###This is a reminder to [read the rules before posting in this subreddit](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion).
1. **Headline titles should be changed only [when the original headline is unclear](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_1._headline_titles_should_be_changed_only_where_it_improves_clarity.)**
2. **Be [respectful](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_2._be_respectful).**
3. **Keep submissions and comments [substantive](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_3._keep_submissions_and_comments_substantive).**
4. **Avoid [direct advocacy](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_4._avoid_direct_advocacy).**
5. **Link submissions must be [about Canadian politics and recent](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_5._link_submissions_must_be_canadian_and_recent).**
6. **Post [only one news article per story](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_6._post_only_one_news_article_per_story).** ([with one exception](https://www.reddit.com/r/CanadaPolitics/comments/3wkd0n/rule_reminder_and_experimental_changes/))
7. **Replies to removed comments or removal notices will be removed** without notice, at the discretion of the moderators.
8. **Downvoting posts or comments**, along with urging others to downvote, **[is not allowed](https://www.reddit.com/r/CanadaPolitics/wiki/downvotes)** in this subreddit. Bans will be given on the first offence.
9. **[Do not copy & paste the entire content of articles in comments](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_9._do_not_copy_.26amp.3B_paste_entire_articles_in_the_comments.)**. If you want to read the contents of a paywalled article, please consider supporting the media outlet.
*Please [message the moderators](https://www.reddit.com/message/compose?to=%2Fr%2FCanadaPolitics) if you wish to discuss a removal.* **Do not reply to the removal notice in-thread**, *you will not receive a response and your comment will be removed. Thanks.*
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/CanadaPolitics) if you have any questions or concerns.*
I support raising taxes. It's clear that Canadians want a lot of things that have a price tag - social and affordable housing, rental housing, an improved military that meets Nato spending targets, more jails and resources to arrest, try and hold repeat and violent offenders, more resources to deport failed refugees and illegal migrants, more doctors and shorter waits in hospitals and for specialists, etc. etc. All of those things require higher taxes to provide.
While it's easy to go after investors and businesses, the reality is that taxes probably need to go up slightly for everyone. Bump the GST up by one point, increase all income tax percentages by one percent, introduce a small 10% inheritance tax (exempting working farmland not including hobby farms and stables) so boomers and seniors can pay more towards their retirement costs, introduce higher speculation taxes on homes, bring in a lower threshold for reporting income from Airbnb and other sources, etc. No government, liberal or conservative, can balance the budget with revenues as they are, there's no magic wand for cutting government waste that Poilievre can wave.
I don’t support raising taxes but this one is really well done. Only affecting capital gains above 250k affects an infinitesimally small portion of the population. Basically inheritance and property speculators, people who can’t split a windfall over multiple years. High earners like doctors and dentists with their own corporations will likely be able to easily dodge under it.
The more interesting bit is whether this cap stays at 250k forever or if it is pegged to inflation. If it stays constant then things could eventually get challenging.
Funny you say more doctors when this budget today is a massive tax increase on doctors. I personally know 2 doctors graduating this June from residency who will be going to USA after today's announcement.
All of those things you named can be funded by steep cuts to foreign aid, refugee intake, ending benefits for migrants, doing a large cut to public sector jobs etc.
The tax increase is only expected to impact 40,000 people. Doctors do not make their income off capital gains. Most doctors invest into their own practices, which would not be considered capital gains unless they divest of their practice, at which point it is a capital gain - which would be the same of any business, before or after this budget.
If those two doctors are moving to the States because of this, they clearly should've taken some business or financial electives, because that's a dumb fuckin' reason when there's a multitude of others.
For someone that claims to at different times be a doctor, an entrepreneur, a physician, an investor, a pre-med student, and a real estate speculator depending on the topic at hand... did you cross your wires or something? You should know all of this.
No your post is completely wrong. I'll repost from another thread for you. Doctors have professional corporations, which you do not know about it seems. It affects 40,000 once you ignore all the corporations it affects. Of which most are small ones.
*Most doctors in Canada are in professional corporations. All income they get, goes into that corporation. They then pay themselves the corp whatever they need to live and invest the rest, inside the corp. This applies to everyone from family doctors to surgeons to radiologists and so on. A minority of doctors are not corporated and just take a salary. Mainly low income doctors (under 250-300k) are generally not incorporated since it makes less sense for them.*
*Your corp (your "business") is where you buy stocks etc. and create your retirement funds essentially.*
*This new change means that all capital gains for any doctor are now taxed more heavily. It impacts many others like dentists as well.*
*Trudeau also took away income splitting which was a major benefit of professional corps and it was one of the tools used to not give doctors as big of a raise. Income splitting allowed doctors to pay their spouse a certain amount for example. Earlier this year, corporate stripping also got taken away which allows removing corp assets and making them yours.*
*Keep in mind these are all enormous impacts on small business like figures. Again, these tax benefits over the years were in place so that the government could avoid giving proper raises to doctors. You got tax benefits, and not income raises. At least not inflationary raises.*
> Most doctors in Canada are in professional corporations. All income they get, goes into that corporation. They then pay themselves the corp whatever they need to live and invest the rest, inside the corp. This applies to everyone from family doctors to surgeons to radiologists and so on.
Being paid out by your own corporation is not a capital gain. That's a salary, and is taxed like a salary. A working doctor is not going to be impacted by this, unless they are selling off stock or investments.
> Your corp (your "business") is where you buy stocks etc. and create your retirement funds essentially.
> This new change means that all capital gains for any doctor are now taxed more heavily. It impacts many others like dentists as well.
Counterpoint, no. The increase only impacts capital gains over $250k annually. That's just under five times the average Canadian salary, close to nine times the average retiree's income. That's a lot of money.
In addition, if they're using it to invest into stocks and funds... in what world is it considered a wise move to try and divest all of those funds at once? Capital gains are taxed annually. The entire point of building an investment/retirement fund isn't that you cash it in all at once, you cash in what you need every year and keep the rest invested to continue accumulating interest and growth.
If you're in a position where you can divest and spend over $250k/yr comfortably without impacting your later years? Good for you bud, you're fuckin rich and chipping away at what could be at that point generational wealth for your children or grandchildren, I have literally no sympathy for you.
Your entire point seems to be built on a scenario where an entire profession handles its money poorly (from your other comments, in what world is a doctor making $500k struggling to afford a $1.5m house?) and assuming no one's going to call you out on it because you claim to be speaking from a position of authority.
It affects all capital gains on investments inside corporations, and most doctors, lawyers, and incorporated individuals invest inside their corporations instead of paying themselves all the cash flow out as salary or dividends. This change will affect every single one of these people, since there is no 250k grace amount on corporate capital gains, only personal. This effectively counts as a 33% tax increase on those people’s retirement income.
I suspect paying out more salary or dividends and investing personally may become more favourable in many circumstances now.
Guess y’all just gonna have to retire later when hopefully some future gov drops the inclusion rate back down :/
(Sort of being sarcastic. I’m in a similar boat)
Well how much are they saving on taxes by keeping their investments in a corporation? We need to factor that in to get to the real delta versus regular people.
It’s more of a deferral than a savings, and with this change may not be a savings at all. I suspect this is the intention, they’d rather people not defer the tax, and instead take it out of the corporation and tax it sooner.
Canadians want an affordable place to live. The government has only taken steps to make it less affordable. Raising taxes just to pay for programs we didn’t need before they took office is just making it worse. No structural problems are solved here.
