Wealth Redistribution Could Stabilize Economy by Reducing Debt and Inequality, IRIS Study Finds

A recent analysis by the Institut de recherche et d’informations socioéconomiques (IRIS) highlights how better wealth redistribution in Quebec could enhance economic stability and reduce inequality. The study reveals that wealthier individuals tend to increase their debt levels when financial means allow, while poorer households are more inclined to repay their debts. This contrasting behavior suggests that increasing income taxes on the rich could boost disposable income for lower-income groups, effectively lowering household debt and associated economic risks.

According to the IRIS analysis, a 10% rise in household debt leads to a $165 million decline in consumption over four years and an overall GDP loss of approximately $448 million during the same period. Consumption patterns vary significantly across income brackets: the top 20% are largely unaffected by their debt, the bottom 40% slightly increase consumption when borrowing more, but middle-income earners—those netting between $58,101 and $121,300 after tax—curtail their spending as debt grows. This middle group, possessing greater spending power, has a disproportionate impact on the economy through reduced consumption.

Researcher Raphaël Langevin points out a complex link between income and debt for middle-class households, noting they tend to accumulate more debt with rising income. He suggests that simple tax reforms could effectively address household indebtedness and reinforce economic resilience.