Implied Redistributive Preferences in Canada

Abstract: This thesis investigates the implied social preferences for income inequality in the Canadian federal tax system from 2012 to 2019. I characterize social preferences with inverted social welfare weights derived from an optimal tax model featuring comprehensive capital and labour income taxation. To calibrate the social welfare weights calculation, I attempt to estimate the elasticity of taxable income using a 2016 tax reform. The implied social welfare weights are relatively flat across middle incomes, and prioritize bottom income earners while disfavouring top income earners to a non-Pareto efficient extent. Exploratory analysis shows distinctively different social preferences toward capital income, where top capital income earners are favoured over bottom capital income earners.