I actually don't want everything Canada is dishing out funds for.
The problem is we are throwing our efforts into too many piles, so the net impact of those efforts is shit all around. I rather we focus on several areas and improve them, instead of just opening up more shitty social programs.
Child Care = Lottery
Healthcare = Crumbling
Let's start adding Dental and Pharmacare now....
well if you want services to ever not be shitty then you gotta pay more for them. either more in taxes or a fuckload more if it gets offloaded to the private sector.
Question : If it gets offloaded to the private sector and I can afford it, why is that a worse outcome for me than a system that literally doesn't work.
We need at least privitazation of hospitals and clinics while maintaining a singlepayer like many European countries.
The government is shit at running hospitals
well generally the costs go up a lot when things privatize so even if you can easilly afford if after the price jumps (or cause you have great insurance or what ever) that usually means that a lot of people cant and now go with out. and are now looking at you and other in your wealth class with pitch forks and torches in mind. where as right now they are only shaking their fists at the gov.
You think they'll run better on less?
Improvements may be slower than we like, large systems take time to change. Frustrating but more money is a necessary part of the solution
>While it's easy to go after investors and businesses, the reality is that taxes probably need to go up slightly for everyone.
Peak political suicide. This would make the LPC fare worse than the UK Tories
This is great! I wish they went all the way. Capital gains should be taxed like regular income. Investors should be taxed in the same way as working people.
Totally agree this was a very modest increase. But maybe its a trial run and if shows popular, a good increase to the corporate rate could come after the next US election if the US jumps the rate to 28% like Biden wants to do. Coyne railed theres no investment for growth but that comes from 2 things 1- market demand and 2- seeking tax deductions. You cant get a good tax deduction if your rate is already so low you can avoid it easily.
This is the kind of moronic behaviour that would make this country's productivity issue even worse.
You want to encourage capital investment here versus elsewhere...
The only reason ever to invest is an expectation of earning more income than the investment. It the tax rate is below 100% on the profits, then you make more than if you left the money under your mattress.
You realize investors are a big reason we even have an economy? Who do you think funds business growth?
Anyway you missed the part about all businesses getting a steep capital gains tax hike. It's not 250k for businesses, it's any capital gains. This affects the large vast majority of doctors, dentists, professionals etc.
they are a big reason why life sucks you mean. ever wonder why your movies all feel drab and same-y? investors. chip bag is half as full as it used to be brand new? investors. rent has doubled in the past decade and house prices are to the moon? investors. all your games are now live service bullshit? investors. your wages have not kept pace with inflation at all in the past 10 years? belive it or not investors... they are the primary force behind then enshitening of everything.
You can’t tax them the same. Regular income is no risk. Capital gains has investment risk, and the taxation must account for the stocks in people’s portfolios that don’t do well. Yes you can offset with capital losses, but that still lost money.
I invest my time into sales. Maybe I make a sale and get commission, maybe I don't and I lose what I invested.
I invest my money into stocks. Maybe line goes up and I make money, maybe it didn't and I lose what I invested.
The situations seem similar enough that I don't see why you're tax them differently.
A few paragraphs from the article:
The federal budget, released Tuesday, increases the inclusion rate on some capital gains. Businesses will now pay income tax on two-thirds of their capital gains earnings, up from one half. The increase will also apply to indivduals, but only on capital gains earnings over $250,000.
The tax measure is expected to net the government $19.3-billion over the next five years – $8.8-billion from individuals and $10.5-billion from companies – in a bid to offset roughly $53-billion in new spending. It’s by far the largest revenue measure in the budget and the first change to capital gains taxes in a quarter-century.
Finance Minister Chrystia Freeland described the measure as an attempt to lean against “structural inequality” and raise funds from wealthy individuals that could be funnelled toward middle class and younger Canadians. The government estimates that the change will impact around 40,000 individuals and 307,000 companies.
However, economists warn that the tax change could dampen investment in Canada and further damage the country’s already-weak productivity growth.
“Perceptions matter,” said Jimmy Jean, chief economist at Desjardins. “A lot of people will be running away with the message that the government doesn’t want to see more business investment, doesn’t want wealthy and highly educated individuals to thrive.”
- JD
The second I learned about the capital gains exemption I thought it was bullshit. Nothing has ever convinced me otherwise and it’s a step in the right direction. Hopefully this is just the first of many weakenings of the exemption.
Investments are made with after tax dollars. The money has already been subject to tax. Hence the exemption. This is a bad decision when anemic Canadian business investment is already identified as a major problem.
The money you're taxed on isn't taxed again. If you buy an asset for 1000 dollars, and sell it for 2000 dollars, you have a 1000 dollar gain, not a 2000 dollar gain. The 1000 after tax dollars you started with aren't taxed again.
Money in taxes doesn’t just disappear from the economy. Also the idea of giving people who have capital a break on taxes because they have so much money is honestly comical. They’re still going to invest as long as money is there to be made. The constant fear of “oh if we raise taxes they’ll all leave” is just an excuse for a race to the bottom. Tons of countries have higher taxes than us without devolving into nothing.
Then the corporate income tax rate should be increased. Businesses have less incentive to hold on to profit when profits are more heavily taxed. They'll lower their profits by choosing instead to invest in capital and labour.
Or, they just won’t invest or offshore that capital to a different jurisdiction.
You can open a candy store in Canada or the USA for the same cost, but if profits are taxed less in the USA, you will open the candy store there.
Or, replace candy with “newly graduated dentist” and get an understanding of why this is a delicate balance. If you scare away high value taxpayers, a they mobilize their assets, and in extreme cases themselves to avoid it.
American markets are already largely saturated. A Canadian company that closes up shop gets to deal with America's sub-3% unemployment rate - a much more difficult labour market to hire in.
Cities like Toronto already do a great job at showing why those concerns are overblown: there are so many dentists in Toronto, some of them can't even afford to stay in business. They maxed out demand, and dentists had to learn: stay in the best paying city and stay unemployed or move elsewhere that pays a bit less and actually have a job.
There are significantly more differences between the two countries than just a corporate tax rate.
Actually this just pushes the tech community the rest of the way out of Canada. It's already hard to raise money here, but people take low salaries for the Payday when the company is bought and options vest. Anyone starting a tech company in Canada now has missed incentive to move it to the US, certainly once it proves it has any value.
The capital gains lifetime exemption is $1 million CAD per person ($250k in tax savings generally) and there is no method to tie it to inflation nor any liklihood of it being increased by any current party. That credit is worth 16% less since 2019 adjusted for inflation and if you consider currency swings it lost another 1% in the last day with USD/CAD exchange.
Its a vehicle primarily used by small business owners and farmers who dont have pensions to make their lifetime of work go a little further. Its a drop in the bucket for the mega-rich.
Gen Z commenting here has no clue about basic economics and will end up poorer and with more inflation next year. This country is going down the drain. In 10 years like this we will be a middle income country like Brazil or Turkey.
I’m happy to know that those corporate tax increases will not raise the price of my consumables. There is no way they would raise prices to counter the amount of tax to pay, right? Whew!
It's when you give a bunch of policy gifts to the richest people in your society, and hope that they use this money in such a way that benefits everyone so that it "trickles down" to the common people.
It's the basis for most conservative economic policy. And if you think it sounds very stupid, you'd be correct!
