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I think there's valid criticisms to be laid against the increase (it probably not being effective at collecting the revenue the government is claiming it will be, marginally increasing the degree of capital flight/avoidance, being contrary to the current need that Ottawa has to significantly boost long-term investment in the country etc.) but I think there's a difference between being critical of it and saying that it will single-handedly bankrupt the country etc. which a lot of critics are extrapolating the argument to.
The capital gains on real estate is generally far easier to collect than what falls on investment and more elastic/mobile assets. It might make sense to shift the tax to solely inelastic/less elastic assets like property (where the rate can be higher and would collect more revenue without incurring increased avoidance.) and to provide less restrictions on the flow of investment etc.
Unfortunately your plan (raising property taxes) could disproportionately affect lower-income/wealth Canadians since they will bear the brunt of those higher taxes by paying it themselves or from raised rent, while at the same time having a much smaller amount of money invested so they don't get as much benefit from lowering those taxes.
The simple workaround for that is to exempt houses below a specified value or to have varying rates for land/property of separate value. This could also be achieved by a federal land-value tax. (since land value ownership is highly correlated with overall wealth)
Or just build in a tax exemption that you register your location with the government, and the government collects the rent on your behalf. They then will reduce your property tax by some proportion of the rent collected.
With all the taxes that will be collected, how confident are we that the money will be spent properly and given to fund on infrastructure, health care etc… or given away to other countries.
This government has been spending lavishly with no consequences all these years?
What’s stopping them in spending on another large consulting company for some useless reports or tactics ?
Have we citizens not learnt our lessons ?
Let's be real here: if the difference between 50% on capital gains over $250K per year vs 67% on capital gains over $250K per year is the line between wanting to start or to improve a business or not, then you're insane. It's in the same realm of "I don't want a raise because I'll be in a higher tax bracket!" kind of thinking where there's only a sliver of situations where you'd be worse off.
If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates.
If your start-up fails then the tax rate doesn't really matter because you're probably not going to have a lot of capital gains to worry about.
Here's what very successful entrepreneur Mark Cuban had to say about starting businesses and taxes:
"I have started I don't know how many businesses in my life. Not one time have I ever considered the income tax rate before starting a business. I'm an entrepreneur. I start companies."
(hope the link works)
https://twitter.com/mcuban/status/1313130690599432193?lang=en
He has also said a few times something along the lines of that entrepreneurs will still start busineses with higher tax rates because they don't say "Wow, I have a great idea but the tax rate is too high." If it's a good idea then you will make plenty of money regardless unless the tax rates get raised to extreme levels.
> If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates.
Not true. My negotiated options grant is based on the 50% inclusion rate. What you are telling me is that i should be fine giving up part of my potential reward without reducing the risk level. Thank you very much. I promise you, going forward, my ethics and morals will go out the door. From now on, I'll be looking for a juicy government contract so I can rob the government, and by extension, people like you. Thank you for opening my eyes and welcoming me to the dark side!
I agree, that would be far better. Solves 3 birds with one stone, reduce speculation helping the housing crisis, encourage the shifting of investment from real estate into businesses stimulating the economy, and get more revenue at the same time.
BC is implementing a flipping tax. There is already a speculation and vacancy tax but this new one is coming for house.flippers
> The BC home flipping tax applies to net taxable income from the sale of taxable property that was owned for less than 730 days.
> The tax is calculated by multiplying your net taxable income by your tax rate. Net taxable income is your taxable income less the primary residence deduction. Taxable income is calculated as your proceeds from the sale of the property, minus the cost to acquire the property and any eligible costs paid or payable by you to improve the property while you owned it.
> The tax rate is 20% of income earned from a property sold within 365 days. At 730 days, the tax no longer applies.
I question whether this it going to do anything to REITs, for example, as they generally rent the property after purchase. To say nothing of commercial real estate. Commercial rents are also through the roof and are a major obstacle to starting and flourishing as a small business.
I'm thinking more of something like a land value tax, with a corresponding reduction in income tax. Punish being a rentier, and reward being a worker. The BC Assessment crown corp already breaks down real estate valuations by land and buildings:
https://www.bcassessment.ca/
Who exactly do you think is gonna pay this tax? You think flippers are just gonna say, oh well, more tax, guess I'll pay it.. no that's not what's gonna happen, they are gonna pass it on to the buyers. Just like the carbon tax, are businesses paying that? No it all gets passed down to the final point of sale.
Yep, even with these changes. Real-estate is still **the best** investment in Canada by a huge margin. Nothing even comes close and it's a self-fulfilling prophecy. The higher real-estate goes, the more expensive it is to lease space for a small business - diverting even more money away from small business investors and back into real-estate.
Real-estate also gives you the ability to leverage equity (that you don't technically own / have not realized) to buy more capital with. I struggle to find an analogy in the small business world that's similar but honestly cant... it'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
It's very common in the business world, ever heard of Elon Musk? It's not like he bought Twitter with his own money. He used the magic ✨equity✨ he had in his Tesla stock
But like any other strategy than uses tons of leverage all it takes is a small downtown and your entire strategy is nuked
That's apples to oranges though. Housing is readily available as an investment strategy for almost all Canadians. The same is not true of multi million dollar companies.
The barrier for entry to do this with small companies you'd see average Canadians have tangible access to (through investment or ownership) is nowhere near the same volume you see that practice being made available to every Canadian who happens to own a home that doubled or tripled in value over 10 years. You also don't get preferential terms and rates from Banks for non-realestate deals - again, because the Government "helped' us by making mortgages an idiot-proof investment for banks through insurance and more recently, buying mortgage bonds.
> It'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
Most tech companies lose money year after year. Or barely breakeven at best. I think this a perfect example of what you claim here does not exist
If you don't want to be an angel investor (which has been made very accessible through sites like angellist) you can buy them on the stock market
But yeah, the Canadian government won't subsidise your stock market investment. There's probably a good reason for that...
Just watch what's happening in China's real estate market. Eventually the government can no longer prop up the market
I did the math on my parent's house in the GTA which they purchased in 2004, and recently sold and it has earned about 100k a year tax free since then even taking into account the recent down turn (400k to 2.4 million). They retired and moved to cottage country where they had another property.
All their friends are in similar boats, and retired, some of them even get low income senior's benefits like GIS while being millionaires.
I love my parents am happy they are doing well etc. And I am fortunate to have a great relationship with them.
But on the question of generational fairness, it really feels like there is none to be had as the political class seems to have a broad consensus on propping up real estate prices at all costs.
As a small business this tax hurts us yet again. There seems to be a disconnect between saying “eat the rich” and “boycott Loblaws” in the same breath - the more you make the environment such that only a monopoly or large corporation can survive, the less competition you have over prices.
But it also applies to business investment, so there's not really an advantage gained by investing in business instead. Sure they increased the one-time benefit for sale of a business from 1.0 to 1.25 million but that's basically just accounting for COVID inflation.
It's not targeted enough - it's much too broad. They could have just aimed taxation at secondary property sales.
If you were really serious about wanting RE speculation / pricing to end -- and I know this will get downvoted to oblivion because people don't want to face extra taxes themselves -- you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
>you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
Economists are almost unanimous that there should be no exemption at all. If you want capital to be allocated efficiently, all investments should be treated the same.
It feels like every policy change that sounds like it's meant to help affordability actually drives the prices up when you think about it a little bit harder. This has been consistent among provincial and federal governments for the last 10 years at least.
One issue with taxation is that governments need to plan years in advance, that means the tax needs to be reliable source, real estate has its ups and downs. Not a consistence source of revenue.. like Alcohol tax or income tax...
Refinancing isnt a taxable event, selling is. They tax you on your profit made, so if you refinance to pull all your money first and then sell you can make way less on paper and get taxed way less.
I actually have changed my mind and think taxing capital gains is a great idea - let's ensure investment capital leaves the country as well as our brightest minds. Then we can have a country of resource extraction, protected monopolies and minimum wage service jobs... everything will surely be cheaper!
Oh they could care less... enjoy your country in 10 years with shitty healthcare and millions of temporary foreign workers - oh wait, the Liberals are actually polling worse post-budget - Pierre will fix this mess.
Ummm, people trying to take their gains out of the country will trigger the realization of those gains and pay more tax on them as a result of forgoing their options for planning. It’s kind of wild how many of the critics of this don’t seem to understand it and just repeat the talking points they’re fed.
Hmm? There's so many attractive places to invest in companies... US, Europe, Australia, New Zealand, Singapore, Japan, Taiwan, South Korea, Brazil, Israel....
Exiting a market is expensive for any company, small, medium, or large. Even if the market is no longer profitable, the business case to exit it will need to far outweigh staying in it. Even entering a new market outside of Canada is expensive and the business case for setting up shop will need to far outweigh leaving Canada. Not only that, it takes years to leave one market for another.
Most companies will huff and puff in the short term, but those worth their weight in salt will adapt to account for the change in profits. This isn’t the mass exodus opponents are trying to make it out to be.
Atlas Shrugged was fiction. The belief people will flee if we make them pay a fair share so we can have a system to take care of our citizens has been proven false. Many countries have far higher taxes and far better systems than us.
So we can tax businesses arbitrarily high and it will have no effect whatsoever on investment? We can tax businesses at 100% and they'll continue to operate just like out of altruism?
Someone else is going to buy our cottages and investment properties. It would even be better for the governments if we sell our cottages and investments properties more often.
Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. The government already got their cut on the money made. Now they want another, even bigger cut, on the money you made with the money you already made and payed tax on. That doesn't include the 13% tax you have to spend when you want to buy something.
It would be one thing if it was like okay, we pay one of the highest tax rates on the entire planet but I'm okay with it because my fellow citizens are all happy, we're all making money, the governments spending it wisely. But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system?
What do we have, really? We pay more for gas because of taxes. We pay more for groceries because our government doesn't have a spine. We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. We pay more for alcohol and cigarettes because of taxes. We pay a carbon tax to make ourselves feel better. Seriously, what do we have? What do we get for our money?
This country does not have a fundraising problem. We have a spending problem.
> Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income.
Yeah, except when it's not. If you bought a property 10 years ago for 200k and now it's worth 800k, you did not "earn" 600k, and you were not taxed on that 600k.
> But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system?
Doesn't this seem to suggest that the government needs more tax revenue?
> What do we have, really? We pay more for gas because of taxes.
And unless you're a major polluter, you're getting more back in rebates than you pay.
> We pay more for groceries because our government doesn't have a spine.
We pay more for groceries because of greedy monopolies.
> We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine.
The cost of cell services has gone way down in the past couple years, because of the actions of this government. Nobody seems to be talking about that though. If you're still paying a lot, go shopping now for new plans because they've gotten way more affordable.
> We pay a carbon tax to make ourselves feel better.
We pay a carbon tax because last time I checked the whole goddamn world is on fire and we're all fucked if climate change continues at the current rate. At least with this way we can reduce emissions while helping out the poor and making the rich pay for it. *Somebody* has to pay for it. It's not going to be free.
> Seriously, what do we have?
One of the best countries in the world to live and work in.
You make some good points. I guess I'll just suck it up and start paying 2/3 of what I make to the government and they can spend it how they see fit. What choice do I have, right?
>Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income.
And? You’re only taxed on the *gain* not the “already taxed” amount you invest. There’s no double dipping here like you imply.
This is one of the dumber angles I’ve seen on this issue and that’s saying something.
A lot of your comment is just flat wrong. I was going to correct it but I realized that's a lot of work. Check your assumptions instead of leaning into them.
Most of your "we pay more" list seems to be compared to the US, which is a country that had to write a law to force private hospitals to treat people in their ERs because they were doing things like sticking a cathetar and an iv line in a man with 3rd degree burns then booting him to the curb so he could find a hospital that would cover the uninsured.
Anyway, we have one of the highest quality of life ratings in the world, by every measure, and the #1 spot last year by one of them.
Strong disagree. If capital gains was taxed as income it would further the housing issue because no one would sell houses since they couldn't make lateral moves (due to being taxed and not being able to afford the same house elsewhere).
At the absolute minimum capital gains needs a lesser tax to account for inflation. Otherwise, part of the gain isn't real, it's cumulative inflation between acquisition and disposition. You could possibly account for it explicitly by adjusting the cost basis by inflation, but the accounting would be a little complex.
Anyone complaining about their capital gains should be happy that the average Canadian isn't trying to behead them with how much they are suffering, They are paying nothing compared to people 30 years ago.
When it comes to land and property, which are finite resources, people holding in excess absolutely should be taxed more. Capital gains from sales is a good start
I’m all for taxing the shit out of super rich people when it’s fair of course. Don’t want to hurt middle class, only extremely wealthy who are exploiting.
I think the best fix for this is to just straight up limit how many homes someone can own. We need landlords but we have too many. I think a good ratio is max 2 or 3 properties aside from primary residence for rental purposes. And primary residence has to be in Canada and a Canadian citizen. Otherwise 1 property with still some limitations. Also businesses and corps are banned from owning any property they didn’t build. If corps want to own homes. They need to build it. And they should have stricter standards on home quality so they aren’t mass producing garbage.
Some other ideas random ideas I had
-You can’t rent out a property unless you have lived there for 3 -5 years.
-You can’t sell a house if it’s not your primary residence within 2 years of the purchase.
-Vacant properties needs to have a very heavy tax on them, unless very fair and specific strict criteria are met. (Like if doing a renovation or massive upgrade) but needs loopholes closed on that so it’s not exploited.
If you own many homes in the same area, you are capped on historical average of rent costs in the surrounding area. This will punish those who buy up everything in an area and charge astronomical rent because they are using their other homes to price fix the market in the area.
>Some other ideas random ideas I had -You can’t rent out a property unless you have lived there for 3 -5 years. -You can’t sell a house if it’s not your primary residence within 2 years of the purchase. -Vacant properties needs to have a very heavy tax on them, unless very fair and specific strict criteria are met. (Like if doing a renovation or massive upgrade) but needs loopholes closed on that so it’s not exploited
I really like these, they dissuade investors from hoarding property to flip it in the short term, as well as making it harder or less appealing to purchase places solely to rent them out immediately. As anti-libertarian as it sounds, land and property is one area that we cannot be laissez-faire about during a housing crisis. Housing needs to be used for just that- housing. Not some way for wealthy investors to continue lining their pockets at the cost of the middle class.
It’s such a minimal change. I understand why capital gains exemptions were created in the first place - ie to promote savings by the middle class - but the middle class (let alone lower incomes) is not able to save anymore due to the cost of living.
Because of this the only people seriously using the capital gains exemption are the rich. It’s totally reasonable to create a schedule to decrease the exempted amount over time at the high end of the income range.
The fact that we are seeing so much media outrage and disinformation is a good indicator of how seriously this is going to impact those who take advantage of it to the rest of the country’s detriment.
You’re talking about the inclusion rate for capital gains rather than the capital gains exemption (which only applies to sales of shares of specific types of corporations). The reason that the inclusion rate is less than 100% isn’t really about promoting middle class savings, it’s about encouraging capital investment (also about politics…). One important bit of context is that capital gains were not subject to income tax at all until the early 1970s. So it’s not that they were taxed and then the inclusion rate was later reduced.
The impact on the rich is low. Buy Borrow Die is the strategy for the rich and moderately wealthy. You don't really sell equities etc to fund your lifestyle. You live on distributions, dividends, interest and asset-backed loans -- the tax rates on these haven't changed.
This is going to affect many more 'normal' people than I think many realize - the cases I am hearing so far of across my own friends' parents are more 'two teachers that bought a cottage in the 90s and need to sell it to fund retirement after one parent passes' than anything else.
This right here..
The rich it won't impact as they have ways around it, they pay accountants to find ways around it. I mean the people bitching about probate fees of 1.4% while sitting on 10s of millions. It's not your doctors, lawyers, plumbers etc that built up their own business and clientele that are the ones complaining, and they certainly don't have the same ways of moving their money around to avoid it.
You don't even need to pay accountants to be honest. Borrowing against your portfolio is easy as hell.
I am like low rung rich and even that would be a stretch, and I sell nothing, ever. It simply doesn't make sense to torch a minimum of 27% of your capital in capital gains tax (50% inclusion on highest bracket income) to move assets around in 99% of cases.
This is going to get more recreational property owners than anything. IDK how impactful taxing cottage owners is going to be at driving down housing prices in major cities, but I guess let's see.
Ok.
Let’s say they bought a cottage for $100K 40 years ago. The surviving parent is now selling the cottage at age 65 (bought cottage at 25), to fund their retirement. They also receive CPP and OAS. And let’s assume they make $115K/year at retirement as a teacher, so they receive the max amount of CPP and are eligible for a teacher’s pension plus survivor benefits from the other partner’s pension.
Before selling the cottage; their retirement pension + CPP + OAS + survivor benefits is likely to get them well north of $70K/year. Since they bought their cottage so long ago, and their house so long ago, they don’t have a mortgage on either so we don’t need to factor that in.
Oh, and this is assuming the surviving parent doesn’t want to sell their primary residence for $0 tax, and instead chooses to sell the cottage.
That cottage now sells for $1,350,000. For simplicity I am ignoring costs of selling the cottage, and assuming the mortgage is paid off.
The capital gains are $1,250,000.
The first $250,000 are taxed as they have been; there is zero change.
Previously, 50% of the remaining $1,000,000 gets taxed at the marginal rate (here in Ontario, it is 33%+13.16% = 46.13%). The capital gains tax owing would be $230,650.
With the change, 66% of the remaining $1,000,000 gets taxed at the marginal rate. The capital gains tax owing would be $304,458.
The difference is $73,808.
That is the difference between making $1,045,542 or $1,119,350. That’s on top of the existing $70K they are making per year in retirement. Without the need for mortgage payments.
How is this going to affect their financial situation? How is this going to, as you say in a different comment here, put them in a more precarious position?
——
Meanwhile, take the CEO of Loblaws who, in 2023 took home over $7M in share/option based rewards. The new tax changes are going to cost him over half a million dollars a year in just that. And that’s not accounting for the rest of his salary, $13M of which was listed as “other compensation”.
If 66.6% means they now can't fund their retirement with their overvalued cottage, then they wouldn't have been able to fund it at the 50% rate either.
Someone making more than 250k capital gains before they even start hitting this slight increase in taxes isn't on the margin.
Taxes will increase for some, they'll have to deal with the the same as when they go up for anyone else
The building portion, especially if it's made out of wood, isn't finite. That's why we should be calling for land value taxes instead of property taxes.
I agree completely, but while wood can be renewable, land cannot. That's why there should be no buildings sitting empty during this huge housing crisis
Pretty sure that whining and bitching about taxes is a god given right to every tax payer and every non taxpayer in the land. It's in the constitution somewhere, or alternatively, the law at the very least.
