As a regular consumer of media, I find myself more and more looking for patterns. While there is likely no such thing as totally consistent media narratives, I do think a preponderance of print, television and social media frame stories in ways that doubtlessly influence our perception of events.
Two recent events suggest such patterns: the Trudeau government's decision to raise capital gains taxes to a 66% attribution rate from 50% for those making more than $250,000 in such profits per year, and the coverage of the increasingly widespread protests on campuses over the Israeli genocidal actions in Gaza subsequent to the murderous Hamas attack last October.*
In a previous post, I discussed in some detail the howls of outrage from the business community over the capital gains hike; that outrage has spread to doctors, small businesses (despite some pretty strong mitigation measures) and, a group with whom so many identify, hapless cottage owners.
There is a reason I subscribe to The Toronto Star. If there is to be a voice that breaks from the media chorus, it will be found there. A recent article by David Olive demonstrates this with some much-needed perspective, since
raising the inclusion rate on capital gains strengthens the country’s social fabric by making the tax system a bit fairer at a time of punishing income inequality.Canada’s marginal effective tax rate (METR), which accounts for all business taxes and tax deductions by federal, provincial, and territorial governments, is the lowest in the G7.
Canada’s METR is 14.5 per cent compared to America’s 19.7 per cent and Japan’s 31.4 per cent.
Most critics of the capital gains reform say it will worsen Canada’s laggard productivity growth.
Those critics must answer for the chronic underinvestment by Canadian business in productivity enhancing plant, machinery, R&D and skills training during the past 24 years when the inclusion rate was just 50 per cent.
Meanwhile, businesses have found the money for stock buybacks that inflate the price of shares to which executive pay is tied.
The anemic rate of business investment has so undermined productivity growth that the Bank of Canada recently called the situation an “emergency.”
It’s as if Ottawa decided that since the lower inclusion rate wasn’t boosting productivity, the government might as well tax a larger share of those idle profits.
And to use that money to finance its ambitious $8.5 housing plan, a new $1.5 billion pharmacare program, funding for more daycare spaces, one of the biggest-ever increases in defence spending ($8.1 billion), and a new $1 billion school lunch program.
And to make those additional investments without increasing the deficit, which is projected at $39.8 billion in fiscal 2024-25, basically unchanged from the previous year’s $40 billion deficit.
No one likes higher taxes. But in its reform of capital gains taxes, Ottawa has settled on a least-bad way of financing improvements to Canadian quality of life.
While that point of view may be anathema to those who regard capitalism as a zero-sum game, the rest of us should just take a few breaths and disengage from the media narrative seeking to villainize anything that seeks to make things just a bit fairer for all.
* Since this post went a bit long, I will save the discussion of campus unrest for another post. In the meantime, if so inclined, see if you can detect the pattern in that reportage.
