The Death of the Welfare State

Politicians frequently campaign on promises to make the “rich pay their fair share”. Slogans like “tax the rich” resonate with the general public. However, these slogans are not only erroneous, but they also foster societal division and encourage an unsustainable tyranny of the majority.

According to a study from the Fraser Institute, an independent Canadian think-tank, high-income families already shoulder a disproportionately large share of the tax burden.[1] In fact, the top 20 percent of income-earning families pay approximately 64.5% percent of Canada’s personal income taxes. This is largely due to Canada’s progressive income tax system.

In contrast, low-income earners often pay little to no tax, thanks to marginal tax rates and government credits. The median Canadian household actually receives more in government transfers than it pays in taxes. Given this system, it is unsurprising that a majority of voters support increased taxation on the so-called “rich”.

But who exactly are the “rich”? In 2022, the top 10% of Canadians earned around $111,900.00 annually. This means that a relatively small segment of the population ends up financing the benefits enjoyed by a much larger majority, who, in turn, continue to vote for these exploitative policies.

How is this sustainable?

Income taxes fund essential public services for all – like healthcare, infrastructure, law enforcement, and national defence. These services depend on a broad and stable tax base. They cannot exist without people contributing to them. If a growing number of people contribute little or nothing while drawing increasingly from public funds, and a shrinking minority is left to carry an increasingly heavy burden, the system becomes dangerously unbalanced. Eventually, this dynamic risks undermining not just the welfare state, but the very foundation of Western civil society. We will no longer be able to afford important services, let alone quality services. 

Contrary to political rhetoric, further taxing the top 20% is not a viable solution. These individuals are already heavily taxed. Excessive and exploitative taxation policies disincentivize people from earning more, discouraging productivity, stifling entrepreneurship, and reducing job creation. Additionally, it incentivizes wealthier citizens to relocate to more tax-friendly jurisdictions, taking their businesses, investments, and tax contributions with them.

The only sustainable path forward is one where everyone contributes. A shared social contract requires everyone to subscribe to this social project together and agree to a shared responsibility. These public services are a facet of our Western society, and everyone needs to pay their fair share —whether they earn $40,000.00 or $1,000,000.00. 

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[1] See: https://www.fraserinstitute.org/studies/measuring-progressivity-canadas-tax-system-2025