and unfairness---are contributing to social unrest not only in the U.S. and Canada but, currently, in Europe as well. One thing Tea Partiers and Wall Street protesters have in common is their perceptions that ordinary people are getting screwed by self-serving, callous people at the top of the political, financial, and economic pyramids.

Ladner could spend more time studying economics, however. So-called harmonized sales taxes are not major contributors to prosperity around the world. Moreover, there are not two paths to equality, as he suggests--the Japanese and Swedish models, both of which enforce it. The healthier path is the one once pursued, but recently lost, in the U.S. That is the model in which economic growth lifts those at the bottom as well as at the top and all have the opportunity to rise. (Another way to put it: In the U.S., always a floor protecting the vulnerable but never a ceiling impeding the creative and enterprising).

It is a particularly bitter pill to swallow, in the current downturn, to witness the unbridled greed and arrogance which have become the norm among financial executives who helped cause the crisis and business executives who have failed their shareholders and employees. Americans have never been focused on equality per se but, rather, on fairness and justice. When these are missing, the social compact is breeched.

Posted Mon, Oct 3, 7:58 a.m. Inappropriate

The impacts of social inequality on various parameters of public health, are explored in interviews woven an interesting film entitled "Zeitgeist: Moving Forward," which posted here:

http://www.youtube.com/watch?v=4Z9WVZddH9w

Spoiler alert: This film is very long (2.5 hours) and expresses quite a number of poorly articulated viewpoints on potential solutions to urgent global problems including overpopulation, natural resource depletion, climate change, etc. Nontheless, the interview segments with Dr. Mate and other social scientists are well worth watching. Many points the film argues about social disintegration in the advanced nations seem prescient in light of the rising social inequality protest movement that is beginning to find its voice by articulating "We Are The 99%," etc.

Mud Baby

Posted Mon, Oct 3, 9:09 a.m. Inappropriate

Unmentioned in the article is the dynamic of two income households vs. one income households. If equality is the goal then until every family has one job that is sustaining(in the US that's @ $20 hour+) by choice households should limit themselves to one job per family. The top rich and the bottom poor have remained stable. The great divide is between families with one income vs. families with two.

chapala21

Posted Mon, Oct 3, 9:40 a.m. Inappropriate

Part 1

From the piece:

In Vancouver, one intriguing explanation for the recent referendum defeat of the Harmonized Sales Tax (HST) is that lower-income voters were fighting back against the growing income split. A key feature of the revenue-neutral tax was that it would shift some of the tax burden from businesses to consumers.

By all accounts this would stimulate the economy, as evidenced by the implementation of similar taxes in the vast majority of countries in the world. That, in turn, would lead to more jobs for everyone, according to virtually all the economists commenting on it.

This guy's premise is flat wrong. High sales taxes do not stimulate economies – we are proof of that.

We’ve got about the highest sales taxes in the country here, and the state’s economy and the region’s economy both are lousy.

The real unemployment rate around here is about 17%. One key measure of overall economic activity (the state “Revenue Act” tax receipts) dropped significantly beginning in 2008 and it has recovered now only to 2006 levels.

Who around here is doing well? AMZN, MSFT, BA – our multinational corporations that don’t pay (or “collect and remit”) our high state or local sales taxes to any significant degree in light of their huge revenues. THEY don’t care about the state economy – they don’t have to. The other significant entities in this state with increasingly-fat revenue streams include public employee unions.

crossrip

Posted Mon, Oct 3, 9:42 a.m. Inappropriate

Part 2

The state and local political leadership around here has implemented really high sales taxes for the past several decades. It has resulted in an oppressive tax regime that harms the least well-off and encouraged a growing gap between the rich and the poor. Nowhere has this been more evident than the fevered zeal that high regressive taxes have been imposed in the name of transit.

No, Virginia, having bus and train service does NOT mean you should be forced to pay a 1.8% sales tax rate (upping the total to 9.5%), plus car tab taxes, plus property taxes.

Take as examples how smarter, more frugal, and less abusive peers pay for buses and trains. The Twin Cities and Portland come to mind. Those metro areas’ leaders do a great job of providing transit – especially light rail – to people and businesses at NO regressive tax cost targeting people.