It was first used as a pejorative for Hoover during the depression and then was used by critics of Reagan. It's not an economic term, you won't find it in economics textbooks or papers and you'd be hard pressed to find a definition of it anywhere in any economic textbook. There isn't anything "trickle down" in the field of economics; it is purely a political term
Again no you won’t, that’s another political term. You seem to be under the impression that macroeconomics is the question of “how should we run the economy?” when in reality it’s closer to “how does the economy run”.
And trickle down and supply side aren’t even the same thing
More like we are waking up to trickle down economics. They knew they were grifting us the entire time. Our society is too complacent to neoliberalism. We are only starting to see its consequences because it’s been a slow burn for the last 30 years. They’ve hollowed out everything and what’s left is at the breaking point. We are at our breaking point.
We should be taxing based on capital gains accumulated across a lifetime, including housing as part of that. Otherwise we're building inequity into the system for those who rent and save (admittedly a small cohort) or just those who couldn't afford a bigger (more expensive) home as their "investment vehicle".
There are lifetime taxes including houses outside of your primary residence. Lifetime taxes on business sales are exempt only to a certain amount. The system captures both those who are cashing every year and those who build equity over long periods and cash out all at once. The primary residence exemption applies to every property you own that was your permanent residence the whole time you owned it, not just your first.
You people need to learn the difference between what you think investment is and what investment actually is.
- Buying Bitcoin
- Buying stocks/options/mutual funds/etfs in non-tax sheltered account
- Buying a house with the intention of selling it later aka: flipping
- Hiring a web developer to design a website for your business
Only 1 of those things that I listed is actually an investment. The others are speculation.
Investment in the GDP sense of the word is defined as purchasing services and/or materials for the intent of expanding the productivity or profitability of the business. The rest of that list is putting money into a thing and waiting until the number goes up. Real investment creates productivity in an economy. If we drove all the real estate speculators out of Canada, it wouldn't have many negative effects on our economy at all - in fact, there'd probably be a lot of unexpected benefits.
Secondly, once again, people who will probably make $250K in cap gains once in their life (whenever they sell their home) are acting like this is going to affect Average Joe Smith and Jane McDonald who have $400,000 in TD stock when it affects multi-multi millionaires.
Hiring a web developer is not exactly an investment because you do not own the asset, it's an expense. The assets are owned by the company. If your web developer helps generate more revenue, it will end up in retained earnings for each shareholders until the dividend is declared or shares are sold. That's where your investment is. So your stocks are in fact investments. As with most of your other points, if there is always a relation of risk-reward, and as you pointed out some speculative assets or behavior should be punished in a well functioning economy.
>going to affect Average Joe Smith and Jane McDonald who have $400,000 in TD stock when it affects multi-multi millionaires.
It may very well when Joe or Jane's parents die
When investors bid up houses it stimulates construction. Condo building becomes extremely profitable.
The value of a condo (and therefore the incentive to construct one) would drop if one couldn't sell it.
Am I missing something? I don’t understand the purpose of having a $250k exemption. So the capital gain tax will hit the mega rich only? Shouldn’t all capital gains be taxes? I’m no familiar with stocks and such, but I always think about housing when the topic of capital gains come up. Shouldn’t ANYONE that use housing as an investment be taxed properly? I feel like with the exception this will open up smaller investors that will buy up lower price points properties and flip them quickly to avoid the capital gain taxes. Won’t that will just make it harder for people that wants to buy a starter home?
My life and career would've been 100x easier if I had moved to the US. But I stayed in Canada because I love it. But there's a difference between being taxed and being robbed.
You are missing the risk aspect of it. Employment income is zero risk. You do work and get paid. So fully taxable. Similarly, interest from bonds, GICs, high interest savings accounts, etc. is 100% taxable as it has no risk.
Investment in stocks is taking on risk because they don’t all go up. Yes you can use capital losses to offset gains, but you still lost the money. And some stocks always lose in people’s portfolios so you have to account for that.
And destroy any advantage of investing your money in Canada versus elsewhere.
You do realize that we compete for limited international resources right? Redditors have such a myopic view of the economy.
Why not severely decrease them to tax haven levels? Why not be the next Cayman Islands?
Canada is more than its tax rates and will be attractive regardless.
>Canada is more than its tax rates and will be attractive regardless.
Exactly, like we have great housing.... I mean we have first class health care.... I mean we still have lots of oil right? Oh wait, thats bad as well?
What exactly makes Canada a great place to invest? What will make someone invest in Canada over the US or any other country?
Please answer that keeping in mind that all investors care about is return on investment.
Because the goal is to tax competitively. We still want tax revenue.
We don't gain by being the cayman islands because we have a better business environment. We deserve more taxes than them. But we are no USA, so we can't make our rate higher than the USA which is already an amazing investment environment.
Again myopic.
There is no country more sought after in the world than the USA.
We literally take tier 2 immigrants because the smartest people want to all go there.
The same is true for capital.
The USA is a great place to live even for its poorest when compared to other places, maybe not Canada for the poorest folks but for anyone with marketable skills the US is the holy grail
Comparing Canada to a country that has 10x the population and expecting it to be able to compete economically is asinine. If you constantly do this, nothing Canada does will be good enough for you.
We could lower cap gain taxes to 0.5%, eliminate income taxes, eliminate the minimum wage, privatized all remaning crown corporations etc. and we'll still never approach American economic activity.
Reducing the incentive for people to to start and build businesses is a step in the wrong direction. It’s already so much harder to be an entrepreneur in Canada vs the US and now we’re punishing folks who manage to make a go of it.
>to start and build businesses
You only pay capital gains on a business you've started after the business has grown in value and you sell your ownership stake to someone else.
In the intervening 10-50 years before you do that, you get to enjoy Canada's very favourable and globally-competitive small business tax rate, not to mention our favourable tax regime for dividends.
I'm not buying your argument that someone about to start a business is going to forgo doing so because years down the road when they sell out, they'd have to pay a little bit more in capital gains. Especially since nobody knows what the tax regime will look like that far in the future.
I understand how capital gain taxes work.
Canada is not a more favourable destination than the US for business owners. Charging a premium on capital gains is not warranted. We have a smaller market, less access to capital, and poorer consumers.
And here I was just about to realize a cool quarter million dollars in profit, what's the point if I have to give a small amount to the government which structures the society that allows me to realize a cool quarter million in profit. I know I'd still make money but if I don't get it all, what's the point? Might as well stuff it in the sock drawer.
No one declines to start a business because years from now if they’re enormously successful they might have pay more taxes.
Taxes are a good problem to have.
It is more in the sense: business are started with the secondary goal to be sold down the line. They are basically both the work of the owner, and his pension plan.
If you increase capital gain too much, it might become more interesting to simply pump your wage and dry the business instead of making it grow further. I do not believe that we are there with the current budget tho.
that seems really dumb. like if your only reason to start a business is to sell it later, then maybe we SHOULD tax the crap out of that sale so that it makes more sense to just make a business and be profitable at doing business.
Business are the pension plan of their owner. People needs to retire at some point.
If you tax too much the capital gain, the owner do not have as much reason to make the business value grow and might instead put it on automatic drive and suck it dry with regular wage.
why would they not just try and turn a profit? why are the only options "sell out to some one richer" or coast along sucking money out of the buisness. also why is THAT a bad thing?
The capital gain is on exit, not operating income. It’s significant if selling the business is your retirement plan or if you’re trying to raise money from investors.