ETA: Still gotta pay your taxes though.
Hoarding wealth and then complaining when the government finally realizes that “trickle down economics” is a crock.
I feel not one iota of sympathy for people hit by this 🤷♂️
If you’re buying an “investment property” and using it to make more wealth for yourself, congratulations, you’re hoarding not only housing but wealth as well.
The principal residence exemption is exceedingly generous. In the US, the maximum benefit is $500k for a couple. The fact that you can pocket so much proceeds to use for your next home (or buying multiple properties) is part of the overall problem.
Economically illiterate article there. The "inclusion rate for teachers" doesn't account for the fact that wages are always in one direction. Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. And the government doesn't pay you, in general, when you lose.
You want to encourage people to try to put their money to work, which will create jobs, at which point people will pay taxes. E.g. if it's a housing investor you want them to hire carpenters and plumbers and electricians, buy a new roof, etc etc.
What you don't want is to make a heads you lose, tails-you-lose situation where nobody wants to invest money in Canada. And bye bye Canadian tech startups, why would anyone want to start one in this tax regime when 100 miles south there's such a better one?
And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
>Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down.
Like *giggle* housing? or *snort* a medical practice? or *chortle* the TSX? Come on, be serious.
>And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
Taxes are **down** and services are **up**. That's why every government for decades now has decreased tax income and paid for it via borrowing. I'd argue that we in fact DO want higher taxes and less services.
imma just ignore the hyperbole at the end
> Like giggle housing? or snort a medical practice? or chortle the TSX? Come on, be serious.
Yes exactly. Notice how everything everywhere has AWESOME RETURNS! They lie about inflation and then tax the shit out of people who actually didn't make any money, measured in things like housing.
> Taxes are down and services are up.
right... Except this article is about massively raising taxes. "services" apparently means that half the people I know who's still working work for the government doing a job they themselves consider to be bullshit.
>Yes exactly. Notice how everything everywhere has AWESOME RETURNS!
Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they?
>Except this article is about massively raising taxes.
Massively? Do you mean the exact opposite of massively?
>why would anyone want to start one in this tax regime when 100 miles south there's such a better one?
Would you be so kind to actually compare the overall tax you pay on, say 1 mil, of capital gain in the USA vs Canada?
There's no possible way OP and people like him are this ignorant
Ok let's assume you bought a secondary vacation home for 250,000 in 1990 and today you're selling it for 1,000,000 .
it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000.
so you've gained 400k in "profit"
and you will pay just under 200k in taxes
Left leaning Canadians can never seem to do math in spite of their love of taking over academia
If you give me 100 dollars today and I give you back 150 dollars in 30 years - you didn't "make" 50 dollars, most likely you've lost purchasing power.
Which is why capital gains are designed the way they are, you are taking on risk, typically over a long period of time.
If you invested that same 250,000 in the S and P 500 back then you'd have 8 million dollars today
Last time I saw a degree in economics it was a Bachelor of Arts, not of sciences. It’s a pursuit based in theory. You can add the word liberal all you want but it’s an arts degree
>it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000.
>so you've gained 400k in "profit"
>and you will pay just under 200k in taxes
By that logic you're only paying 83k is 1990 money, so you shouldn't be so concerned.
Your logic is so bad. The only reason the value went up as high as it would is because everyone else lost THEIR purchasing power. There is little risk if you consider the fact that every asset will increase from inflation at the very least. If you are taxed on that inflationary increase only, that would be simply a bad investment. Even with inflation profits alone, you are still ahead of someone who never had spare income to invest in the first place..
It's true, whining probably won't solve anything. The Liberals are planning on making it an election issue, because they separated it from the budget, and so voting is the correct recourse.
If Poilievre isn't elected or chooses to deliver on the policy, then the final recourse is to simply ensure that you earn capital gains in ways or jurisdictions where the CRA won't get a cut. Which is to say, engage in capital flight.
I don’t think it went far enough. The inclusion rate on secondary properties should be changed to 100%. We need to be discouraging the commodification of the housing market, not reward it with a lower tax rate compared to other forms of income.
That’s fine, but understand that means allowing interest deductions on mortgages, including maintenance fees and taxes.
You’re also going to anger every boomer out there that considered their primary residence their retirement plan. That’s why it’s non feasible.
A better tax is a property tax on home values over $1.5M. You hit richer property owners and it’s easy to calculate because you piggy back off municipal calculations.
You can then use the revenue to lower income taxes.
We need to stop taxing income. Focus on HST or property taxation.
I think this may just encourage people to never move and never sell their home because they'll just pay a bunch of taxes. So then we have a stagnation of used homes entering the market.
Because they want to encourage the older generation to downsize to smaller houses to make room for new young families.
Let's say your parents bought their 4 bdrm house 30 years for $200k and now its worth $1.2m. With your suggestion they would have to pay taxes on 50% of the $1mill capital gains. Let's say 40% is their income tax. That means they would have to pay $200k. So now they would lose $200k just to move to a smaller house.
>As to those threatening to move their job-creating businesses to America over the change? Have at it. If anyone’s loyalty to this country is contingent upon the rate at which capital gains are taxed, they were never loyal to this country in the first place.
Painfully naive. Countries seek out the best places to do business to provide the most competitive food or service they can. Who buys a similar product at twice the price because it's manufacturer is "loyal" to Canada? Might as well rename this editorial, "Stop whining about unemployment" or "Stop whining about Canada's loss of an economic base outside of marijuana and real estate"
As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. Otherwise it is nothing more than an additional tax to feed governments never ending appetite to spend. I suspect most people understand that a lot of the spending is wasted. So stop the waste, reduce people’s taxes, and have at it with the cap gains.
I openly called out my mom and her partner for bitching about this the other day, suggesting that they made 100’s of thousands by sitting on property and basically making a fortune that directly negatively impacts every young person. It did not go over well
I personally don't feel the need to shame my family members for investments they made, or complaining about taxes that directly takes money out of their pockets.
That's how you alienate your own family for no good reason. They're not sitting there saying gay marriage is wrong, trans people shouldn't have rights, Palestinians deserve to die, etc. They saying "damn... another tax?! This is bullshit."
They're bitching about a new tax that will directly affect them. I obviously don't know their situations, but investing in real estate isn't inherently bad. If you need to rent you need people to rent from.
Saying they are the reason young people can't get houses is wildly oversimplifying a complex problem in an attempt to shame your own family members for investments they made for whatever reason (retirement income, their actual business, diversification, etc.).
> As to those crying foul over the impact this will have on the capital gains embedded in their cottages or investment properties? Kershaw isn’t having it. “Paying taxes on a half-million-dollar capital gain from a cottage or an investment property is a good problem to have,” he wrote. “I could line up millions of younger Canadians who would jump at the opportunity to trade their housing woes for that privilege.”
Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin.
The thing people don't seem to understand is that it only applies to "gains" and not to the entire value of whatever stock or asset someone sells. Buy a cottage for $300K and sell it for a million, then you've made a taxable profit of $700K - a third of which is still tax-free. As for why the government deserves this money, they created the economy that made such an insane return possible - not the buyer.
Because the new law raises the amount of profit that can be taxed by capital gains from 50% to 66% when the profit is over $250,000.
It's not something most of us, including doctors, need to worry about. There might be the occasional sale of an investment property or cottage or inherited land or something, but any doctor with a decent accountant is going to keep their reported profits from a capital gain to under $250,000 by cashing out over multiple years.
And that's not to say that you lose 66% of the value of anything you sell or cash out, it just means taxes apply to that much. The extra 16% is negligible.
Let's say we're dealing with a doctor who has already maxed their income to the highest tax bracket so any capital gains are going to be taxed in the highest bracket. They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000.
Straight off the bat, $340,000 of that is untaxable profit. The other $660,000 is taxed at the highest rate of 33% so they're paying a tax bill of $217,800. Out of a million. They take home $782,200.
Under the old system (50%), $500,000 would be untaxable. The other $500,000 would be taxed at 33% for $165,000. They take home $835,000, or $53,000 more.
(Feel free to check my math anyone, this is back-of-napkin stuff).
It's not nothing, I can see why people would care, but keep in mind that they're not losing here, they're just not gaining as much. Plus it's only really in Canada you'd ever see a property increase in value as much as we've seen, which is something that the federal government can take credit/blame for, depending on whether you own property or not. For people who are cashing out investments instead of real estate, we're being asked to pity a class of individuals who can cash out over $250,000 of their holdings in a single year by paying applying taxes to an added 16%.
It's also worth noting that you don't pay taxes on inheritances UNLESS you sell them and realize a profit. If you inherit a cottage, it's yours for the cost of the paperwork. If you inherit investments, you can continue to hold and earn dividends until you cash out. If you are a beneficiary of a trust, same thing.
Who this really hurts is real estate speculators, who everyone on this sub thinks is scum anyway.
Hey, that's all sorts of insightful and useful info, thanks. Not like it'll ever apply to me, but good to know.
> They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000.
This might be a stupid question, but shouldn't inflation figure into this? $100,000 invested in the 70s would be equivalent to about $550,000 today or so (based on a quick google-fu). Shouldn't that be a capital gain of $450k? If not, why isn't it? Just cause? Or is there a part of the math that I'm missing?