In the Twin Cities they built out a new light rail system from downtown to the airport (with a tunnel) in just a couple of years in the mid-2000’s. There was NO new local taxing for that. About the same population is served as in Sound Transit’s area (2.8 million) but just check out how no long-term bonding and no new taxing was used there for light rail:

http://www.metrotransit.org/facts-about-trains-and-construction.aspx

The new local taxing associated with ST2 will be about $85 billion over the next forty years, as required by the terms of Sound Transit bond sales contracts. That’s a terrible way to finance trains and buses – no other government leaders do that to their communities. Punishing people financially is the name of the game here though.

TriMet serves three counties around Portland. It only needs about $230 million in local taxing each year to provide expanding bus and rail systems and services to roughly the same population as the Sound Transit taxing area. The TriMet financing plan imposes taxes on businesses directly. The average family there pays $0 in direct taxes for transit each year. The way it was designed here though is nasty: Sound Transit and Metro taxes cost the average family of four here $500 every year, and that amount is set to increase for decades. Oh, and the Seattle TBD is putting car tab fees on top of that ($20 in new annual taxes per vehicle per year, and maybe another $60 per vehicle per year if voters approve the thing at the November general election).

Unlike any of their peers the bus and train services providers here impose crushingly-heavy regressive taxes. The details are disgusting. Taxes targeting individuals and families in the name of transit are very high. Metro obtained (mostly sales tax) tax increases in 1980, 1993, 2001, 2006, and this year. Sound Transit obtained very high sales tax powers twice recently. All of those tax hikes were designed by the political leadership to target individuals (for the most part).

So where’s the “stimulated economy” around here that the author of this piece thinks should be happening? Hint - his thesis is bunk.

crossrip

Posted Mon, Oct 3, 9:43 a.m. Inappropriate

Part 3

This area is the poster child for how exceedingly heavy regressive taxing (especially in the name of transit) is bad for an economy.

Metro, the transit governments in Pierce and Snohomish counties, and Sound Transit will confiscate something on the order of $1.5 billion in local tax revenue this year alone. All the peers do a great job of providing bus service, and expanding train systems, with far less annual local tax revenue:

- TriMet (Portland) - $233 million;

- DART (Dallas/Fort Worth) - $385 million;

- San Diego Metropolitan Transit System - $100 million; and

- RTID (Denver) - $241 million.

There is no excuse for that high taxing level; it’s many times higher than in the peer metro areas.

Not only are dedicated transit taxes too high here, they are the wrong kinds of taxes. The 1.8% sales tax for buses and trains, plus existing car tab taxes and Metro’s property tax, are designed to target people. That’s exactly what we don’t need now. Those regressive taxes act as an anchor on consumer spending, and it is consumer spending that pulls areas out of recessions.

Moreover, consider how much of the regressive tax revenue confiscated for “transit” is lost to the local economy, immediately. Sound Transit can’t ship sales tax revenue out of the local private sector fast enough. It makes huge payments to institutional bondholders, bankers, non-local contractors, and multi-national engineering firms. Vast sums are sent off to BNSF and Amtrak. Oversees contractors get hundreds of millions of dollars for railsets and tunnel boring machines. The size of Sound Transit’s payments to entities such as other local governments, state governments, and indirectly to unions are staggering – far larger than its peers make. That kind of taxing and spending is terrible for the local economy.

Want to elect smarter, more frugal individuals onto Sound Transit’s board to get better results out of that local government? Tough nuts. It was designed to be entirely unaccountable to people. That means its treatment of the public – especially in a financial sense – will deteriorate.

The author of this piece posits that higher sales taxes would stimulate economic activity. The Puget Sound region is an abject example of the utter fallacy of that noxious premise.

crossrip

Posted Mon, Oct 3, 10:26 a.m. Inappropriate

Oregon has no sales tax and an even more lousy economy. So what does that prove? You can't isolate one factor and pin the whole economy on it. Sales taxes might be regressive, but they are taxes on consumption, therefore ways of steering more money into savings and investment. Europe, through the VAT, has exceedingly high sales taxes (and good transit).

Posted Mon, Oct 3, 11:07 a.m. Inappropriate

Sales taxes might be regressive, but they are taxes on consumption, therefore ways of steering more money into savings and investment.