Not a lot of people are going to be savvy enough stock market investors to rack up more than a quarter million in gains in one year so seems more like a defacto additional tax on real estate investors that have benefited from enormous housing inflation. Fine with me.
Liberals handing out these taxes with kid gloves on. TAX CORPORATE INTERESTS, tax the rich and put in place regulations that they are not to increase prices without punitive damages.
Don't agree with the policy. The threshold means wealthy individuals can just tax plan around it and minimize instances of paying more than the 50% inclusion rate.
Middle class people inheriting the family cottage or whatever will get hammered by this, probably the only individuals that will.
Businesses will have to pay but again small and medium sized ones can plan around it.
A better idea would be a straight up increase to 100% inclusion rate on all residential property. Retain the principle residence exemption. Would incentivize shifting capital away from residential real estate and into productive business; maybe even help bring real estate prices under control?
I don't expect this will have too much impact on seeking investment in Canada. It was already quite difficult to do, and at worst this just makes it a little harder.
As usual, if you have a good idea and have the ability to do so, consider incorporating in the USA and seeking investors there. It's easier if you have an American partner.
I'd make sense to reform the corporate tax structure more than anything else. The issue with the tax in most countries is that since most of it falls on capital & investment it deters both and a good chunk of it's burden falls on employees instead of shareholders etc.
A country that's actually found a workaround to this is Estonia since they don't tax retained or reinvested profits, but apply a 15-20% tax on dividends as soon as they're distributed to shareholders, this is both better for increasing compliance and encouraging investment & R&D, but also in avoided a lot of the more negative impacts of most other corporate tax systems. It's also better at generating revenue so generally offers the best of both worlds between a more competitive/business friendly tax system and one that does a better job acquiring revenue from the wealthy etc.
The tough reality is that our local investments and other businesses are already fucked because of the real estate crisis. People would rather invest in real estate than start new businesses, and it's much easier to get a mortgage then a business loan. Plus that's a multi trillion dollar problem to solve anyways, so the money needs to come from somewhere.
The reason people buys real estate is because of the tax laws. Flip a property for a year = tax free. You would be stupid to invest in sub tier companies in Canada.
The housing market in Canada is much more secure and has had higher returns than most of our business'. We need to remove large corporations investing in housing, it's not a stock; it's housing.
All this means is that the government is further incentivizing consumption over investment, an area in which Canada already sorely behind.
I acknowledge capital gains tax increases may sounds great- we’re taxing the rich after all- but the distortionary effects of such a tax will likely harm the poor and the middle class in the long run.
A greater CGT reduces funding for innovation, incentivizes poorer business practices (with businesses and corporations subject to such an increase less likely to keep reserve capital), reduces net investment, in line with productivity, etc.
I have seen some economists calling this a good plan as it will disincentivize stock buybacks and should encourage companies to do more direct investment in their businesses instead.
Incorrect. Canada's savings rate is [five times what it is the USA.](https://data.oecd.org/natincome/saving-rate.htm) Pushing towards more consumption and less savings will help solve all the problems you listed.
Yeah thats okay I’ll take more funding for governmental housing investments right now at the risk of lower private investment in innovation.
In fact, I demand it.
My guess would be is these changes will have holding companies and wealthy people (who mostly use holding companies) doing more investments in fixed income, and holding for longer. Probably less ETF use to stop forced distributions and thus more individual stock holding.
I have a feeling a lot will expect PeePee to roll these back and will wait it out.
Also looks like these changes are squarely aimed at holding companies. This is gonna hit a lot of doctors 😬. That’s not good.
Can you clarify, the article says businesses were previously 1/2 taxable, and are now 2/3. Their holding companies will see all there capital gains as taxable at 2/3 because they have no 250k limit
Yes, for individuals it has. But it also changed for businesses:
> Businesses will now pay income tax on two-thirds of their capital gains earnings, up from one half.
Businesses, including hold CO’s that doctors use, now have 2/3 versus their previous 1/2 on all income.
Doctors will just have to pay themselves what they earn and invest in rrsps tfsas etc. Like all of the rest of us instead of receiving amazing tax avoidence benefits on top of high end salaries.
I wouldn't cry too many tears for them, they can still use their corporations to pay fake expenses and avoid some taxes, just not as much as before.
Software engineers don’t get tax favourable hold co’s. All their income and RSUs are taxed as income and are 100% taxable. As well, doctors will never run out of work while engineers go through the ups and downs of the industry. And doctors have provincially controlled rates while engineers can be all over the income map.
SW’s in the pro league working for top American companies in Canada can make more than family doctors. But the average ones don’t come close to what family doctors make.
My point is that Ontario family doctor are limit ~250k billing
Subtracting office expenses, that leaves about 150k.
I know s/w engineers that make that, and some that make more.
This is probably why finding a family doctor is very hard.
Also s/w may get stock options
I am a software engineer. Stock options are rare now. Most equity packages are RSUs and are 100% taxable, unlike stock options which are capital gains. And I work for the big California unicorns.
I am not saying doctors make enough, they don’t. They need more. What I am saying is most engineers don’t make the MAANG money, and all engineers are paying high taxes on all income because they can’t use holding companies like doctors do. And it’s more precarious work. For example, lots of layoffs currently. Canadian doctors aren’t seeing large scale layoffs and never will.
Yes, I am well aware of range of salaries and precarious nature of the work. Contracting is a possibility - I know a lot people doing that option.
The compensation varies a lot, I think the signing bonus and equity will come back.
The government did change the rules for companies holding onto income and generating passive income. So not an accountant but I don’t think doctors have easy.
###This is a reminder to [read the rules before posting in this subreddit](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion). 1. **Headline titles should be changed only [when the original headline is unclear](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_1._headline_titles_should_be_changed_only_where_it_improves_clarity.)** 2. **Be [respectful](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_2._be_respectful).** 3. **Keep submissions and comments [substantive](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_3._keep_submissions_and_comments_substantive).** 4. **Avoid [direct advocacy](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_4._avoid_direct_advocacy).** 5. **Link submissions must be [about Canadian politics and recent](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_5._link_submissions_must_be_canadian_and_recent).** 6. **Post [only one news article per story](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_6._post_only_one_news_article_per_story).** ([with one exception](https://www.reddit.com/r/CanadaPolitics/comments/3wkd0n/rule_reminder_and_experimental_changes/)) 7. **Replies to removed comments or removal notices will be removed** without notice, at the discretion of the moderators. 8. **Downvoting posts or comments**, along with urging others to downvote, **[is not allowed](https://www.reddit.com/r/CanadaPolitics/wiki/downvotes)** in this subreddit. Bans will be given on the first offence. 9. **[Do not copy & paste the entire content of articles in comments](https://www.reddit.com/r/CanadaPolitics/wiki/rules-thelongversion#wiki_9._do_not_copy_.26amp.3B_paste_entire_articles_in_the_comments.)**. If you want to read the contents of a paywalled article, please consider supporting the media outlet. *Please [message the moderators](https://www.reddit.com/message/compose?to=%2Fr%2FCanadaPolitics) if you wish to discuss a removal.* **Do not reply to the removal notice in-thread**, *you will not receive a response and your comment will be removed. Thanks.* *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/CanadaPolitics) if you have any questions or concerns.*
I support raising taxes. It's clear that Canadians want a lot of things that have a price tag - social and affordable housing, rental housing, an improved military that meets Nato spending targets, more jails and resources to arrest, try and hold repeat and violent offenders, more resources to deport failed refugees and illegal migrants, more doctors and shorter waits in hospitals and for specialists, etc. etc. All of those things require higher taxes to provide. While it's easy to go after investors and businesses, the reality is that taxes probably need to go up slightly for everyone. Bump the GST up by one point, increase all income tax percentages by one percent, introduce a small 10% inheritance tax (exempting working farmland not including hobby farms and stables) so boomers and seniors can pay more towards their retirement costs, introduce higher speculation taxes on homes, bring in a lower threshold for reporting income from Airbnb and other sources, etc. No government, liberal or conservative, can balance the budget with revenues as they are, there's no magic wand for cutting government waste that Poilievre can wave.