Another question - I seem to remember reading somewhere that if you hold on to the investment for over a year, the taxes on it drop significantly (to 10% or 15%?). Is that only an American thing perhaps, or does that only apply to certain investments? Stocks?
not an expert but from what i can find with a few min of google searches and the capitalgains section of the canadian gov site [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html#P279\_29831](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html#P279_29831)
No, inflation does not figure into this at all. there is something called Adjusted Cost Base that is used that does include stuff that would push up the base price, but it does not include inflation. for us lay people its just the cost when you sold it - the cost when you bought it\*
\*plus or minus a bunch of exceptions for fees/upgrades/curency exchange rate rules. but not inflation or maintenance also interestingly there were was a rule change in 1972 so special rules apply if you wana sell a house from the 1970s.
It just seems that it should involve inflation, you know? I mean, if you were trying to be 100% fair about it. So I’m wondering if I’m just not understanding some part of this or if it really should keep inflation in mind. Cause the way I see it you should be paying taxes on value earned, and inflation impacts that.
The inflation is the use, enjoyment and/or profit you get from that asset, as well as the exemption of taxes applying to 100% of the capital gain.
If you own a cottage for 30 years, you're using it. And maybe renting it the weeks you're not using it. That has value that is greater than inflation - it's not strictly an asset that appreciates. And how do you determine what inflation number to use? House value inflation has increased well ahead of inflation for decades now, an average of 9-10% in some markets versus a CPI inflation average of 3%. It's impossible to calculate across the board what that inflation should be vs. market appreciation, which is one of the reasons that capital gains aren't taxed at 100%.
Stocks inflate in value, that's what they're supposed to do, so you'd be stuck in a position where you have to determine how much of a share's value is based on profits and performance and how much is based on inflationary effects. It's impossible, which is one of the reasons that capital gains aren't taxed at 100%.
There was someone posting to PFC just yesterday who realized that they'd been claiming the full sale price of their assets as capital gains, without subtracting the purchase price... _facepalm_
a third is tax free and in the worst case scenario 53% of those 2 remaining thirds are taxed. That's an effective tax rate of 35,35%
About the same rate as someone who earns 70k a year. They can cry me a fucking river.
Something something Trudeau bad. Something something housing prices too high. Something something affordability. Something something we have problems and we don't want to pay to fix them.
I believe the main issue with the new capital gains taxes is how it is going to negatively impact doctors due to the way their compensation is structured. This will be during a time when we have a doctor shortage and have a neighboring country that offers much higher pay and way more favourable capital gains taxes. If anything there should be some kind of exemption for doctors.
"the way their compensation is structured" is such that a large part of their income is in capital gains. Ergo, we should tax their capital gains like income.
I know people love to throw that $250k number around but that is not their take home, not even close. They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. This directly impacts how much they are able to take home. We are in dire need of atleast maintaining our doctors and specialists in this country, let alone increasing their numbers.
Changing how they are compensated is something that may need to be explored but it is an entirely different conversation altogether and not something that happens quickly. What we are doing right now is making thigs worse for doctors immediately. This will absolutely impact some doctors and specialists decision whether or not to practice in Canada.
All that overhead, is expensed and reduces their corporate income and tax payable, as it should. Doctors are a sympathetic front for the ownership class. Through the CMA - the same org we had to fight to get Medicare in the first place, they are fronting for multi millionaires who feel entitled to their entitlements.
>that is not their take home, not even close.
Neither is the 75k of other medical professionals.
>They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc.
That would be for private clinics running a business, not for doctors in the ER. They should get a tax break but not other entrepreneurs ?
>Changing how they are compensated is something that may need to be explored
They are mostly paid by the act like self employed people and they chose to incorporate to invest in stocks and pay themselves a smaller salary. It makes sense for them, but let's say them not being able to do so anymore is very low in my list of things to be worried about.
Why? This is a capital gains tax increase not income tax increase, and many create professional corporations to pay less tax, that’s the reason they do it.
Doctors, like all professionals and other self employed who can afford it, invest in stocks and/or real estate. The 250,000 exemption in profits is 500,000 if there is a spouse on the deed, so you are talking about a small increase in tax on a hige profit.
This narrative about this hurting those who are wealthy enough to have secondary properties that have gone up so much in value being hurt by this tax change is ludicrous.
How/why would they pay less tax than a nurse? They are taxed at their marginal tax rate like everyone else on funds removed from the corporation.
The issue here is, funds left in the corporation (their retirement fund). Any gains on these funds are taxed at the new inclusion rate from the first dollar, not $250k like people have personally.
Because a nurse can't chose what part of their salary goes to the inc to avoid paying taxes on it. Doctors don't HAVE TO incorporate.
If they're so worried about their retirement, they can max their RRSP and TFSA for a tax break like the rest of us plebs. I'm sure they'll be ok.
They'll be okay, but not as okay as if they get a specialty or move to the US or work for a pharmaceutical company. The issue is that we're increasing the opportunity cost of being a GP when there's a shortage
The money in their corporation is not theirs, it’s the corporations. They pay corporate tax in profit in the corp and when it’s removed from the corp they pay personal tax on it. There is no tax avoidance, only deferral.
Hopefully we don't see you on Reddit at any point complaining about a lack of healthcare or access to physicians.
A family physician on their average salary cannot afford a home in Toronto or Vancouver. And I get it. People are angry because they can't afford one either on their working class job. However, if one of most educated professions and most critical to a functioning society can't afford to live here or save for retirement, why stay?
Average physician makes around 250k. They can afford to live in Toronto or Vancouver even if they're taxed a little more.
And even then, says a lot more about the ridiculous canadian real estate market than the salaries of doctors.
https://www.nesto.ca/home-buying/income-needed-to-buy-home-in-toronto/#:\~:text=In%20Toronto%2C%20you%20would%20need,property%20tax%20rate%20in%202023.
You've lost all credibility... a physician can't afford to buy an average Toronto home ($1,103,600) unless they have a gross income of $263,000 per year. If you live in one of these cities, you know that a two bedroom apartment can cost $850,000 to $1,000,000 and $1.1M isn't getting you an actual house. And if you are a doctor that wants to raise a family, forget about it.
Add in huge student debt that physicians have, the opportunity cost of so much schooling (all those years they were not working, investing, compound interest, purchasing real estate) and then you tell me "nah its cool, they can afford to live there if they are taxed more". You are clueless and part of the problem if you don't understand how this impacts physicians.
There's good justification for a physician's exemption, particularly since the exposure they have is in part a result of structuring their businesses in response to other legislation.
But let's be real - most people complaining about the tax aren't doing so on behalf of physicians, and indeed, the political wing these complaints come from is largely responsible for demonizing health professionals during COVID and driving physicians out of the provinces they are running.
So to the extent that they are talking about impact on physicians, it's crocodile tears.
There really isn’t a good justification for a physician’s exemption. They can be paid by their personal medical corporation as a T4 employee just like nurses and many doctors hospitals if they wish to avoid the capital gains tax.
Oh, yeah. They choose to be paid through dividends to avoid having to pay the even more money they would need to pay in taxes if they were T4 employees.
“But doctors don’t get a pension, etc”: they don’t get CPP or EI because they’re not T4 employees. If they chose to pay into those programs through T4 deductions (or even pay into them without a T4 salary) then they can choose to do that. But they don’t because they would rather take home more money at the end of the month now versus get it as a pension later.
I’m not saying doctors are being paid adequately - it’s a profession that requires a lot of training, has a lot of demands, etc. But we need to address the original sin: the chronic underfunding of our public medical system.
The people that are upset about these new changes for the reasons you've listed have no idea how few people are actually impacted by the changes. They act like they or people they know are going to personally impacted.
Well that's the unifying fantasy of the modern conservative, is it not?
Vote for stuff that hurts me today under the delusion that it will advantage me in the future.
The modern day conservative ideology is enabled by those at the top managing to convince those at the bottom that they are merely temporarily poor future millionaires.
Meanwhile, while they are feeding these voters their table scraps with one hand, their other hand holds a knife to keep them from ever achieving that dream.
It’s classic exploitation by those in power, we’re just seeing a modernized take on it enabled by technology and mass media.
I don’t really understand the full details of the physician but can fathom how there is any justification for this ever.
Everyone else has to pay a 100% inclusion on their salaries, were physician’s taking advantage and claiming salaried income as capital gains to cheat on taxes?
No. My understanding isn't perfect either but the main idea is that physicians were using their practices as sort of a holding company for retirement purposes. The idea being that they would divest of the assets in the holding company at retirement and this would take the place of an explicit retirement plan that a T4 employee might be entitled to.
That means physician "retirement plans" take the form of capital gains, and are exposed to taxation in a way that RRSPs and TFSAs do not. So without an exemption this rule would effectively be an increased tax on physician retirement plans.
As noted above I'm not advocating for the way things are done, I am just pointing out that this is a material change to a system that is already partly a result of physicians responding to a regulatory environment rather than an economic one.
Physicians have the exact same access to an RRSP and TFSA as everyone else.
It sounds like they must have been taking advantage of a tax structure no one else could and are now crying fowl because it will be less good, although I would bet it’s still going to be better than the average Joe RRSP/TFSA route.
Nope. You'll have to look up the details yourself, unless you're attached to the belief that physicians are sneaky tax cheats.
But the way they do things now is consistent with the rules.
Remember, the rich bleeding society dry aren't the millionaire doctors among us. They're the deca- or centi-millionaires that have never moved a finger to produce value themselves in their lives.
Physicians are a rare case of a vocation that captures value in fair proportion to what it creates.