Sales taxes target what little discretionary spending power individuals and families in the lower half of the wealth continuum possess. When an underemployed mother buys the new shoes, pants, towel, light bulbs and toothpaste her child needs she pays an extra 10% here. That takes food off her table, makes meeting rent and utilities obligations more difficult, etc. It does not increase her savings and investment. You do not understand the precarious financial situations in which many, many families in this region exist, and you do not understand how regressive sales taxes exacerbate the widening gap between rich and poor.

That's your "good policy" explanation for high regressive transit taxing (it steers money toward investment and savings)? What we need now is MORE consumer spending locally. That will bring jobs and increase the dollars sloshing around in the local economy. That is what traditionally has brought regions out of recessions. It's only in overheated economic times (which we certainly are not experiencing) that there's a good argument for taxing consumption to slow down economic activity by increasing savings.

The taxing for transit the way TriMet does it is FAR superior: moderate taxing of businesses on a flat per-employee basis (coupled with much greater leveraging of federal and state dollars than what goes on here). Business taxes here are low in comparison to the vast majority of states' business taxes, they should be paying more for transit - they are the primary beneficiaries of good transit. Individuals here, most of whom don't use transit on any regular basis, should not be targeted with anything like the level of regressive taxing now being imposed.

Your allusion to the VAT and Europe's good transit are disingenuous. The VAT that is imposed there pays for FAR more than transit (only a small sliver goes to trains and buses). There is nothing like the $500 average annual taxing of a family for transit there as there is here in the Puget Sound region, and it's wrong for you to suggest otherwise.

Finally, it'd be great if you could let on what evidence supports your assertion that Oregon has a "more lousy economy". Around here we've got high income hiring by BA, MSFT and AMZN - companies that do not depend on a robust local economy. Moreover, we have far more public employees making considerably more money than in Oregon. Factoring out those economic drivers (as they are not causally-correlated to the health of the local economy) could well reveal we're worse off than Oregon. For example, TriMet's transit ridership represents a benefit to the local economy around Portland. People don't pay direct transit taxes, and transit riders save money over driving costs that they spend locally. Here though, the average family pays hundreds of dollars of regressive direct transit taxes per year, and much of the tax revenue is shipped by the governments out of state. The (relatively few, compared to the overall population) transit riders here save some money over driving costs, but what they can spend locally of those savings is peanuts in comparison to all the money siphoned out of the region via the oppressive tax and spend policies the transit service providers employ.

crossrip

Posted Mon, Oct 3, 11:26 a.m. Inappropriate

I don't know about Texas or Colorado but, unlike Washington, Oregon and California both have income taxes. California also has sales tax. I don't know whether Colorado does. So while generally I am against all this spending on various transit options in preference to keeping our roads in good repair and other priorities I consider more important, Oregon and California have income taxes as sources to support the building and operating of at least some of their transit.

mspat

Posted Mon, Oct 3, 11:56 a.m. Inappropriate

I think the author should have at least mentioned that Vancouver is a boom economy and has been for twenty years. "Boom" economies with their fast growth tend to attract immigrants and many of these immigrants are poor and looking for work. This will raise the underemployment and unemployment rate and contribute to a relatively high poverty rate. As an example I remember reading that North Dakota has, at the same time it's economy is leaping ahead, is suffering from serious social problems (housing, schools unemployment) especially among immigrants. I am not suggesting this condition explains the relative economic distortions that Vancouver is experiencing (taking the author's assertions as accurate) but it surely should be mentioned as a partial cause. Another thing to consider is the author's concentration on comparative standards of living rather than the absolute: people in Peru or Myanmar may have a relatively narrow range of incomes but if you are at the bottom of that range your standard of living is desperate while poor people in Canada and USA have a comparatively high standard of living in spite of the income disparity the author complains about. It's not an easy choice to make but it's clear to me that the relatively unfettered capitalism we have is at largely responsible for the high standard of living we experience.

kieth

Posted Mon, Oct 3, 4:36 p.m. Inappropriate

Oregon has no sales tax and an even more lousy economy

Actually David, Oregon has no economy to speak of. The state's extractive industries have long since ceased to be a factor, and Portland's chronic high unemployment goes back generations. Both Oregon and Washington would benefit from comprehensive tax reform, up to a point. But when you have states like red red North Carolina, which will do things like build production facilities and lease them at below-market rates to businesses it's trying to attract (uh, THAT would be socialism), it won't be enough...

orino

Posted Mon, Oct 3, 6:51 p.m. Inappropriate

Actually David, Oregon has no economy to speak of.