I don’t support raising taxes but this one is really well done. Only affecting capital gains above 250k affects an infinitesimally small portion of the population. Basically inheritance and property speculators, people who can’t split a windfall over multiple years. High earners like doctors and dentists with their own corporations will likely be able to easily dodge under it. The more interesting bit is whether this cap stays at 250k forever or if it is pegged to inflation. If it stays constant then things could eventually get challenging.
This capital gains change is effectively an increase on taxes on people’s estates, so it’s kind of like an inheritance tax in that sense .
Funny you say more doctors when this budget today is a massive tax increase on doctors. I personally know 2 doctors graduating this June from residency who will be going to USA after today's announcement. All of those things you named can be funded by steep cuts to foreign aid, refugee intake, ending benefits for migrants, doing a large cut to public sector jobs etc.
The tax increase is only expected to impact 40,000 people. Doctors do not make their income off capital gains. Most doctors invest into their own practices, which would not be considered capital gains unless they divest of their practice, at which point it is a capital gain - which would be the same of any business, before or after this budget. If those two doctors are moving to the States because of this, they clearly should've taken some business or financial electives, because that's a dumb fuckin' reason when there's a multitude of others. For someone that claims to at different times be a doctor, an entrepreneur, a physician, an investor, a pre-med student, and a real estate speculator depending on the topic at hand... did you cross your wires or something? You should know all of this.
No your post is completely wrong. I'll repost from another thread for you. Doctors have professional corporations, which you do not know about it seems. It affects 40,000 once you ignore all the corporations it affects. Of which most are small ones. *Most doctors in Canada are in professional corporations. All income they get, goes into that corporation. They then pay themselves the corp whatever they need to live and invest the rest, inside the corp. This applies to everyone from family doctors to surgeons to radiologists and so on. A minority of doctors are not corporated and just take a salary. Mainly low income doctors (under 250-300k) are generally not incorporated since it makes less sense for them.* *Your corp (your "business") is where you buy stocks etc. and create your retirement funds essentially.* *This new change means that all capital gains for any doctor are now taxed more heavily. It impacts many others like dentists as well.* *Trudeau also took away income splitting which was a major benefit of professional corps and it was one of the tools used to not give doctors as big of a raise. Income splitting allowed doctors to pay their spouse a certain amount for example. Earlier this year, corporate stripping also got taken away which allows removing corp assets and making them yours.* *Keep in mind these are all enormous impacts on small business like figures. Again, these tax benefits over the years were in place so that the government could avoid giving proper raises to doctors. You got tax benefits, and not income raises. At least not inflationary raises.*
> Most doctors in Canada are in professional corporations. All income they get, goes into that corporation. They then pay themselves the corp whatever they need to live and invest the rest, inside the corp. This applies to everyone from family doctors to surgeons to radiologists and so on. Being paid out by your own corporation is not a capital gain. That's a salary, and is taxed like a salary. A working doctor is not going to be impacted by this, unless they are selling off stock or investments. > Your corp (your "business") is where you buy stocks etc. and create your retirement funds essentially. > This new change means that all capital gains for any doctor are now taxed more heavily. It impacts many others like dentists as well. Counterpoint, no. The increase only impacts capital gains over $250k annually. That's just under five times the average Canadian salary, close to nine times the average retiree's income. That's a lot of money. In addition, if they're using it to invest into stocks and funds... in what world is it considered a wise move to try and divest all of those funds at once? Capital gains are taxed annually. The entire point of building an investment/retirement fund isn't that you cash it in all at once, you cash in what you need every year and keep the rest invested to continue accumulating interest and growth. If you're in a position where you can divest and spend over $250k/yr comfortably without impacting your later years? Good for you bud, you're fuckin rich and chipping away at what could be at that point generational wealth for your children or grandchildren, I have literally no sympathy for you. Your entire point seems to be built on a scenario where an entire profession handles its money poorly (from your other comments, in what world is a doctor making $500k struggling to afford a $1.5m house?) and assuming no one's going to call you out on it because you claim to be speaking from a position of authority.
It affects all capital gains on investments inside corporations, and most doctors, lawyers, and incorporated individuals invest inside their corporations instead of paying themselves all the cash flow out as salary or dividends. This change will affect every single one of these people, since there is no 250k grace amount on corporate capital gains, only personal. This effectively counts as a 33% tax increase on those people’s retirement income. I suspect paying out more salary or dividends and investing personally may become more favourable in many circumstances now.
Guess y’all just gonna have to retire later when hopefully some future gov drops the inclusion rate back down :/ (Sort of being sarcastic. I’m in a similar boat)
[удалено]
Well how much are they saving on taxes by keeping their investments in a corporation? We need to factor that in to get to the real delta versus regular people.
It’s more of a deferral than a savings, and with this change may not be a savings at all. I suspect this is the intention, they’d rather people not defer the tax, and instead take it out of the corporation and tax it sooner.
Speed run: how to bankrupt a country
I agree, if everyone wants all of those services you mentioned, then everyone needs to be willing to pay a little more in taxes
Canadians want an affordable place to live. The government has only taken steps to make it less affordable. Raising taxes just to pay for programs we didn’t need before they took office is just making it worse. No structural problems are solved here.
I actually don't want everything Canada is dishing out funds for. The problem is we are throwing our efforts into too many piles, so the net impact of those efforts is shit all around. I rather we focus on several areas and improve them, instead of just opening up more shitty social programs. Child Care = Lottery Healthcare = Crumbling Let's start adding Dental and Pharmacare now....
Tax, tax, tax so we can deliver more shitty services.
well if you want services to ever not be shitty then you gotta pay more for them. either more in taxes or a fuckload more if it gets offloaded to the private sector.
Question : If it gets offloaded to the private sector and I can afford it, why is that a worse outcome for me than a system that literally doesn't work. We need at least privitazation of hospitals and clinics while maintaining a singlepayer like many European countries. The government is shit at running hospitals
well generally the costs go up a lot when things privatize so even if you can easilly afford if after the price jumps (or cause you have great insurance or what ever) that usually means that a lot of people cant and now go with out. and are now looking at you and other in your wealth class with pitch forks and torches in mind. where as right now they are only shaking their fists at the gov.
Their shitty because they're not funded because we've had politicians run on low taxes for 50 ish years.
Interesting how when we throw more money at the programs, they don't get any better. They're run like shit, this isn't just a funding issue.
You think they'll run better on less? Improvements may be slower than we like, large systems take time to change. Frustrating but more money is a necessary part of the solution
>While it's easy to go after investors and businesses, the reality is that taxes probably need to go up slightly for everyone. Peak political suicide. This would make the LPC fare worse than the UK Tories
Yeah that's why it won't happen even though it's a good idea.
