Canada raises capital gains tax(to 66.6%) on business & the wealthy to pay for billions in spending aimed at affordable housing/improving young lives

[.Detective.]

Canada will raise capital gains taxes on businesses and wealthy individuals to help pay for tens of billions in new spending aimed at making housing more affordable and improving the lives of young people.

Finance Minister Chrystia Freeland said the government will tax Canadian companies on two-thirds of their capital gains, up from half currently. That change will also apply to individual taxpayers when they have gains over $250,000 in a year, though people will still be able to sell the homes they live in tax-free.

In prepared remarks to lawmakers, Freeland said the job of Canada's tax system is to combat "structural inequality," adding that by increasing the tax rate on investment gains, she was merely "asking those who are benefiting from the winner-takes-all economy to pay a little bit more."

Prime Minister Justin Trudeau's administration has been sinking in opinion polls, which show that he's losing younger voters who are frustrated about the high cost of housing. The benchmark home price in Canada has gone up about 60 per cent since he took office and apartment rents have also surged — forcing the government to begin rolling out programs to try to speed construction and alleviate the cost crunch.

Overall, Freeland's new budget shows a government squeezed between those spending demands, higher borrowing costs and its commitment to keep the deficit — expected at $39.8 billion this fiscal year — under control. Trudeau and Freeland are now turning to the richest Canadians and corporations to help foot the bill.

The capital-gains inclusion rate hasn't been this high in decades in Canada. The government expects the hike to generate $6.9 billion in the current fiscal year, partly because some investors and businesses will rush to sell ahead of a June 25 deadline to avoid the higher tax rate.

"It may reduce the incentive for companies to invest," said Charles St. Arnaud, chief economist at Alberta Central. "While the tax changes are marginal, they have the potential to impact the perception of Canada's business environment."

"In thinking about raising revenue, we thought very, very carefully about the investment climate," Freeland said. "That is one of the principal considerations in my mind, one of the main things that the government is focused on and thinking about. I am confident that the measure that we are putting forward today will not have a negative effect on business certainty."

Click to shrink...

Ottawa hikes capital gains tax to raise billions for housing

Ottawa will raise capital gains taxes on businesses and wealthy individuals to help pay for billions in new housing spending. Find out more.

financialpost.com

 

[StopMakingSense]

Uh, they didn't raise the rate to 66% as your title suggests. It's that 66% of the gain is subject to tax. Up from 50%

 

[orochi91]

This would have been fabulous to have announced in 2023, lol

Less than 2 years out from elections, nothing will change much from here till then.

 

[PumpkinPieAddict]

This impacts an incredibly small amount of people who make 250k in capital gains per year. Something like the first $1.25 million lifetime capital gains tax exemption for small businesses/farmers, which goes up to $3.25 million now.

I actually like the changes to the tax overall. You get hammered if you're part of the landlord class and flipping houses. And those who use a loophole to avoid income taxes and get paid in dividends get hit.

Now I don't think anyone is going to rush to sell houses, it won't add up much taxes on their end but it will increase money for the government.

Basically if your money is tied up in real estate and you're selling houses you're paying a few grand more in taxes for the transaction. I'd imagine people borrowing against the mortgage to buy more properties will continue.

Really, a mixture of this and taxing second homes for rental properties/holding vacancy tax would have been a good balance.

And it will be the first thing the conservatives axe by the way.

 

[Kernel]

And it will be the first thing the conservatives axe by the way.

Click to shrink...

Yeah it will just be another "axe the tax" for them.

 

[filkry]

Definitely agree that all of this is Hail Mary stuff that won't last when the first conservative budget is tabled for 2026. I don't think the Liberals can do anything to hold power between now and October. They need an absolute miracle.

 

[Consequence]

I actually like the changes to the tax overall. You get hammered if you're part of the landlord class and flipping houses. And those who use a loophole to avoid income taxes and get paid in dividends get hit.

Click to shrink...