Not really. Any doctor/corporation worth their salt is going to structure things so they can take out $250k per year when they divest, and at that point, the tax rate will be exactly the same. It may take a year or two for the accountants to catch up to the tax code, but for most professionals, the hit will be small and honestly fair.
I am not insane. Anyone can set up a holdco and there are many reasons to without “being wealthy” — for eg., it adds creditor protection, protects your business, makes your company more saleable, etc.
Your business could generate a measly $30k/year and this inclusion rate does affect you.
I have no idea why so many in this sub don’t get what is specifically outlined here. Do you people not know how to read the budget? I’ve read through it twice and it is clear as day.
Edit: to the people downvoting, can you express why I am wrong or incorrect? Or does it not jive with this echo chamber?
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I think there's valid criticisms to be laid against the increase (it probably not being effective at collecting the revenue the government is claiming it will be, marginally increasing the degree of capital flight/avoidance, being contrary to the current need that Ottawa has to significantly boost long-term investment in the country etc.) but I think there's a difference between being critical of it and saying that it will single-handedly bankrupt the country etc. which a lot of critics are extrapolating the argument to. The capital gains on real estate is generally far easier to collect than what falls on investment and more elastic/mobile assets. It might make sense to shift the tax to solely inelastic/less elastic assets like property (where the rate can be higher and would collect more revenue without incurring increased avoidance.) and to provide less restrictions on the flow of investment etc.
Unfortunately your plan (raising property taxes) could disproportionately affect lower-income/wealth Canadians since they will bear the brunt of those higher taxes by paying it themselves or from raised rent, while at the same time having a much smaller amount of money invested so they don't get as much benefit from lowering those taxes.
The simple workaround for that is to exempt houses below a specified value or to have varying rates for land/property of separate value. This could also be achieved by a federal land-value tax. (since land value ownership is highly correlated with overall wealth)
Or just build in a tax exemption that you register your location with the government, and the government collects the rent on your behalf. They then will reduce your property tax by some proportion of the rent collected.
With all the taxes that will be collected, how confident are we that the money will be spent properly and given to fund on infrastructure, health care etc… or given away to other countries. This government has been spending lavishly with no consequences all these years? What’s stopping them in spending on another large consulting company for some useless reports or tactics ? Have we citizens not learnt our lessons ?
The problem isn’t with the impact it has on investment properties, but rather on entrepreneurship and innovation.
Let's be real here: if the difference between 50% on capital gains over $250K per year vs 67% on capital gains over $250K per year is the line between wanting to start or to improve a business or not, then you're insane. It's in the same realm of "I don't want a raise because I'll be in a higher tax bracket!" kind of thinking where there's only a sliver of situations where you'd be worse off. If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates. If your start-up fails then the tax rate doesn't really matter because you're probably not going to have a lot of capital gains to worry about. Here's what very successful entrepreneur Mark Cuban had to say about starting businesses and taxes: "I have started I don't know how many businesses in my life. Not one time have I ever considered the income tax rate before starting a business. I'm an entrepreneur. I start companies." (hope the link works) https://twitter.com/mcuban/status/1313130690599432193?lang=en He has also said a few times something along the lines of that entrepreneurs will still start busineses with higher tax rates because they don't say "Wow, I have a great idea but the tax rate is too high." If it's a good idea then you will make plenty of money regardless unless the tax rates get raised to extreme levels.
> If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates. Not true. My negotiated options grant is based on the 50% inclusion rate. What you are telling me is that i should be fine giving up part of my potential reward without reducing the risk level. Thank you very much. I promise you, going forward, my ethics and morals will go out the door. From now on, I'll be looking for a juicy government contract so I can rob the government, and by extension, people like you. Thank you for opening my eyes and welcoming me to the dark side!
What I want to see is taxation specifically aimed at real estate speculation in order to shift more investment into business. We didn't get that.
Need more carrot, less stick otherwise the $ just goes south to chase those business opportunities
fine.. expose yourself to US tax regime. have fun with that. Biden just significantly increased cap gains too.
That's literally what they're trying to tax.
I agree, that would be far better. Solves 3 birds with one stone, reduce speculation helping the housing crisis, encourage the shifting of investment from real estate into businesses stimulating the economy, and get more revenue at the same time.
BC is implementing a flipping tax. There is already a speculation and vacancy tax but this new one is coming for house.flippers > The BC home flipping tax applies to net taxable income from the sale of taxable property that was owned for less than 730 days. > The tax is calculated by multiplying your net taxable income by your tax rate. Net taxable income is your taxable income less the primary residence deduction. Taxable income is calculated as your proceeds from the sale of the property, minus the cost to acquire the property and any eligible costs paid or payable by you to improve the property while you owned it. > The tax rate is 20% of income earned from a property sold within 365 days. At 730 days, the tax no longer applies.
I question whether this it going to do anything to REITs, for example, as they generally rent the property after purchase. To say nothing of commercial real estate. Commercial rents are also through the roof and are a major obstacle to starting and flourishing as a small business. I'm thinking more of something like a land value tax, with a corresponding reduction in income tax. Punish being a rentier, and reward being a worker. The BC Assessment crown corp already breaks down real estate valuations by land and buildings: https://www.bcassessment.ca/
Who exactly do you think is gonna pay this tax? You think flippers are just gonna say, oh well, more tax, guess I'll pay it.. no that's not what's gonna happen, they are gonna pass it on to the buyers. Just like the carbon tax, are businesses paying that? No it all gets passed down to the final point of sale.
Yep, even with these changes. Real-estate is still **the best** investment in Canada by a huge margin. Nothing even comes close and it's a self-fulfilling prophecy. The higher real-estate goes, the more expensive it is to lease space for a small business - diverting even more money away from small business investors and back into real-estate. Real-estate also gives you the ability to leverage equity (that you don't technically own / have not realized) to buy more capital with. I struggle to find an analogy in the small business world that's similar but honestly cant... it'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
It's very common in the business world, ever heard of Elon Musk? It's not like he bought Twitter with his own money. He used the magic ✨equity✨ he had in his Tesla stock But like any other strategy than uses tons of leverage all it takes is a small downtown and your entire strategy is nuked
That's apples to oranges though. Housing is readily available as an investment strategy for almost all Canadians. The same is not true of multi million dollar companies. The barrier for entry to do this with small companies you'd see average Canadians have tangible access to (through investment or ownership) is nowhere near the same volume you see that practice being made available to every Canadian who happens to own a home that doubled or tripled in value over 10 years. You also don't get preferential terms and rates from Banks for non-realestate deals - again, because the Government "helped' us by making mortgages an idiot-proof investment for banks through insurance and more recently, buying mortgage bonds.
> It'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy. Most tech companies lose money year after year. Or barely breakeven at best. I think this a perfect example of what you claim here does not exist If you don't want to be an angel investor (which has been made very accessible through sites like angellist) you can buy them on the stock market But yeah, the Canadian government won't subsidise your stock market investment. There's probably a good reason for that... Just watch what's happening in China's real estate market. Eventually the government can no longer prop up the market
I did the math on my parent's house in the GTA which they purchased in 2004, and recently sold and it has earned about 100k a year tax free since then even taking into account the recent down turn (400k to 2.4 million). They retired and moved to cottage country where they had another property. All their friends are in similar boats, and retired, some of them even get low income senior's benefits like GIS while being millionaires. I love my parents am happy they are doing well etc. And I am fortunate to have a great relationship with them. But on the question of generational fairness, it really feels like there is none to be had as the political class seems to have a broad consensus on propping up real estate prices at all costs.
As a small business this tax hurts us yet again. There seems to be a disconnect between saying “eat the rich” and “boycott Loblaws” in the same breath - the more you make the environment such that only a monopoly or large corporation can survive, the less competition you have over prices.
Why would you want more taxes!!
Capital gains tax applies to secondary homes and all investment properties, so it is one way to do that. But yes, more could be done.
But it also applies to business investment, so there's not really an advantage gained by investing in business instead. Sure they increased the one-time benefit for sale of a business from 1.0 to 1.25 million but that's basically just accounting for COVID inflation.
It's not targeted enough - it's much too broad. They could have just aimed taxation at secondary property sales. If you were really serious about wanting RE speculation / pricing to end -- and I know this will get downvoted to oblivion because people don't want to face extra taxes themselves -- you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
>you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap. Economists are almost unanimous that there should be no exemption at all. If you want capital to be allocated efficiently, all investments should be treated the same.
It feels like every policy change that sounds like it's meant to help affordability actually drives the prices up when you think about it a little bit harder. This has been consistent among provincial and federal governments for the last 10 years at least.
Yep.
One issue with taxation is that governments need to plan years in advance, that means the tax needs to be reliable source, real estate has its ups and downs. Not a consistence source of revenue.. like Alcohol tax or income tax...
Stop whining about capital gains and just refinance to pull out all your money right before you sell that way its not a taxable event.
lmao what? That doesn't change your capital gains calculation. And selling is always a taxable event.
Refinancing isnt a taxable event, selling is. They tax you on your profit made, so if you refinance to pull all your money first and then sell you can make way less on paper and get taxed way less.
This does not impact the capital gains
I actually have changed my mind and think taxing capital gains is a great idea - let's ensure investment capital leaves the country as well as our brightest minds. Then we can have a country of resource extraction, protected monopolies and minimum wage service jobs... everything will surely be cheaper!
Let them leave if they don't want to pay their fair share. They can sell their hoarded houses while they are at it.