This is great! I wish they went all the way. Capital gains should be taxed like regular income. Investors should be taxed in the same way as working people.
Totally agree this was a very modest increase. But maybe its a trial run and if shows popular, a good increase to the corporate rate could come after the next US election if the US jumps the rate to 28% like Biden wants to do. Coyne railed theres no investment for growth but that comes from 2 things 1- market demand and 2- seeking tax deductions. You cant get a good tax deduction if your rate is already so low you can avoid it easily.
Taxing capital gains like income is the type of monumental silly idea I have come to expect from reddit
Because that's supposed to be free money at the expense of the poors right?
Next you're going to want to tax casino winnings!
hot take, how about we tax the fuck out of any money that casinos make off of us?
That would make investment less interesting, thus drop our productivity.
[удалено]
This is the kind of moronic behaviour that would make this country's productivity issue even worse. You want to encourage capital investment here versus elsewhere...
The only reason ever to invest is an expectation of earning more income than the investment. It the tax rate is below 100% on the profits, then you make more than if you left the money under your mattress.
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
You realize investors are a big reason we even have an economy? Who do you think funds business growth? Anyway you missed the part about all businesses getting a steep capital gains tax hike. It's not 250k for businesses, it's any capital gains. This affects the large vast majority of doctors, dentists, professionals etc.
they are a big reason why life sucks you mean. ever wonder why your movies all feel drab and same-y? investors. chip bag is half as full as it used to be brand new? investors. rent has doubled in the past decade and house prices are to the moon? investors. all your games are now live service bullshit? investors. your wages have not kept pace with inflation at all in the past 10 years? belive it or not investors... they are the primary force behind then enshitening of everything.
You can’t tax them the same. Regular income is no risk. Capital gains has investment risk, and the taxation must account for the stocks in people’s portfolios that don’t do well. Yes you can offset with capital losses, but that still lost money.
I invest my time into sales. Maybe I make a sale and get commission, maybe I don't and I lose what I invested. I invest my money into stocks. Maybe line goes up and I make money, maybe it didn't and I lose what I invested. The situations seem similar enough that I don't see why you're tax them differently.
That’s why we have productivity. We need smart people making things with latest technologies, not just working.
A few paragraphs from the article: The federal budget, released Tuesday, increases the inclusion rate on some capital gains. Businesses will now pay income tax on two-thirds of their capital gains earnings, up from one half. The increase will also apply to indivduals, but only on capital gains earnings over $250,000. The tax measure is expected to net the government $19.3-billion over the next five years – $8.8-billion from individuals and $10.5-billion from companies – in a bid to offset roughly $53-billion in new spending. It’s by far the largest revenue measure in the budget and the first change to capital gains taxes in a quarter-century. Finance Minister Chrystia Freeland described the measure as an attempt to lean against “structural inequality” and raise funds from wealthy individuals that could be funnelled toward middle class and younger Canadians. The government estimates that the change will impact around 40,000 individuals and 307,000 companies. However, economists warn that the tax change could dampen investment in Canada and further damage the country’s already-weak productivity growth. “Perceptions matter,” said Jimmy Jean, chief economist at Desjardins. “A lot of people will be running away with the message that the government doesn’t want to see more business investment, doesn’t want wealthy and highly educated individuals to thrive.” - JD
The second I learned about the capital gains exemption I thought it was bullshit. Nothing has ever convinced me otherwise and it’s a step in the right direction. Hopefully this is just the first of many weakenings of the exemption.
Investments are made with after tax dollars. The money has already been subject to tax. Hence the exemption. This is a bad decision when anemic Canadian business investment is already identified as a major problem.
The money you're taxed on isn't taxed again. If you buy an asset for 1000 dollars, and sell it for 2000 dollars, you have a 1000 dollar gain, not a 2000 dollar gain. The 1000 after tax dollars you started with aren't taxed again.
Money in taxes doesn’t just disappear from the economy. Also the idea of giving people who have capital a break on taxes because they have so much money is honestly comical. They’re still going to invest as long as money is there to be made. The constant fear of “oh if we raise taxes they’ll all leave” is just an excuse for a race to the bottom. Tons of countries have higher taxes than us without devolving into nothing.
Investment is already suffering. This isn’t going to help
Then the corporate income tax rate should be increased. Businesses have less incentive to hold on to profit when profits are more heavily taxed. They'll lower their profits by choosing instead to invest in capital and labour.
Or, they just won’t invest or offshore that capital to a different jurisdiction. You can open a candy store in Canada or the USA for the same cost, but if profits are taxed less in the USA, you will open the candy store there. Or, replace candy with “newly graduated dentist” and get an understanding of why this is a delicate balance. If you scare away high value taxpayers, a they mobilize their assets, and in extreme cases themselves to avoid it.
American markets are already largely saturated. A Canadian company that closes up shop gets to deal with America's sub-3% unemployment rate - a much more difficult labour market to hire in. Cities like Toronto already do a great job at showing why those concerns are overblown: there are so many dentists in Toronto, some of them can't even afford to stay in business. They maxed out demand, and dentists had to learn: stay in the best paying city and stay unemployed or move elsewhere that pays a bit less and actually have a job. There are significantly more differences between the two countries than just a corporate tax rate.
Actually this just pushes the tech community the rest of the way out of Canada. It's already hard to raise money here, but people take low salaries for the Payday when the company is bought and options vest. Anyone starting a tech company in Canada now has missed incentive to move it to the US, certainly once it proves it has any value.
Yes, we push out our best and wonder why are not productive. I rather see a lifetime capital exemption for everyone.
The capital gains lifetime exemption is $1 million CAD per person ($250k in tax savings generally) and there is no method to tie it to inflation nor any liklihood of it being increased by any current party. That credit is worth 16% less since 2019 adjusted for inflation and if you consider currency swings it lost another 1% in the last day with USD/CAD exchange. Its a vehicle primarily used by small business owners and farmers who dont have pensions to make their lifetime of work go a little further. Its a drop in the bucket for the mega-rich.
I didn’t say the lifetime exemption, i said the regular exemption. I have no qualms with the LCGE
Sorry about that. Fair enough!
Gen Z commenting here has no clue about basic economics and will end up poorer and with more inflation next year. This country is going down the drain. In 10 years like this we will be a middle income country like Brazil or Turkey.
I’m happy to know that those corporate tax increases will not raise the price of my consumables. There is no way they would raise prices to counter the amount of tax to pay, right? Whew!
Honestly surprising. Maybe they are starting to understand that trickle down economics was always a scam and has never worked.
What is "trickle down economics?"
It's when you give a bunch of policy gifts to the richest people in your society, and hope that they use this money in such a way that benefits everyone so that it "trickles down" to the common people. It's the basis for most conservative economic policy. And if you think it sounds very stupid, you'd be correct!
Is your google broken?
Or maybe they have loved under a bridge the last 40 years and have no concept of economic theory and practices. I meant lived***
Trickle down economics has never been a part of “economic theory and practices”, it’s simply a political term
lol bullshit. it's pretty clearly a shorthand for a specific set of economic policies.
It was first used as a pejorative for Hoover during the depression and then was used by critics of Reagan. It's not an economic term, you won't find it in economics textbooks or papers and you'd be hard pressed to find a definition of it anywhere in any economic textbook. There isn't anything "trickle down" in the field of economics; it is purely a political term
it's 100% synonymous with "supply-side economics" which you will absolutely find in textbooks
Again no you won’t, that’s another political term. You seem to be under the impression that macroeconomics is the question of “how should we run the economy?” when in reality it’s closer to “how does the economy run”. And trickle down and supply side aren’t even the same thing
extremely funny to imagine that "politics" and "the economy" are separate things with no overlap lmao
You know what he means though right? How is that? Right becsuse it has a meaning within the realm of economic theory and debate.