It won't impact dividends - they're investment income but not capital gains. I say this not because you really need correcting on the point of your post, but to arm others against right wingers whining that this will impact professionals that use this method.

 

[CharlesAznable]

And it will be the first thing the conservatives axe by the way.

Click to shrink...

Damn so conservatives are about to take over Canada? What happened?

 

[orochi91]

Damn so conservatives are about to take over Canada? What happened?

Click to shrink...

Trudeau/Liberals sat on their asses doing nothing for the past 2 years to address inflation/cost of living/immigration.

Only when their numbers tanked significantly in the polls did they finally start making major announcements.

However, they conceded significant mindshare to the Conservative party and have effecrively lost the youth votes that got them elected in the first place.

There isn't much hope that Trudeau can turn this around by fall of 2025, when the next election is slated to happen.

 

[PumpkinPieAddict]

Damn so conservatives are about to take over Canada? What happened?

Click to shrink...

Global inflation and economic issues impacting the party in power + housing bubble uniquely impacting Canada + party power fatigue. Trudeau will be like the 7th longest tenured PM by the time the election hits.

Still time to turn things around but not looking great.

 

[Sir Wiart]

More and more signs that cracks are getting bigger. Hearing things about condo markets, bonds and now tomorrow huge jump in gas.

Not looking good for cuts this year and inflation numbers. Goes to get gas…..

In Ontario? Use this to see gas prices for the next day:

Toronto & GTA Gas Prices

Before you fuel up, check tomorrow's gas price, today. Save on gas in Toronto and the GTA by knowing the price change at the pump.

toronto.citynews.ca

 

[Jebusman]

Damn so conservatives are about to take over Canada? What happened?

Click to shrink...

The world went to shit while the Liberals were in power so they're on the chopping block.

Combined with US style political rhetoric where people simply "hate" Trudeau now. You couldn't get them to articulate why if asked, it's just "Trudeau should be put to death" kind of fervor.

And like, there's a lot of reasons to dislike Trudeau. The fact that he survived his blackface scandal still amazes me to this day.

But a lot of the hate doesn't seem to have any real substance behind it anymore. Conservatives know they can just outright lie about things now and there's no consequence, not from the media or from the public.

 

[PumpkinPieAddict]

It won't impact dividends - they're investment income but not capital gains. I say this not because you really need correcting on the point of your post, but to arm others against right wingers whining that this will impact professionals that use this method.

Click to shrink...

Did some light reading last night of the proposal. I think you're correct, point taken.

 

[Riot]

I don't mind this change but I'm not sure if it's enough to sway people.

In regards to the conservative swing, If history is anything to go by, Canada has always been like a pendulum when it comes to voting. There are significant amount of people who just want a "change" in government and they don't really consider the implications of it. They just "feel" the time is right for a change.

 

[404LinkNotFound]

I don't mind this change but I'm not sure if it's enough to sway people.

In regards to the conservative swing, If history is anything to go by, Canada has always been like a pendulum when it comes to voting. There are significant amount of people who just want a "change" in government and they don't really consider the implications of it. They just "feel" the time is right for a change.

Click to shrink...

I would say thats majority of democracies, people sometimes get tired of the status quo and vote for the other guy every 2 terms

 

[prophetvx]

That number seems wildly low, it's going to hit a lot of middle class as they rebalance or shift their funds around in preparation for retirement.

They should remove capital gains entirely from secondary properties if they're concerned about revenue but that of course would be unpopular and actually be effective.

Just another thing to add to the list that'll increase risk of brain drain heading south.

 

[StevieP]

More and more signs that cracks are getting bigger. Hearing things about condo markets, bonds and now tomorrow huge jump in gas.

Not looking good for cuts this year and inflation numbers. Goes to get gas…..

In Ontario? Use this to see gas prices for the next day:

Toronto & GTA Gas Prices

Before you fuel up, check tomorrow's gas price, today. Save on gas in Toronto and the GTA by knowing the price change at the pump.

toronto.citynews.ca

Click to shrink...