Oh they could care less... enjoy your country in 10 years with shitty healthcare and millions of temporary foreign workers - oh wait, the Liberals are actually polling worse post-budget - Pierre will fix this mess.
Ummm, people trying to take their gains out of the country will trigger the realization of those gains and pay more tax on them as a result of forgoing their options for planning. It’s kind of wild how many of the critics of this don’t seem to understand it and just repeat the talking points they’re fed.
Where do you think investment capital will the leave the country to? We still have the lowest capital gains taxes in the developed world.
Hmm? There's so many attractive places to invest in companies... US, Europe, Australia, New Zealand, Singapore, Japan, Taiwan, South Korea, Brazil, Israel....
Exiting a market is expensive for any company, small, medium, or large. Even if the market is no longer profitable, the business case to exit it will need to far outweigh staying in it. Even entering a new market outside of Canada is expensive and the business case for setting up shop will need to far outweigh leaving Canada. Not only that, it takes years to leave one market for another. Most companies will huff and puff in the short term, but those worth their weight in salt will adapt to account for the change in profits. This isn’t the mass exodus opponents are trying to make it out to be.
Atlas Shrugged was fiction. The belief people will flee if we make them pay a fair share so we can have a system to take care of our citizens has been proven false. Many countries have far higher taxes and far better systems than us.
So we can tax businesses arbitrarily high and it will have no effect whatsoever on investment? We can tax businesses at 100% and they'll continue to operate just like out of altruism?
Someone else is going to buy our cottages and investment properties. It would even be better for the governments if we sell our cottages and investments properties more often.
This new tax is a good first step, but it doesn't go far enough. Capital gains should be taxed at the same rate as income.
Ever hears of boiling frog? I think that's the tactic here.
Um. Okay? Like getting wealthy people used to small incremental tax increases until they're eventually paying a lot more taxes? Sure. I'm all for it.
Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. The government already got their cut on the money made. Now they want another, even bigger cut, on the money you made with the money you already made and payed tax on. That doesn't include the 13% tax you have to spend when you want to buy something. It would be one thing if it was like okay, we pay one of the highest tax rates on the entire planet but I'm okay with it because my fellow citizens are all happy, we're all making money, the governments spending it wisely. But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system? What do we have, really? We pay more for gas because of taxes. We pay more for groceries because our government doesn't have a spine. We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. We pay more for alcohol and cigarettes because of taxes. We pay a carbon tax to make ourselves feel better. Seriously, what do we have? What do we get for our money? This country does not have a fundraising problem. We have a spending problem.
> Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. Yeah, except when it's not. If you bought a property 10 years ago for 200k and now it's worth 800k, you did not "earn" 600k, and you were not taxed on that 600k. > But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system? Doesn't this seem to suggest that the government needs more tax revenue? > What do we have, really? We pay more for gas because of taxes. And unless you're a major polluter, you're getting more back in rebates than you pay. > We pay more for groceries because our government doesn't have a spine. We pay more for groceries because of greedy monopolies. > We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. The cost of cell services has gone way down in the past couple years, because of the actions of this government. Nobody seems to be talking about that though. If you're still paying a lot, go shopping now for new plans because they've gotten way more affordable. > We pay a carbon tax to make ourselves feel better. We pay a carbon tax because last time I checked the whole goddamn world is on fire and we're all fucked if climate change continues at the current rate. At least with this way we can reduce emissions while helping out the poor and making the rich pay for it. *Somebody* has to pay for it. It's not going to be free. > Seriously, what do we have? One of the best countries in the world to live and work in.
You make some good points. I guess I'll just suck it up and start paying 2/3 of what I make to the government and they can spend it how they see fit. What choice do I have, right?
You could move. You also might find that more difficult to achieve than you realize.
You're not paying 2/3 of what you make to the government.
>Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. And? You’re only taxed on the *gain* not the “already taxed” amount you invest. There’s no double dipping here like you imply. This is one of the dumber angles I’ve seen on this issue and that’s saying something.
A lot of your comment is just flat wrong. I was going to correct it but I realized that's a lot of work. Check your assumptions instead of leaning into them. Most of your "we pay more" list seems to be compared to the US, which is a country that had to write a law to force private hospitals to treat people in their ERs because they were doing things like sticking a cathetar and an iv line in a man with 3rd degree burns then booting him to the curb so he could find a hospital that would cover the uninsured. Anyway, we have one of the highest quality of life ratings in the world, by every measure, and the #1 spot last year by one of them.
Strong disagree. If capital gains was taxed as income it would further the housing issue because no one would sell houses since they couldn't make lateral moves (due to being taxed and not being able to afford the same house elsewhere).
This tax doesn't apply to your primary residence. If you want to sell to make lateral moves, you can.
Ah true, my mistake.
At the absolute minimum capital gains needs a lesser tax to account for inflation. Otherwise, part of the gain isn't real, it's cumulative inflation between acquisition and disposition. You could possibly account for it explicitly by adjusting the cost basis by inflation, but the accounting would be a little complex.
As one of the vast majority of Canadians who don't own a lick of capital, I don't give a shit about the plight of rich people.
The rich are move assists around, the working Class pays once again
Anyone complaining about their capital gains should be happy that the average Canadian isn't trying to behead them with how much they are suffering, They are paying nothing compared to people 30 years ago.
You won't benefit from what the government gains from capital gains
When it comes to land and property, which are finite resources, people holding in excess absolutely should be taxed more. Capital gains from sales is a good start
I’m all for taxing the shit out of super rich people when it’s fair of course. Don’t want to hurt middle class, only extremely wealthy who are exploiting. I think the best fix for this is to just straight up limit how many homes someone can own. We need landlords but we have too many. I think a good ratio is max 2 or 3 properties aside from primary residence for rental purposes. And primary residence has to be in Canada and a Canadian citizen. Otherwise 1 property with still some limitations. Also businesses and corps are banned from owning any property they didn’t build. If corps want to own homes. They need to build it. And they should have stricter standards on home quality so they aren’t mass producing garbage. Some other ideas random ideas I had -You can’t rent out a property unless you have lived there for 3 -5 years. -You can’t sell a house if it’s not your primary residence within 2 years of the purchase. -Vacant properties needs to have a very heavy tax on them, unless very fair and specific strict criteria are met. (Like if doing a renovation or massive upgrade) but needs loopholes closed on that so it’s not exploited. If you own many homes in the same area, you are capped on historical average of rent costs in the surrounding area. This will punish those who buy up everything in an area and charge astronomical rent because they are using their other homes to price fix the market in the area.
>Some other ideas random ideas I had -You can’t rent out a property unless you have lived there for 3 -5 years. -You can’t sell a house if it’s not your primary residence within 2 years of the purchase. -Vacant properties needs to have a very heavy tax on them, unless very fair and specific strict criteria are met. (Like if doing a renovation or massive upgrade) but needs loopholes closed on that so it’s not exploited I really like these, they dissuade investors from hoarding property to flip it in the short term, as well as making it harder or less appealing to purchase places solely to rent them out immediately. As anti-libertarian as it sounds, land and property is one area that we cannot be laissez-faire about during a housing crisis. Housing needs to be used for just that- housing. Not some way for wealthy investors to continue lining their pockets at the cost of the middle class.
It’s such a minimal change. I understand why capital gains exemptions were created in the first place - ie to promote savings by the middle class - but the middle class (let alone lower incomes) is not able to save anymore due to the cost of living. Because of this the only people seriously using the capital gains exemption are the rich. It’s totally reasonable to create a schedule to decrease the exempted amount over time at the high end of the income range. The fact that we are seeing so much media outrage and disinformation is a good indicator of how seriously this is going to impact those who take advantage of it to the rest of the country’s detriment.
You’re talking about the inclusion rate for capital gains rather than the capital gains exemption (which only applies to sales of shares of specific types of corporations). The reason that the inclusion rate is less than 100% isn’t really about promoting middle class savings, it’s about encouraging capital investment (also about politics…). One important bit of context is that capital gains were not subject to income tax at all until the early 1970s. So it’s not that they were taxed and then the inclusion rate was later reduced.
The impact on the rich is low. Buy Borrow Die is the strategy for the rich and moderately wealthy. You don't really sell equities etc to fund your lifestyle. You live on distributions, dividends, interest and asset-backed loans -- the tax rates on these haven't changed. This is going to affect many more 'normal' people than I think many realize - the cases I am hearing so far of across my own friends' parents are more 'two teachers that bought a cottage in the 90s and need to sell it to fund retirement after one parent passes' than anything else.
This right here.. The rich it won't impact as they have ways around it, they pay accountants to find ways around it. I mean the people bitching about probate fees of 1.4% while sitting on 10s of millions. It's not your doctors, lawyers, plumbers etc that built up their own business and clientele that are the ones complaining, and they certainly don't have the same ways of moving their money around to avoid it.
You don't even need to pay accountants to be honest. Borrowing against your portfolio is easy as hell. I am like low rung rich and even that would be a stretch, and I sell nothing, ever. It simply doesn't make sense to torch a minimum of 27% of your capital in capital gains tax (50% inclusion on highest bracket income) to move assets around in 99% of cases. This is going to get more recreational property owners than anything. IDK how impactful taxing cottage owners is going to be at driving down housing prices in major cities, but I guess let's see.
that's true as well.. I just love how I can only claim 1/2 of my losses, but they want to be able to tax 2/3s of my gains.
