Channelling NDP, Chrystia Freeland defends higher taxes on wealthy

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OTTAWA — The Liberals say they are “asking the wealthiest Canadians to pay their fair share” by increasing the taxes on profits from capital gains in the federal budget tabled Tuesday, as they aim to pay for their billions in new expenses.

That “ask,” which won’t actually be optional, strongly echoes language used lately by the NDP, which has been supporting the Liberals’ minority government in a supply and confidence agreement.

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The government announced it will be amending the Income Tax Act to increase the inclusion rate on all capital gains realized by corporations and trusts from one-half to two-thirds as of June 25, 2024 and raise the inclusion rate to two-thirds for capital gains above $250,000 realized by individuals.

“To grow the middle class and invest in younger Canadians —while keeping their taxes lower — new generational investments in Budget 2024 will be supported by contributions from the wealthiest Canadians,” reads the 416-page budget document.

NDP Leader Jagmeet Singh had asked the Liberals to present measures to make big corporations pay their “fair share” but said he was dissatisfied with what was in the budget.

“We know the major driver that is driving up the cost of living is corporate greed … That is a major problem. That makes life unaffordable, and the Liberals failed to use the opportunity it had to take on corporate greed,” Singh said after the document was tabled.

The government said it will maintain the exemption for capital gains from the sale of a principal residence and will increase the lifetime capital gains exemption as of June to $1.25 million on the sale of small-business shares and farming and fishing property.

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In concrete terms, that means that an individual who makes a profit of $350,000 on the sale of a cottage — if it is a second residence — will still be paying one-half of capital gains tax on the first $250,000 and two-thirds on the remaining $100,000 profit.

It is expected that this measure will increase federal revenues by $19.4 billion over five years, with $6.9 billion collected in 2024–25.

The government had signalled ahead of time that it was considering a tax on exceptionally wealthy Canadians that would affect fewer than one per cent of Canadians. These hikes should only affect 0.13 per cent of Canadians and a “small minority” of Canada’s corporations, the budget maintains.

Robert Asselin, the senior vice-president of policy at the Business Council of Canada, dismissed the suggestion that the measure is aimed at the “super rich” only, and said it will create a chill on businesses, entrepreneurs, and innovators in Canada at large.

“What (the government) is doing is discouraging business investment at a moment where we have a productivity crisis, where we need more business investments,” he said.

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Asselin, a former Liberal adviser, said the increased tax on capital gains was done in response to the “high level of spending” from the government year after year.

“They could face the credit rating agencies with really bad deficit numbers, or they could raise revenue, which they did, but in a way that will be detrimental to productivity, to investments, to more economic performance in the future,” he said.

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The Canadian Chamber of Commerce similarly responded after Freeland delivered budget that the plan raised taxes on businesses while ignoring dismal productivity and economic growth.

Finance Minister Chrystia Freeland, anticipating the criticism, said in the House of Commons that former prime minister Brian Mulroney had raised the capital gains rate to 75 per cent — much higher than the rate in the budget.

“Yet, I know there will be many voices raised in protest. No one likes paying more tax, even — or perhaps particularly,— those who can afford it the most,” she said.

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“But before they complain too bitterly, I would like Canada’s one per cent — Canada’s 0.1 per cent — to consider this: What kind of Canada do you want to live in?”

Freeland went on to remind MPs of some of the government’s social promises detailed in the budget, such as dental care, a school food program, free contraceptives, and the multiple housing programs meant to boost supply and lower the costs of housing.

Conservative Leader Pierre Poilievre said that the middle class is already bearing the brunt of the Liberals’ billions in promises.

“It’s not going to take money from the billionaires who give (Prime Minister Justin Trudeau) free vacations on islands in the Caribbean,” he told reporters Tuesday.

Poilievre said the Liberals already raised taxes on the middle class when the carbon tax went up on April 1. The increase is making gas more expensive at the pumps by three cents, but the Liberals say most Canadians will be better off with carbon rebates.

“It is the working-class people that Justin Trudeau is ripping off with his high inflationary taxes and spending, and everything else he does today is political theatre designed to distract from that,” said Poilievre.

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