Better tax treatment of capital gains will improve Canada's economy and productivity
Last week, I appeared as a witness before the House of Commons Finance Committee regarding the proposed capital gains inclusion rate increase, and it was not surprising to hear the Liberal and NDP committee members, and their witnesses, go on about how great the capital gains inclusion rate proposal is.
Frankly, it’s exhausting to listen to such nonsense. Some of that nonsense? “Studies have concluded that a high capital gains inclusion rate — or full taxation — of capital gains has no impact on a country’s economic results.” Yeah, right. For every such study, I’ll show you three that say otherwise.
The most recent research, released by economist Jack Mintz last week, concludes that the inclusion rate increase will cause Canada’s capital stock to fall by $127 billion, employment will decline by 414,000, gross domestic product (GDP) will fall by almost $90 billion and real per-capita GDP will decline by three per cent. Troubling conclusions.
Others go on and on about “tax breaks” or “fairness” when it’s obvious they do not have a fulsome understanding of our country’s tax system.
But my favourite is “a buck is a buck is a buck.” That line is a summarized phrase from the recommendations of the Royal Commission on Taxation that was convened in 1962 to study the taxation system and make suggestions for improvement.
After four full years of study, the commission released its landmark report in 1966. Many of its recommendations were controversial. Some were ultimately implemented (with some modifications) and others were outright rejected.
The recommendation to move to a family taxation system is an example of one being outright rejected (wrongly, in my view). Very generous employment expense deductions was another that was
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