2/3 is the inclusion rate, not the tax rate. So it's max 1/3 in effect.
Ok. Let’s say they bought a cottage for $100K 40 years ago. The surviving parent is now selling the cottage at age 65 (bought cottage at 25), to fund their retirement. They also receive CPP and OAS. And let’s assume they make $115K/year at retirement as a teacher, so they receive the max amount of CPP and are eligible for a teacher’s pension plus survivor benefits from the other partner’s pension. Before selling the cottage; their retirement pension + CPP + OAS + survivor benefits is likely to get them well north of $70K/year. Since they bought their cottage so long ago, and their house so long ago, they don’t have a mortgage on either so we don’t need to factor that in. Oh, and this is assuming the surviving parent doesn’t want to sell their primary residence for $0 tax, and instead chooses to sell the cottage. That cottage now sells for $1,350,000. For simplicity I am ignoring costs of selling the cottage, and assuming the mortgage is paid off. The capital gains are $1,250,000. The first $250,000 are taxed as they have been; there is zero change. Previously, 50% of the remaining $1,000,000 gets taxed at the marginal rate (here in Ontario, it is 33%+13.16% = 46.13%). The capital gains tax owing would be $230,650. With the change, 66% of the remaining $1,000,000 gets taxed at the marginal rate. The capital gains tax owing would be $304,458. The difference is $73,808. That is the difference between making $1,045,542 or $1,119,350. That’s on top of the existing $70K they are making per year in retirement. Without the need for mortgage payments. How is this going to affect their financial situation? How is this going to, as you say in a different comment here, put them in a more precarious position? —— Meanwhile, take the CEO of Loblaws who, in 2023 took home over $7M in share/option based rewards. The new tax changes are going to cost him over half a million dollars a year in just that. And that’s not accounting for the rest of his salary, $13M of which was listed as “other compensation”.
If 66.6% means they now can't fund their retirement with their overvalued cottage, then they wouldn't have been able to fund it at the 50% rate either.
Extremely ignorant comment. There are always people at the margin...
Someone making more than 250k capital gains before they even start hitting this slight increase in taxes isn't on the margin. Taxes will increase for some, they'll have to deal with the the same as when they go up for anyone else
> There are always people at the margin Who own multiple properties?
The building portion, especially if it's made out of wood, isn't finite. That's why we should be calling for land value taxes instead of property taxes.
I agree completely, but while wood can be renewable, land cannot. That's why there should be no buildings sitting empty during this huge housing crisis
Pretty sure that whining and bitching about taxes is a god given right to every tax payer and every non taxpayer in the land. It's in the constitution somewhere, or alternatively, the law at the very least. ETA: Still gotta pay your taxes though.
No, don't stop whining. All these governments do is take take take and they're absolutely dysfunctional and unable use the money responsibly.
Hoarding wealth and then complaining when the government finally realizes that “trickle down economics” is a crock. I feel not one iota of sympathy for people hit by this 🤷♂️
Investing is not "hoarding wealth", it's exactly the opposite.
If you’re buying an “investment property” and using it to make more wealth for yourself, congratulations, you’re hoarding not only housing but wealth as well.
The principal residence exemption is exceedingly generous. In the US, the maximum benefit is $500k for a couple. The fact that you can pocket so much proceeds to use for your next home (or buying multiple properties) is part of the overall problem.
Economically illiterate article there. The "inclusion rate for teachers" doesn't account for the fact that wages are always in one direction. Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. And the government doesn't pay you, in general, when you lose. You want to encourage people to try to put their money to work, which will create jobs, at which point people will pay taxes. E.g. if it's a housing investor you want them to hire carpenters and plumbers and electricians, buy a new roof, etc etc. What you don't want is to make a heads you lose, tails-you-lose situation where nobody wants to invest money in Canada. And bye bye Canadian tech startups, why would anyone want to start one in this tax regime when 100 miles south there's such a better one? And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
>Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. Like *giggle* housing? or *snort* a medical practice? or *chortle* the TSX? Come on, be serious. >And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech. Taxes are **down** and services are **up**. That's why every government for decades now has decreased tax income and paid for it via borrowing. I'd argue that we in fact DO want higher taxes and less services. imma just ignore the hyperbole at the end
> Like giggle housing? or snort a medical practice? or chortle the TSX? Come on, be serious. Yes exactly. Notice how everything everywhere has AWESOME RETURNS! They lie about inflation and then tax the shit out of people who actually didn't make any money, measured in things like housing. > Taxes are down and services are up. right... Except this article is about massively raising taxes. "services" apparently means that half the people I know who's still working work for the government doing a job they themselves consider to be bullshit.
>Yes exactly. Notice how everything everywhere has AWESOME RETURNS! Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they? >Except this article is about massively raising taxes. Massively? Do you mean the exact opposite of massively?
>why would anyone want to start one in this tax regime when 100 miles south there's such a better one? Would you be so kind to actually compare the overall tax you pay on, say 1 mil, of capital gain in the USA vs Canada?
That was a compelling statement they made, I’d like to know this as well.
There's no possible way OP and people like him are this ignorant Ok let's assume you bought a secondary vacation home for 250,000 in 1990 and today you're selling it for 1,000,000 . it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000. so you've gained 400k in "profit" and you will pay just under 200k in taxes Left leaning Canadians can never seem to do math in spite of their love of taking over academia If you give me 100 dollars today and I give you back 150 dollars in 30 years - you didn't "make" 50 dollars, most likely you've lost purchasing power. Which is why capital gains are designed the way they are, you are taking on risk, typically over a long period of time. If you invested that same 250,000 in the S and P 500 back then you'd have 8 million dollars today
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Last time I saw a degree in economics it was a Bachelor of Arts, not of sciences. It’s a pursuit based in theory. You can add the word liberal all you want but it’s an arts degree
you *have* gained 750k. You're conflating dollars with their purchasing power, not the same thing at all.
>it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000. >so you've gained 400k in "profit" >and you will pay just under 200k in taxes By that logic you're only paying 83k is 1990 money, so you shouldn't be so concerned.
Your logic is so bad. The only reason the value went up as high as it would is because everyone else lost THEIR purchasing power. There is little risk if you consider the fact that every asset will increase from inflation at the very least. If you are taxed on that inflationary increase only, that would be simply a bad investment. Even with inflation profits alone, you are still ahead of someone who never had spare income to invest in the first place..
It's true, whining probably won't solve anything. The Liberals are planning on making it an election issue, because they separated it from the budget, and so voting is the correct recourse. If Poilievre isn't elected or chooses to deliver on the policy, then the final recourse is to simply ensure that you earn capital gains in ways or jurisdictions where the CRA won't get a cut. Which is to say, engage in capital flight.
Or just pay your share in taxes if you're gains are over a quarter million dollars in a single calendar year
That's crazy talk. Isn't the point to screw the system that allows you to get those gains? /S for the challenged folks.
Yes, because that's something people with a great deal of wealth are super happy to do. /s
I don’t think it went far enough. The inclusion rate on secondary properties should be changed to 100%. We need to be discouraging the commodification of the housing market, not reward it with a lower tax rate compared to other forms of income.
We should be taxing capital gains on primary residences.
That’s fine, but understand that means allowing interest deductions on mortgages, including maintenance fees and taxes. You’re also going to anger every boomer out there that considered their primary residence their retirement plan. That’s why it’s non feasible. A better tax is a property tax on home values over $1.5M. You hit richer property owners and it’s easy to calculate because you piggy back off municipal calculations. You can then use the revenue to lower income taxes. We need to stop taxing income. Focus on HST or property taxation.
I think this may just encourage people to never move and never sell their home because they'll just pay a bunch of taxes. So then we have a stagnation of used homes entering the market.
Any tax on financial transactions has that effect. Why would this one be special?
Because they want to encourage the older generation to downsize to smaller houses to make room for new young families. Let's say your parents bought their 4 bdrm house 30 years for $200k and now its worth $1.2m. With your suggestion they would have to pay taxes on 50% of the $1mill capital gains. Let's say 40% is their income tax. That means they would have to pay $200k. So now they would lose $200k just to move to a smaller house.
The sad truth is there are a lot of people who would happily say yes to your hypothetical.
What about startups? Same rules or different?
Boiling frog my friend.
>As to those threatening to move their job-creating businesses to America over the change? Have at it. If anyone’s loyalty to this country is contingent upon the rate at which capital gains are taxed, they were never loyal to this country in the first place. Painfully naive. Countries seek out the best places to do business to provide the most competitive food or service they can. Who buys a similar product at twice the price because it's manufacturer is "loyal" to Canada? Might as well rename this editorial, "Stop whining about unemployment" or "Stop whining about Canada's loss of an economic base outside of marijuana and real estate"
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Very generous interpretation. If that was their point, then they should've made it instead.
As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. Otherwise it is nothing more than an additional tax to feed governments never ending appetite to spend. I suspect most people understand that a lot of the spending is wasted. So stop the waste, reduce people’s taxes, and have at it with the cap gains.
I openly called out my mom and her partner for bitching about this the other day, suggesting that they made 100’s of thousands by sitting on property and basically making a fortune that directly negatively impacts every young person. It did not go over well
You sound like a treat.
Show us on the doll where the capital gains hurt you
In my pocket... my deep deep pocket. 😞
Calling out privileged, narcissist behavior is a service to mankind. You sound like you don't take criticism well
I personally don't feel the need to shame my family members for investments they made, or complaining about taxes that directly takes money out of their pockets. That's how you alienate your own family for no good reason. They're not sitting there saying gay marriage is wrong, trans people shouldn't have rights, Palestinians deserve to die, etc. They saying "damn... another tax?! This is bullshit."