Gas prices are because of the annual switch to summer blend. It happens every year, and yet somehow it's going to get blamed on BS like the feds or carbon tax.

 

[Jebusman]

I would say thats majority of democracies, people sometimes get tired of the status quo and vote for the other guy every 2 terms

Click to shrink...

The frustrating part is in parliamentary democracies, there's more than just "the other guy".

But no one is going to humor the NDP here. It's become a strict "left/right" divide.

 

[Foltzie]

Uh, they didn't raise the rate to 66% as your title suggests. It's that 66% of the gain is subject to tax. Up from 50%

Click to shrink...

Agreed. The title should read.

Canada raises amount of capital gains (50% to 66%) subject to income tax on business & the wealthy to pay for billions in spending aimed at affordable housing/improving young lives

 

[404LinkNotFound]

The frustrating part is in parliamentary democracies, there's more than just "the other guy".

But no one is going to humor the NDP here. It's become a strict "left/right" divide.

Click to shrink...

Unfortunately thats how it is under FPTP. Two party systems galore

 

[Riot]

I would say thats majority of democracies, people sometimes get tired of the status quo and vote for the other guy every 2 terms

Click to shrink...

Yeah I'd assume so but I've only ever lived in Canada so I don't necessarily want to jump to that conclusion.

It's very frustrating too because I know several well adjusted reasonable people who simply think "Trudeau has been in power long enough". Which is wild to me that that alone is enough to change a vote. There are things to criticize the Liberal party but for the response to then be to go vote for the opposite party is just so illogical to me.

 

[CrudeDiatribe]

I actually like the changes to the tax overall. You get hammered if you're part of the landlord class and flipping houses. And those who use a loophole to avoid income taxes and get paid in dividends get hit.

Click to shrink...

Didn't the dividends trick get gutted in an earlier budget, with dividends becoming much less tax advantaged?

 

[prophetvx]

Didn't the dividends trick get gutted in an earlier budget, with dividends becoming much less tax advantaged?

Click to shrink...

Correct, dividends basically ensure you're at the highest tax rate now.

I love how this new policy has exceptions for cottages, can't hurt that Ontario voter base.

 

[Orayn]

If they tried to do this in the US they would do the Business Plot again, but successfully.

 

[Consequence]

That number seems wildly low, it's going to hit a lot of middle class as they rebalance or shift their funds around in preparation for retirement.

They should remove capital gains entirely from secondary properties if they're concerned about revenue but that of course would be unpopular and actually be effective.

Just another thing to add to the list that'll increase risk of brain drain heading south.

Click to shrink...

A lot of the middle class? Can't get there with ya. If it's a retirement situation, you can spread it out over a few years and duck the 250k limit. If you have so much stock to cash out to make that not feasible, you ain't middle class.

 

[prophetvx]

A lot of the middle class? Can't get there with ya. If it's a retirement situation, you can spread it out over a few years and duck the 250k limit. If you have so much stock to cash out to make that not feasible, you ain't middle class.

Click to shrink...

If you invest $50k in your 20's, that equates to around $1.5m by the time you retire using a regular old index fund. It's got nothing to do with "cashing out", it's functionally moving funds from one bank to another.

If it's a retirement situation, you're usually rebalancing your portfolio about 10 years before it happens. Often that can result in one or two large pivots, especially in times of market volatility ie now.

On top of that, doctors typically hold their income in corporations, use that for investment and then pay themselves dividends. That will be taxed from $1 at 66% capital gains.

If people are drawing down $250,000 per year in capital gains, I absolutely agree that it is decidedly not middle class but that's really not how investments work. There is inherent risk, there is timing risks and it's ultimately reflected in policy that is pretty standard throughout the world, which we are now an outlier.

Why do cottages have an exemption from this? It wouldn't have anything to do with the large LNP voter base resides in Ontario?

 

[Consequence]

If you invest $50k in your 20's, that equates to around $1.5m by the time you retire using a regular old index fund. It's got nothing to do with "cashing out", it's functionally moving funds from one bank to another.

