Following the release of their 2024 budget, the Trudeau government announced an increase in the inclusion rate on capital gains to 67 percent for Canadians earning more than $250,000 through stocks or secondary properties, up from the current 50 percent. A higher capital gains inclusion rate means higher taxes and less profit on the sale of homes, stocks, and other capital property.
But the government may now be learning their decision has some wide-reaching consequences.
The Trudeau government says the move is all about fairness and equity and that it will be only the richest Canadians who will be asked to pay more. They say only 0.13 percent of the population (40,000 Canadians), with an average annual income of $1.4 million, will pay more on their capital gains. They add that it will result in $20 billion in new revenue for building affordable homes.
Pierre Poilievre’s Conservatives have voted against the changes. “This job-killing Trudeau tax will drive billions of dollars of machines, technology, business, and paycheques out of our country,” he said. Poilevre has promised that within 60 days of becoming prime minister he will create a “tax reform task force” made up of entrepreneurs, inventors, farmers, and workers. He also said he would reduce the amount of tax paid by the poor and middle class, cut corporate welfare, and single out those using tax havens.
Others also disagreed with the capital gains change, claiming they are not the rich elite but merely members of the middle class who will be selling a nest egg at least once during their lifetime and don’t want the government taking more of their potential profit. Seniors who are selling homes to fund their retirement, entrepreneurs whose income is reliant on selling shares, doctors, and even farmers have publicly expressed their displeasure with the hike.
Here are five Tweets capturing the blowback against the capital gains inclusion rate increase.
Prime Minister Trudeau contends that people forking over more than sixty percent of the profit to the government from selling their property is just a way of getting the country’s mega rich to pay their fair share.
Echoing the prime minister, Finance Minister Chrystia Freeland gave a bizarre speech last week in which she described what seemed to be a near-apocalyptic scene, should the Liberal government’s capital gains changes not be enacted.
She asked Canadians if they “want to live in a country where kids go to school hungry. Do you want to live in a country where a teenage girl gets pregnant just because she doesn’t have the money to buy birth control?”
“…Do you want to live in a country where those at the very top live lives of luxury, but must do so in gated communities behind ever higher fences, using private health care and airplanes, because the public sphere is so degraded and the wrath of the vast majority of their less-privileged compatriots burns so hot,” she told reporters.
Harley Finkelstein, the president of one of Canada’s largest publicly traded companies, Shopify, spoke out about how the capital gains tax increase is a divisive political move.
In an earlier Tweet, Finkelstein wrote that the tax hikes will cause businesspeople and entrepreneurs to suffer and will penalize their success. He wrote, “[Canada’s] policy failures are America’s gains” as the country is “facing critically low productivity and business investment” while “our political leaders are failing our country’s entrepreneurs.”
Meanwhile, Angus Reid tweeted out a poll that debunks the government’s estimate that only 0.13 percent of Canadians will be impacted by the capital gains inclusion rate increase in any given year. In fact, the government may be off by about 20 percent.
The poll found that about one in five Canadians expect to be affected by the hike, resulting in them footing a larger tax bill within the next five years.
Additionally, contrary to the government’s claim, Canadians of all income levels anticipate being impacted by the increase, not just the country’s wealthiest, who make an average of $1.4 million a year.
Moving into a more rural setting, the Grain Growers of Canada (CGC) launched a campaign against the hike, citing that the tax burden will decrease many farmers’ retirement savings. They say the tax would make it more difficult for young farmers to take over their family farms if some of the tax cost is passed on to the next generation.
GGC is asking the government to keep the 50 percent inclusion rate for intergenerational transfers, which was already defined in tax law after MP Larry Maguire’s Bill C-208, involving family farm transfers, was passed in 2021.
As bearish bets on Canadian currency reached an all-time high, the highest number of non-commercial short positions on Canadian currency futures since 1986 was reached.
Adam Button, chief currency analyst at ForexLive, says that this display of uncertainty in the Canadian dollar indicates that “Global markets are sensing that high interest rates will lead to an economic slowdown, particularly in Canada due to high leverage and housing exposure.”
The capital gains inclusion rate increase will take effect on June 25th.
The Hub Staff
The Hub’s mission is to create and curate news, analysis, and insights about a dynamic and better future for Canada in a single online information source.
