Quite predictably, the rich have reacted with great bitterness to the new budget, in particular the part requiring them to pay more tax on capital gains that exceed $250 thousand. To hear their tune, sung in unison, financial Armageddon is upon the country.
A chorus of Canadian entrepreneurs and investors is blasting the federal government's budget for expanding a tax on the rich. They say it will lead to brain drain and further degrade Canada's already poor productivity.
In the 2024 budget unveiled Tuesday, Finance Minister Chrystia Freeland said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 per cent for businesses and trusts, generating an estimated $19 billion in new revenue.
Capital gains are the profits that individuals or businesses make from selling an asset — like a stock or a second home. Individuals are subject to the new changes on any profits over $250,000.
The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.
In my view, this timid attempt by the federal government to look like they are holding the moneyed to account is little more than political theatre, designed to help distract from Mr. Trudeau's long-time love and admiration for financial titans. But even a bit of performative politics is too much for so many.
Despite the fact that the changes affect almost no one,
some members of the business community say that expanding the taxable amount will devastate productivity, investment and entrepreneurship in Canada, and might even compel some of the country's talent and startups to take their business elsewhere.
Not all agree with this assessment.
Lindsay Tedds, an associate economics professor at Carleton University, said the tax change is one of the most misunderstood parts of the federal budget — and that its impact on the country's talent has been overstated.
"This is not a major innovation-biting tax change treatment," Tedds said. "In fact, when you talk to real grassroots entrepreneurs that are setting up businesses, tax rates do not come into their decision."
As for productivity, Tedds said Canadians might see improvements in the long run "to the degree that some of our productivity problems are driven by stresses like housing affordability, access to child care, things like that."
However, don't expect such sober analysis to fork much lightning with the hysterical. Indeed, even doctors have been infected with this particular virus:
Family doctor David Edward-Ooi Poon said, “If the government intended to tax physicians after we were pushed to the edge during the pandemic, this shows doctors, particularly young ones, that our work is not valued, that if we work harder we should be taxed more,” said Poon. “Many of my colleagues are considering moving to the U.S. or other countries where physicians make more, or lowering their hours to reduce the tax burden. For our strained health-care system to improve, I would hope that physician retention is a priority.”
To believe those in financially advantageous positions, it is never a good time to increase taxes. In good times, they say that success is being punished. In bad times, they say that kicking someone when they are down will only exacerbate problems.
Meanwhile, for those in actual need of government assistance, well, they should just learn to pick themselves up by their bootstraps (a physical impossibility, when you think about it) and stop bothering the rest of us.
Some things never seem to change.
