Bank report recognizes role of public services in reducing income inequality

A recent report from the TD Bank recognized the role public services play in reducing inequality. Health care, education, skills development and social programs were all identified by the authors as ways to make it easier for people with low incomes to reach their full potential.

The report suggested that one of the most effective strategies to reduce income inequality is for government to improve services. Affordable housing and child care were identified as other areas where improved services would help reduce income inequality. Making post-secondary education more accessible for people from low-income families was also considered a significant factor in reducing income inequality.

Reducing income inequality helps economic growth

The report was intended to draw attention to how reducing income inequality can help economic growth. Research by the Organisation for Economic Co-operation and Development (OECD) that found that a 1% increase in income inequality reduces GDP growth by between 0.6% and 1.1%.

Report fails to address revenue question

While the authors recognized the damage done by income inequality and the role public services can play in solving the problem, their recommendations on the revenue side were less helpful. After years of cutting taxes for corporations and the wealthy, governments have a revenue problem. Instead of recognizing this, the authors propose eliminating universal programs and replacing them with means-tested ones.

Instead of reducing income inequality, moving to more means-tested programs will increase inequality. The middle class is under pressure in Canada. Eliminating universal programs and replacing them with means-tested ones will penalize middle-income families who make too much to qualify for means-tested programs and not enough to afford the services they need.

In contrast, increasing income taxes or closing loopholes for those with high incomes would mean those most able to afford it would pay for measures to reduce inequality.