If it's a retirement situation, you're usually rebalancing your portfolio about 10 years before it happens. Often that can result in one or two large pivots, especially in times of market volatility ie now.

On top of that, doctors typically hold their income in corporations, use that for investment and then pay themselves dividends. That will be taxed from $1 at 66% capital gains.

If people are drawing down $250,000 per year in capital gains, I absolutely agree that it is decidedly not middle class but that's really not how investments work. There is inherent risk, there is timing risks and it's ultimately reflected in policy that is pretty standard throughout the world, which we are now an outlier.

Why do cottages have an exemption from this? It wouldn't have anything to do with the large LNP voter base resides in Ontario?

Click to shrink...

Dividends are not capital gains despite them being treated similarly for a long time. I brought this up earlier in the thread already.

Your scenario is plausible but I simply don't think "a lot of the middle class" will bump up against $250k when rebalancing - your 1.5m example is already stretching what middle class earners can invest.

 

[prophetvx]

Dividends are not capital gains despite them being treated similarly for a long time. I brought this up earlier in the thread already.

Click to shrink...

Capital gains within a corporation before they become dividends are.

Your scenario is plausible but I simply don't think "a lot of the middle class" will bump up against $250k when rebalancing - your 1.5m example is already stretching what middle class earners can invest.

Click to shrink...

Middle class can't invest $50k over the course of a decade? Covid completely disproved that and people are more active investing now than ever, especially millennials and younger.

This new policy puts our capital gains at a higher rate than almost every country in the world, including the European Nordics.

 

[Whales]

Middle class can't invest $50k over the course of a decade? Covid completely disproved that and people are more active investing now than ever, especially millennials and younger.

This new policy puts our capital gains at a higher rate than almost every country in the world, including the European Nordics.

Click to shrink...

I agree with you. This new tax is actually going to be more punishing to the middle class. Again.

and also, from rough readings, going to be even more annoying for the middle class inheritances

 

[Riot]

Is a quarter of a million capital gain considered middle class now? That's enough to buy a house in rural cities. I wouldn't classify that person as struggling.

 

[D'@rtagnan]

50k over a decade?
Seems like that would fit nicely in a TSFA and therefore would not be taxable.
The vast majority of Canadians won't be affected by this.

 

[prophetvx]

I agree with you. This new tax is actually going to be more punishing to the middle class. Again.

and also, from rough readings, going to be even more annoying for the middle class inheritances

Click to shrink...

Screws inheritances, screws people specifically in tech who may be offered stock as part of their compensation (specifically in private equity where you can't control the timing of share sale), screws anyone who does retirement planning.

It doesn't screw the property holders who just leverage more financing against their equity and claim the interest as a deduction.

 

[prophetvx]

50k over a decade?
Seems like that would fit nicely in a TSFA and therefore would not be taxable.
The vast majority of Canadians won't be affected by this.

Click to shrink...

The vast majority of Canadians are broke in retirement with their house being their one and only plan.

It doesn't change the fact that the people screwed by this policy won't be the billionaire class, it'll be the middle to upper middle class. If they cared about the middle class, they'd extend an exemption to the rule like they do with small businesses except they know they'll skim a little with most people changing their investment strategies if they've acquired more than $800-1m for retirement, alternatively forcing people to max out their RRSP which is a bad investment for practically everyone except for the 1%.

 

[Consequence]

Capital gains within a corporation before they become dividends are.


Middle class can't invest $50k over the course of a decade? Covid completely disproved that and people are more active investing now than ever, especially millennials and younger.

This new policy puts our capital gains at a higher rate than almost every country in the world, including the European Nordics.

Click to shrink...

Ok, fair about the definition on corporate capital gains but I don't think the solution to underpaid professional classes should be allowing loopholes that can be exploited by larger corporations.