Hyperbole much? The three counties around Portland (the TriMet region) have enough of a private-sector economy that the very modest tax on employers imposed there has been enough local taxing to support scores of miles of light rail build-outs, and expanding bus, train and streetcar service. That tax on private employers is the only local taxing TriMet has needed over the past 30 years for that region's excellent transit system. That's pretty clear evidence there indeed exists an "economy to speak of" in Oregon.

Compare that to here. Here the bus and train services providers impose about $500 per year on the average family, with that amount set to rise for four more decades, at the end of which we'll have less light rail than what TriMet already has in place.

You are correct in some senses, orino . . . there is vastly more profit being made by private employers around here. Thing is, they don't pay their fair share for transit, and the vast majority of individuals and families around here are paying FAR too much for it due to the regressive transit taxing scheme the political leadership here decided to impose.

This gets back to the point of the original article about the situation just north of the border in Vancouver. Exacerbating the gap between the rich and the poor can be accomplished by tax policy, and around here widening that gap by abusive taxing schemes appears to be the driving imperative of our state and local government leaders. They don't like that fact highlighted, but it's what they are doing.

crossrip

Posted Mon, Oct 3, 8:13 p.m. Inappropriate

The three counties around Portland (the TriMet region) have enough of a private-sector economy that the very modest tax on employers imposed there has been enough local taxing to support scores of miles of light rail build-outs

Actually crossrip, the people who run TriMet, unlike those at KC Metro and Sound Transit, were smart enough to figure out how to get the Federal government (and to a lesser extent, the Port of Portland and Trammel Crow) to pony up 90% of the cost of the build-outs to which you refer. TriMet's revenue from said head tax has nosedived in the last couple of years, forcing the agency to cut service and raise fares. But they're working from a much larger base. And TriMet is far easier and more pleasant to use than anything in Seattle, anyway. I speak from experience, having lived in Portland twice in the last 15 years...

orino

Posted Mon, Oct 3, 10:38 p.m. Inappropriate

orino writes: "TriMet's revenue from said head tax has nosedived in the last couple of years, forcing the agency to cut service and raise fares."

It's not that I don't believe you, but I sure haven't seen credible information that would support those assertions. Can you back them up, perhaps with links to authoritative sources? TIA

Your point about how TriMet has been financing its transit infrastructure build-out using federal grant money to cover most of the capital costs is a great one. That's exactly how any rail buildouts during the past several decades should have proceeded. That's the model all competent train system buildouts have been using (except here). Here bus and train costs are covered by the use of financing plans that are abusive in terms of excess regressive tax collections. That is due to the bond security pledges requiring collection of the local taxes at the current high rates while any of the bonds are outstanding (e.g. through 2053 or so).

Why wasn't a reasonable method of financing transit system capital costs used here, when it's how all the peers operate? Simple - using a high percentage of federal funds would mean the lawyers who would get the bond counsel fees and the outside counsel fees wouldn't get as rich. They are the individuals who provided the draft authorizing legislation to the legislators, and then they drafted the local ballot measures they wanted. That whole process was SUPPOSED to result in state and local laws that would be really abusive to the public here (in a financial sense).

Anyone have any different, better explanation for why people here are slammed with regressive taxing in the name of transit when no such nasty phenomenon exists in peer regions?

I don't agree with orino, I think the individuals who call the shots for how transit here is being financed are plenty smart. They are deliberately indifferent though to the financial interests of most of the people living here.

crossrip

Posted Tue, Oct 4, 11:57 a.m. Inappropriate

To add to Crossrip's arguments, the funds used to clean up Lake Washington and create Metro back in the 70's were also bonds. And the person who designed this financing system, Mr. Ellis, also worked for the law firm that helped setup and sell those bonds. So the Puget Sound region has a long history with this sort of financial cronyism.

GaryP

Posted Wed, Oct 5, 2:51 p.m. Inappropriate

Oh, those poor Canadians, being poor in Canada comes with healthcare, cable TV, union membership, price controls, and a host of other, for lack of a better word, ills. Being poor in Sudan, Chad, Somalia, and lots of other African nations comes with the four horsemen of the Apocalypse, Pestilence, War, Famine and Death and CNN.

Djinn

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