Trudeau Stands by Decision to Raise Capital Gains Tax Despite Mounting Criticism
Prime Minister Justin Trudeau defended his government’s decision to increase the capital gains tax in the 2024 federal budget amid growing criticism.
Speaking in Saskatoon, Saskatchewan on April 23, Mr. Trudeau emphasized that the higher capital gains tax is about fairness for younger generations, countering former Liberal finance minister Bill Morneau’s recent comments.
Last week, Mr. Morneau expressed concerns that the capital gains hike, which will require individuals earning over $250,000 annually from capital gains to pay tax on 66.7 percent of the gains, could jeopardize investment.
Mr. Trudeau explained to reporters that the aim of the capital gains tax increase is to support younger generations.
“We’re asking the wealthiest individuals in the country to contribute a bit more,” he stated. “While this may result in higher costs for some when selling properties like cottages, it is essential for young people who are struggling to purchase their first homes.”
The Canadian Medical Association (CMA) also raised concerns that doctors’ retirement savings could be impacted by the changes in capital gains tax, as many doctors operate as small businesses and rely on professional corporations for retirement savings.
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Mr. Trudeau addressed the CMA’s concerns, highlighting the perceived unfairness that students or tradespeople are taxed on 100 percent of their earnings while others are taxed on just 50 percent.
“We are asking the most successful individuals in the country to contribute a bit more to ensure everyone benefits from the country’s success,” he emphasized.
When questioned about potential implications for Canadians relying on investment properties for retirement income due to the increased tax rates, Mr. Trudeau assured that primary residences would not be affected.
“Given the declining prospects for young people to own homes, it was essential to rebalance the situation,” he remarked.
Mr. Trudeau’s remarks reflect his efforts to frame the capital gains tax increase as a matter of intergenerational economic equity, despite facing opposition from various groups and associations.
Over 1,000 CEOs and leaders in the Canadian tech industry signed an open letter urging the prime minister to reconsider the capital gains hike, warning of potential adverse effects on economic growth.
“Those with experience in entrepreneurship and investment can foresee how this might impede growth,” the letter warned.
The deferred implementation of the capital gains tax increase, scheduled for June 25, surprised Budget Officer Yves Giroux.
“While cigarette taxes took immediate effect, we decided to provide a two-month heads-up for capital gains to prevent individuals from rushing to sell assets before the higher rates kick in,” Mr. Giroux explained to the House of Commons finance committee.
“It is highly likely that individuals will sell assets before June 25 to ensure their capital gains are taxed at the lower 50 percent rate rather than the higher two-thirds rate,” he added.