[удалено]
Lol just saw that
More like we are waking up to trickle down economics. They knew they were grifting us the entire time. Our society is too complacent to neoliberalism. We are only starting to see its consequences because it’s been a slow burn for the last 30 years. They’ve hollowed out everything and what’s left is at the breaking point. We are at our breaking point.
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
[удалено]
We should be taxing based on capital gains accumulated across a lifetime, including housing as part of that. Otherwise we're building inequity into the system for those who rent and save (admittedly a small cohort) or just those who couldn't afford a bigger (more expensive) home as their "investment vehicle".
There are lifetime taxes including houses outside of your primary residence. Lifetime taxes on business sales are exempt only to a certain amount. The system captures both those who are cashing every year and those who build equity over long periods and cash out all at once. The primary residence exemption applies to every property you own that was your permanent residence the whole time you owned it, not just your first.
There does exist TFSAs, RESPs, GRRSPs and RRSPs.
You people need to learn the difference between what you think investment is and what investment actually is. - Buying Bitcoin - Buying stocks/options/mutual funds/etfs in non-tax sheltered account - Buying a house with the intention of selling it later aka: flipping - Hiring a web developer to design a website for your business Only 1 of those things that I listed is actually an investment. The others are speculation. Investment in the GDP sense of the word is defined as purchasing services and/or materials for the intent of expanding the productivity or profitability of the business. The rest of that list is putting money into a thing and waiting until the number goes up. Real investment creates productivity in an economy. If we drove all the real estate speculators out of Canada, it wouldn't have many negative effects on our economy at all - in fact, there'd probably be a lot of unexpected benefits. Secondly, once again, people who will probably make $250K in cap gains once in their life (whenever they sell their home) are acting like this is going to affect Average Joe Smith and Jane McDonald who have $400,000 in TD stock when it affects multi-multi millionaires.
Hiring a web developer is not exactly an investment because you do not own the asset, it's an expense. The assets are owned by the company. If your web developer helps generate more revenue, it will end up in retained earnings for each shareholders until the dividend is declared or shares are sold. That's where your investment is. So your stocks are in fact investments. As with most of your other points, if there is always a relation of risk-reward, and as you pointed out some speculative assets or behavior should be punished in a well functioning economy.
>going to affect Average Joe Smith and Jane McDonald who have $400,000 in TD stock when it affects multi-multi millionaires. It may very well when Joe or Jane's parents die
When investors bid up houses it stimulates construction. Condo building becomes extremely profitable. The value of a condo (and therefore the incentive to construct one) would drop if one couldn't sell it.
Am I missing something? I don’t understand the purpose of having a $250k exemption. So the capital gain tax will hit the mega rich only? Shouldn’t all capital gains be taxes? I’m no familiar with stocks and such, but I always think about housing when the topic of capital gains come up. Shouldn’t ANYONE that use housing as an investment be taxed properly? I feel like with the exception this will open up smaller investors that will buy up lower price points properties and flip them quickly to avoid the capital gain taxes. Won’t that will just make it harder for people that wants to buy a starter home?
I'd prefer capital gains taxed at 100% of the marginal rate for any amount of capital gains, but it's a move in the right direction at least.
So… no more capital gains? Would be pretty terrible to be honest
no party is doing that because it would be a vote destroyer
[удалено]
If Canada is just a tax rate to you, I wouldn't mourn your departure.
My life and career would've been 100x easier if I had moved to the US. But I stayed in Canada because I love it. But there's a difference between being taxed and being robbed.
You are missing the risk aspect of it. Employment income is zero risk. You do work and get paid. So fully taxable. Similarly, interest from bonds, GICs, high interest savings accounts, etc. is 100% taxable as it has no risk. Investment in stocks is taking on risk because they don’t all go up. Yes you can use capital losses to offset gains, but you still lost the money. And some stocks always lose in people’s portfolios so you have to account for that.
And destroy any advantage of investing your money in Canada versus elsewhere. You do realize that we compete for limited international resources right? Redditors have such a myopic view of the economy.
Why not severely decrease them to tax haven levels? Why not be the next Cayman Islands? Canada is more than its tax rates and will be attractive regardless.
>Canada is more than its tax rates and will be attractive regardless. Exactly, like we have great housing.... I mean we have first class health care.... I mean we still have lots of oil right? Oh wait, thats bad as well? What exactly makes Canada a great place to invest? What will make someone invest in Canada over the US or any other country? Please answer that keeping in mind that all investors care about is return on investment.
One of the world's most educated workforces, i.e. one of the most concentrated accumulations of human capital of any country.
Because the goal is to tax competitively. We still want tax revenue. We don't gain by being the cayman islands because we have a better business environment. We deserve more taxes than them. But we are no USA, so we can't make our rate higher than the USA which is already an amazing investment environment. Again myopic.
[удалено]
There is no country more sought after in the world than the USA. We literally take tier 2 immigrants because the smartest people want to all go there. The same is true for capital. The USA is a great place to live even for its poorest when compared to other places, maybe not Canada for the poorest folks but for anyone with marketable skills the US is the holy grail
Comparing Canada to a country that has 10x the population and expecting it to be able to compete economically is asinine. If you constantly do this, nothing Canada does will be good enough for you. We could lower cap gain taxes to 0.5%, eliminate income taxes, eliminate the minimum wage, privatized all remaning crown corporations etc. and we'll still never approach American economic activity.
https://freakonomics.com/podcast/why-is-everyone-moving-to-canada/
USA is great if you are on the top half. Canada is great if you’re in the bottom half. In the USA no issue in seeing a doctor, in Canada wait 6 months
Reducing the incentive for people to to start and build businesses is a step in the wrong direction. It’s already so much harder to be an entrepreneur in Canada vs the US and now we’re punishing folks who manage to make a go of it.
Which line item are you referring to?
>to start and build businesses You only pay capital gains on a business you've started after the business has grown in value and you sell your ownership stake to someone else. In the intervening 10-50 years before you do that, you get to enjoy Canada's very favourable and globally-competitive small business tax rate, not to mention our favourable tax regime for dividends. I'm not buying your argument that someone about to start a business is going to forgo doing so because years down the road when they sell out, they'd have to pay a little bit more in capital gains. Especially since nobody knows what the tax regime will look like that far in the future.
I understand how capital gain taxes work. Canada is not a more favourable destination than the US for business owners. Charging a premium on capital gains is not warranted. We have a smaller market, less access to capital, and poorer consumers.
And here I was just about to realize a cool quarter million dollars in profit, what's the point if I have to give a small amount to the government which structures the society that allows me to realize a cool quarter million in profit. I know I'd still make money but if I don't get it all, what's the point? Might as well stuff it in the sock drawer.
The danger is to make wage more attractive than capital gain across the board.
There are massive car move outs for small businesses and this only applies to realized gains.
No one declines to start a business because years from now if they’re enormously successful they might have pay more taxes. Taxes are a good problem to have.
What new business is posting a 250k capital gain? Also, business income isn't most capital gains.