I said your scenario was plausible but I don't think it's widespread in the middle class. 20-30 yr olds are still dealing with student loans, starting salaries that haven't kept up with inflation, and insane housing and transportation initial costs. Some CAN find a partner, get their shit together, and have $50k in an index fund at some point before 30, but it isn't "a lot of the middle class".

 

[Dice]

 

[prophetvx]

Ok, fair about the definition on corporate capital gains but I don't think the solution to underpaid professional classes should be allowing loopholes that can be exploited by larger corporations.

Click to shrink...

Agreed but on average this country is largely underpaid and highly taxed for the services we receive. When we're experiencing a period of stagnating growth, a housing crisis and failing public services, increasing those burdens on those classes perhaps isn't wise.

I said your scenario was plausible but I don't think it's widespread in the middle class. 20-30 yr olds are still dealing with student loans, starting salaries that haven't kept up with inflation, and insane housing and transportation initial costs. Some CAN find a partner, get their shit together, and have $50k in an index fund at some point before 30, but it isn't "a lot of the middle class".

Click to shrink...

I never claimed that it's a "lot" of the middle class but they would make up the majority of the 40,000 the government is claiming and I doubt many of those 40,000 are part of the 40,000 in the year preceding or following being a part of it.

Like much of the policy this government has announced, it's reactionary and more about the optics than being functional.

 

[Riot]

The vast majority of Canadians are broke in retirement with their house being their one and only plan.

It doesn't change the fact that the people screwed by this policy won't be the billionaire class, it'll be the middle to upper middle class. If they cared about the middle class, they'd extend an exemption to the rule like they do with small businesses except they know they'll skim a little with most people changing their investment strategies if they've acquired more than $800-1m for retirement, alternatively forcing people to max out their RRSP which is a bad investment for practically everyone except for the 1%.

Click to shrink...

I think you are really overblowing this issue.

Based on this article, 28.5 million Canadians have zero capital gains. And a further 3 million are under the $250,000 range.

"The data also indicates only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more in personal income tax on their capital gains as a result of the change."

That doesn't sound very middle class to me. Now I'll agree there are better ways to help the middle class, but I'm not against the proposed changes.

 

[prophetvx]

I think you are really overblowing this issue.

Based on this article, 28.5 million Canadians have zero capital gains. And a further 3 million are under the $250,000 range.

"The data also indicates only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more in personal income tax on their capital gains as a result of the change."

That doesn't sound very middle class to me. Now I'll agree there are better ways to help the middle class, but I'm not against the proposed changes.

Click to shrink...

Average is completely meaningless to assess the damage on this. What's the mean? A few billionaires can skew it massively. How many of those in this 0.13% are repeatedly part of the 0.13%?

Does Canada even have 31.5million people who filed taxes in 2022? Or are they saying that's out of the overall population? If it's the latter, a lot of people claimed capital gains.

 

[Riot]

You keep mentioning billionaires but never millionaires, they aren't middle class either. I'm just suggesting that your perspective on how many people this will actually effect is skewed. If you make more than 1.4 million a year I don't feel particularly bad that your taxes increase.

 

[Consequence]

it's going to hit a lot of middle class as they rebalance or shift their funds around in preparation for retirement.

Click to shrink...

Agreed but on average this country is largely underpaid and highly taxed for the services we receive. When we're experiencing a period of stagnating growth, a housing crisis and failing public services, increasing those burdens on those classes perhaps isn't wise.


I never claimed that it's a "lot" of the middle class but they would make up the majority of the 40,000 the government is claiming and I doubt many of those 40,000 are part of the 40,000 in the year preceding or following being a part of it.

Like much of the policy this government has announced, it's reactionary and more about the optics than being functional.

Click to shrink...

You absolutely did say a lot. And look, I don't want to attack you. I feel bad replying again because you are engaging in good faith and thinking critically but language needs to be precise about this before FUD is spread and people who, right or wrong, consider themselves middle class say "Wow, another Trudeau L, me and everyone I know are going to get taxed out the ass on our investments". It is not perfect policy but it is a good step towards funding important initiatives. Could that threshold be adjusted? Sure! But people who receive hundreds of thousands of dollars per year in capital gains are a pretty good resource to draw against.

