Opinion: Capital gains tax hikes are terrible optics for Canada
By Jessica Brandon-Jepp
Since Finance Minister Chrystia Freeland announced a hike to capital gains in last month’s federal budget, we’ve seen countless deep dives into the details of the changes to the tax, which raise the inclusion rate for individuals beyond a certain threshold to 67 per cent, up from 50 per cent. The focus has been almost entirely on who this change affects and how much it affects them rather than on uniting around a common goal: growing our sluggish economy.
Supporters of the tax hikes have suggested the changes will do little if anything to stifle innovation or deter entrepreneurs from starting or scaling businesses. In making these arguments, they’ve often referred back to 1999, when the inclusion rate was cut to 50 per cent from 75 per cent. That did not result in a flood of new companies being created, they argue, so we shouldn’t expect innovation to dry up if we raise the tax now. But the world today is different than it was in 1999, when we all had landlines and dial-up internet, Netflix was a DVD rental service, China wasn’t yet in the WTO and, arguably, the world’s economies were less intertwined and competitive.
Critics of the capital gains tax hike not only are legion, they’re reputable, credentialled and noteworthy. Kathleen Ross, president of the Canadian Medical Association, says the changes could undermine efforts to recruit and retain physicians and even threaten the stability of the health-care system at a time when Canada is facing a severe doctor shortage. Former Liberal finance minister Bill Morneau argues the changes are antithetical to economic growth, increased productivity and greater investment. Shopify CEO Tobi Lütke believes they will be an innovation killer. Over 2,000
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