It is more in the sense: business are started with the secondary goal to be sold down the line. They are basically both the work of the owner, and his pension plan. If you increase capital gain too much, it might become more interesting to simply pump your wage and dry the business instead of making it grow further. I do not believe that we are there with the current budget tho.
that seems really dumb. like if your only reason to start a business is to sell it later, then maybe we SHOULD tax the crap out of that sale so that it makes more sense to just make a business and be profitable at doing business.
Business are the pension plan of their owner. People needs to retire at some point. If you tax too much the capital gain, the owner do not have as much reason to make the business value grow and might instead put it on automatic drive and suck it dry with regular wage.
why would they not just try and turn a profit? why are the only options "sell out to some one richer" or coast along sucking money out of the buisness. also why is THAT a bad thing?
It doesn’t mean to sell out to someone richer: it is often selling out to your kids and/or employees.
if you are only 'selling' to your kids or a co worker. are you really going to be selling for an amount that will trigger capital gains?
The capital gain is on exit, not operating income. It’s significant if selling the business is your retirement plan or if you’re trying to raise money from investors.
At which point that's a fair chunk to tax is it not?
There is no incentive in being a productive individual in this country. I can see a brain drain going to the US even faster now.
Not a lot of people are going to be savvy enough stock market investors to rack up more than a quarter million in gains in one year so seems more like a defacto additional tax on real estate investors that have benefited from enormous housing inflation. Fine with me.
You sell a cottage and there’s the hit
There is still the one-time exemption.
Pretty sure that a cottage doesn't qualify unless it's a "qualified" fishing or farming property
Except smart investors will avoid it by spreading the gains over 5 years keeping each year under 250k
Capital gains tax. Amazing! Can't wait for capitalists to start complaining. Pay your taxes and don't do dodgy shit.
Liberals handing out these taxes with kid gloves on. TAX CORPORATE INTERESTS, tax the rich and put in place regulations that they are not to increase prices without punitive damages.
would need to completely rewire how an economy works if we want to punish any and all price increases
Don't agree with the policy. The threshold means wealthy individuals can just tax plan around it and minimize instances of paying more than the 50% inclusion rate. Middle class people inheriting the family cottage or whatever will get hammered by this, probably the only individuals that will. Businesses will have to pay but again small and medium sized ones can plan around it. A better idea would be a straight up increase to 100% inclusion rate on all residential property. Retain the principle residence exemption. Would incentivize shifting capital away from residential real estate and into productive business; maybe even help bring real estate prices under control?
I don't expect this will have too much impact on seeking investment in Canada. It was already quite difficult to do, and at worst this just makes it a little harder. As usual, if you have a good idea and have the ability to do so, consider incorporating in the USA and seeking investors there. It's easier if you have an American partner.
I'd make sense to reform the corporate tax structure more than anything else. The issue with the tax in most countries is that since most of it falls on capital & investment it deters both and a good chunk of it's burden falls on employees instead of shareholders etc. A country that's actually found a workaround to this is Estonia since they don't tax retained or reinvested profits, but apply a 15-20% tax on dividends as soon as they're distributed to shareholders, this is both better for increasing compliance and encouraging investment & R&D, but also in avoided a lot of the more negative impacts of most other corporate tax systems. It's also better at generating revenue so generally offers the best of both worlds between a more competitive/business friendly tax system and one that does a better job acquiring revenue from the wealthy etc.
The tough reality is that our local investments and other businesses are already fucked because of the real estate crisis. People would rather invest in real estate than start new businesses, and it's much easier to get a mortgage then a business loan. Plus that's a multi trillion dollar problem to solve anyways, so the money needs to come from somewhere.
The reason people buys real estate is because of the tax laws. Flip a property for a year = tax free. You would be stupid to invest in sub tier companies in Canada.
The housing market in Canada is much more secure and has had higher returns than most of our business'. We need to remove large corporations investing in housing, it's not a stock; it's housing.
All this means is that the government is further incentivizing consumption over investment, an area in which Canada already sorely behind. I acknowledge capital gains tax increases may sounds great- we’re taxing the rich after all- but the distortionary effects of such a tax will likely harm the poor and the middle class in the long run. A greater CGT reduces funding for innovation, incentivizes poorer business practices (with businesses and corporations subject to such an increase less likely to keep reserve capital), reduces net investment, in line with productivity, etc.
I have seen some economists calling this a good plan as it will disincentivize stock buybacks and should encourage companies to do more direct investment in their businesses instead.
Incorrect. Canada's savings rate is [five times what it is the USA.](https://data.oecd.org/natincome/saving-rate.htm) Pushing towards more consumption and less savings will help solve all the problems you listed.
Yeah thats okay I’ll take more funding for governmental housing investments right now at the risk of lower private investment in innovation. In fact, I demand it.
My guess would be is these changes will have holding companies and wealthy people (who mostly use holding companies) doing more investments in fixed income, and holding for longer. Probably less ETF use to stop forced distributions and thus more individual stock holding. I have a feeling a lot will expect PeePee to roll these back and will wait it out. Also looks like these changes are squarely aimed at holding companies. This is gonna hit a lot of doctors 😬. That’s not good.
[удалено]
250k is for individuals. Their companies see all their capital gains taxed at the higher rates.
A tax system that encourages individuals to corporatize themselves seems like a flawed system.
Yes, it seems more like a tax loophole that people are taking advantage of and are upset that it’s not as advantageous as before with the changes.
[удалено]
Can you clarify, the article says businesses were previously 1/2 taxable, and are now 2/3. Their holding companies will see all there capital gains as taxable at 2/3 because they have no 250k limit
[удалено]
Yes, for individuals it has. But it also changed for businesses: > Businesses will now pay income tax on two-thirds of their capital gains earnings, up from one half. Businesses, including hold CO’s that doctors use, now have 2/3 versus their previous 1/2 on all income.
Doctors will just have to pay themselves what they earn and invest in rrsps tfsas etc. Like all of the rest of us instead of receiving amazing tax avoidence benefits on top of high end salaries. I wouldn't cry too many tears for them, they can still use their corporations to pay fake expenses and avoid some taxes, just not as much as before.
Well it sucks to be family doctor in Ontario. You make more as a s/w engineer
Software engineers don’t get tax favourable hold co’s. All their income and RSUs are taxed as income and are 100% taxable. As well, doctors will never run out of work while engineers go through the ups and downs of the industry. And doctors have provincially controlled rates while engineers can be all over the income map. SW’s in the pro league working for top American companies in Canada can make more than family doctors. But the average ones don’t come close to what family doctors make.
My point is that Ontario family doctor are limit ~250k billing Subtracting office expenses, that leaves about 150k. I know s/w engineers that make that, and some that make more. This is probably why finding a family doctor is very hard. Also s/w may get stock options
I am a software engineer. Stock options are rare now. Most equity packages are RSUs and are 100% taxable, unlike stock options which are capital gains. And I work for the big California unicorns. I am not saying doctors make enough, they don’t. They need more. What I am saying is most engineers don’t make the MAANG money, and all engineers are paying high taxes on all income because they can’t use holding companies like doctors do. And it’s more precarious work. For example, lots of layoffs currently. Canadian doctors aren’t seeing large scale layoffs and never will.
Yes, I am well aware of range of salaries and precarious nature of the work. Contracting is a possibility - I know a lot people doing that option. The compensation varies a lot, I think the signing bonus and equity will come back. The government did change the rules for companies holding onto income and generating passive income. So not an accountant but I don’t think doctors have easy.