 

[Palette Swap]

Uh, they didn't raise the rate to 66% as your title suggests. It's that 66% of the gain is subject to tax. Up from 50%

Click to shrink...

Which raises the question of why 34% of gains are tax exempt.

 

[prophetvx]

You absolutely did say a lot. And look, I don't want to attack you. I feel bad replying again because you are engaging in good faith and thinking critically but language needs to be precise about this before FUD is spread and people who, right or wrong, consider themselves middle class say "Wow, another Trudeau L, me and everyone I know are going to get taxed out the ass on our investments". It is not perfect policy but it is a good step towards funding important initiatives. Could that threshold be adjusted? Sure! But people who receive hundreds of thousands of dollars per year in capital gains are a pretty good resource to draw against.

Click to shrink...

I mean it's funding housing initiatives. Make the windfall come from profiteering on housing exclusively. Remove capital gains from property entirely and make it fully taxable. Remove deductions for interest on mortgages. Remove tax shelters in corporations, where billionaires actually hide their money.

Don't take it from peoples retirement, don't make a liquid, risky investment illiquid.

It's a terrible step that'll drive investment further away from a shockingly stagnant economy, drive further investment in housing instead of growth generating assets and skim the pot on peoples retirement even if they don't realize it.

 

[survivor]

The sad part of this announcement is this won't do anything to improve housing for people. Their goals are too far out in the future and aren't ambitious enough to tackle any issues.

But hey assuming they survive the next election, enjoy years of deflection of responsibilities.

 

[StopMakingSense]

That will be taxed from $1 at 66% capital gains.

Click to shrink...

That's not what is happening. That $1 will be treated as $0.66 of regular income. The OPs title is very misleading.

 

[prophetvx]

That's not what is happening. That $1 will be treated as $0.66 of regular income.

Click to shrink...

That's what I said. I wasn't saying it'd be taxed at 66%

 

[StopMakingSense]

That's what I said. I wasn't saying it'd be taxed at 66%

Click to shrink...

Ah, OK, sorry, it read that way.

 

[StopMakingSense]

Which raises the question of why 34% of gains are tax exempt.

Click to shrink...

Capital gains are given beneficial tax treatment in most countries. A small number of countries don't even tax capital gains.

 

[giallo]

More and more signs that cracks are getting bigger. Hearing things about condo markets, bonds and now tomorrow huge jump in gas.

Not looking good for cuts this year and inflation numbers. Goes to get gas…..

In Ontario? Use this to see gas prices for the next day:

Toronto & GTA Gas Prices

Before you fuel up, check tomorrow's gas price, today. Save on gas in Toronto and the GTA by knowing the price change at the pump.

toronto.citynews.ca

Click to shrink...

Those prices look dreaming. Just filled up for $2.10L in Vancouver.

 

[LumberPanda]

Capital gains are given beneficial tax treatment in most countries. A small number of countries don't even tax capital gains.

Click to shrink...

Tbh this doesn't really answer the question though. I'm sure there's a reasonable reason.

 

[prophetvx]

Tbh this doesn't really answer the question though. I'm sure there's a reasonable reason.

Click to shrink...

The argument for taxing capital gains at a lower rate is that it's not fixed income. You can attain losses just as easily as you can attain gains. Without any tax incentive to drive investment, in periods of economic uncertainty, the vast majority would have it sit in a bank account and accumulate interest. It's why bank interest is taxed at your full rate and capital gains are not.

It's about offsetting risk, the less you offset, the less you will drive investment in an economy which ultimately impacts jobs, economic confidence and ultimately, revenue for government.

Where it falls short is rewarding investment that doesn't create value, ie housing. It's ultimately inflationary, not liquid, an anchor on economic growth and slows the velocity of money, which is an opportunity for government to collect revenue at every cycle.