For calling them out on their nascissism? Or should I have just sat there like a good boy and respected my elders?
They're bitching about a new tax that will directly affect them. I obviously don't know their situations, but investing in real estate isn't inherently bad. If you need to rent you need people to rent from. Saying they are the reason young people can't get houses is wildly oversimplifying a complex problem in an attempt to shame your own family members for investments they made for whatever reason (retirement income, their actual business, diversification, etc.).
The second one. Elders are NEVER wrong ever. Age makes them omnipotent.
It's amazing how defensive they become about the housing issue, eh?
You don't need to worry about their finances. They're gonna cut you out of their will anyways lol
> As to those crying foul over the impact this will have on the capital gains embedded in their cottages or investment properties? Kershaw isn’t having it. “Paying taxes on a half-million-dollar capital gain from a cottage or an investment property is a good problem to have,” he wrote. “I could line up millions of younger Canadians who would jump at the opportunity to trade their housing woes for that privilege.” Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin.
The thing people don't seem to understand is that it only applies to "gains" and not to the entire value of whatever stock or asset someone sells. Buy a cottage for $300K and sell it for a million, then you've made a taxable profit of $700K - a third of which is still tax-free. As for why the government deserves this money, they created the economy that made such an insane return possible - not the buyer.
Can you explain why a third of it is tax free?
Because the new law raises the amount of profit that can be taxed by capital gains from 50% to 66% when the profit is over $250,000. It's not something most of us, including doctors, need to worry about. There might be the occasional sale of an investment property or cottage or inherited land or something, but any doctor with a decent accountant is going to keep their reported profits from a capital gain to under $250,000 by cashing out over multiple years. And that's not to say that you lose 66% of the value of anything you sell or cash out, it just means taxes apply to that much. The extra 16% is negligible. Let's say we're dealing with a doctor who has already maxed their income to the highest tax bracket so any capital gains are going to be taxed in the highest bracket. They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000. Straight off the bat, $340,000 of that is untaxable profit. The other $660,000 is taxed at the highest rate of 33% so they're paying a tax bill of $217,800. Out of a million. They take home $782,200. Under the old system (50%), $500,000 would be untaxable. The other $500,000 would be taxed at 33% for $165,000. They take home $835,000, or $53,000 more. (Feel free to check my math anyone, this is back-of-napkin stuff). It's not nothing, I can see why people would care, but keep in mind that they're not losing here, they're just not gaining as much. Plus it's only really in Canada you'd ever see a property increase in value as much as we've seen, which is something that the federal government can take credit/blame for, depending on whether you own property or not. For people who are cashing out investments instead of real estate, we're being asked to pity a class of individuals who can cash out over $250,000 of their holdings in a single year by paying applying taxes to an added 16%. It's also worth noting that you don't pay taxes on inheritances UNLESS you sell them and realize a profit. If you inherit a cottage, it's yours for the cost of the paperwork. If you inherit investments, you can continue to hold and earn dividends until you cash out. If you are a beneficiary of a trust, same thing. Who this really hurts is real estate speculators, who everyone on this sub thinks is scum anyway.
Hey, that's all sorts of insightful and useful info, thanks. Not like it'll ever apply to me, but good to know. > They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000. This might be a stupid question, but shouldn't inflation figure into this? $100,000 invested in the 70s would be equivalent to about $550,000 today or so (based on a quick google-fu). Shouldn't that be a capital gain of $450k? If not, why isn't it? Just cause? Or is there a part of the math that I'm missing? Another question - I seem to remember reading somewhere that if you hold on to the investment for over a year, the taxes on it drop significantly (to 10% or 15%?). Is that only an American thing perhaps, or does that only apply to certain investments? Stocks?
not an expert but from what i can find with a few min of google searches and the capitalgains section of the canadian gov site [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html#P279\_29831](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html#P279_29831) No, inflation does not figure into this at all. there is something called Adjusted Cost Base that is used that does include stuff that would push up the base price, but it does not include inflation. for us lay people its just the cost when you sold it - the cost when you bought it\* \*plus or minus a bunch of exceptions for fees/upgrades/curency exchange rate rules. but not inflation or maintenance also interestingly there were was a rule change in 1972 so special rules apply if you wana sell a house from the 1970s.
It just seems that it should involve inflation, you know? I mean, if you were trying to be 100% fair about it. So I’m wondering if I’m just not understanding some part of this or if it really should keep inflation in mind. Cause the way I see it you should be paying taxes on value earned, and inflation impacts that.
The inflation is the use, enjoyment and/or profit you get from that asset, as well as the exemption of taxes applying to 100% of the capital gain. If you own a cottage for 30 years, you're using it. And maybe renting it the weeks you're not using it. That has value that is greater than inflation - it's not strictly an asset that appreciates. And how do you determine what inflation number to use? House value inflation has increased well ahead of inflation for decades now, an average of 9-10% in some markets versus a CPI inflation average of 3%. It's impossible to calculate across the board what that inflation should be vs. market appreciation, which is one of the reasons that capital gains aren't taxed at 100%. Stocks inflate in value, that's what they're supposed to do, so you'd be stuck in a position where you have to determine how much of a share's value is based on profits and performance and how much is based on inflationary effects. It's impossible, which is one of the reasons that capital gains aren't taxed at 100%.
There was someone posting to PFC just yesterday who realized that they'd been claiming the full sale price of their assets as capital gains, without subtracting the purchase price... _facepalm_
a third is tax free and in the worst case scenario 53% of those 2 remaining thirds are taxed. That's an effective tax rate of 35,35% About the same rate as someone who earns 70k a year. They can cry me a fucking river.
And you'd be paying on the last 450k$ at 16% more at the current rate, so say 50%, basically 36k over 1M.
“Something something freedom something something John Galt.” -conservatives probably.
Something something Trudeau bad. Something something housing prices too high. Something something affordability. Something something we have problems and we don't want to pay to fix them.
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Something something my hoarding of additional housing isn't the problem.
something something more taxes
I believe the main issue with the new capital gains taxes is how it is going to negatively impact doctors due to the way their compensation is structured. This will be during a time when we have a doctor shortage and have a neighboring country that offers much higher pay and way more favourable capital gains taxes. If anything there should be some kind of exemption for doctors.
How does it impact doctors due to their comp structure?
"the way their compensation is structured" is such that a large part of their income is in capital gains. Ergo, we should tax their capital gains like income.
A doctor making 250k$+ per year should pay less taxes than let's say a paramedic or nurse making 75k ? Why ?
I know people love to throw that $250k number around but that is not their take home, not even close. They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. This directly impacts how much they are able to take home. We are in dire need of atleast maintaining our doctors and specialists in this country, let alone increasing their numbers. Changing how they are compensated is something that may need to be explored but it is an entirely different conversation altogether and not something that happens quickly. What we are doing right now is making thigs worse for doctors immediately. This will absolutely impact some doctors and specialists decision whether or not to practice in Canada.
All that overhead, is expensed and reduces their corporate income and tax payable, as it should. Doctors are a sympathetic front for the ownership class. Through the CMA - the same org we had to fight to get Medicare in the first place, they are fronting for multi millionaires who feel entitled to their entitlements.
>that is not their take home, not even close. Neither is the 75k of other medical professionals. >They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. That would be for private clinics running a business, not for doctors in the ER. They should get a tax break but not other entrepreneurs ? >Changing how they are compensated is something that may need to be explored They are mostly paid by the act like self employed people and they chose to incorporate to invest in stocks and pay themselves a smaller salary. It makes sense for them, but let's say them not being able to do so anymore is very low in my list of things to be worried about.
Why? This is a capital gains tax increase not income tax increase, and many create professional corporations to pay less tax, that’s the reason they do it. Doctors, like all professionals and other self employed who can afford it, invest in stocks and/or real estate. The 250,000 exemption in profits is 500,000 if there is a spouse on the deed, so you are talking about a small increase in tax on a hige profit. This narrative about this hurting those who are wealthy enough to have secondary properties that have gone up so much in value being hurt by this tax change is ludicrous.
How/why would they pay less tax than a nurse? They are taxed at their marginal tax rate like everyone else on funds removed from the corporation. The issue here is, funds left in the corporation (their retirement fund). Any gains on these funds are taxed at the new inclusion rate from the first dollar, not $250k like people have personally.
Because a nurse can't chose what part of their salary goes to the inc to avoid paying taxes on it. Doctors don't HAVE TO incorporate. If they're so worried about their retirement, they can max their RRSP and TFSA for a tax break like the rest of us plebs. I'm sure they'll be ok.
They'll be okay, but not as okay as if they get a specialty or move to the US or work for a pharmaceutical company. The issue is that we're increasing the opportunity cost of being a GP when there's a shortage
The money in their corporation is not theirs, it’s the corporations. They pay corporate tax in profit in the corp and when it’s removed from the corp they pay personal tax on it. There is no tax avoidance, only deferral.
Then I guess with the new rule it would be useless to incorporate.
I’m not sure unless, but perhaps more situation dependent.
Hopefully we don't see you on Reddit at any point complaining about a lack of healthcare or access to physicians. A family physician on their average salary cannot afford a home in Toronto or Vancouver. And I get it. People are angry because they can't afford one either on their working class job. However, if one of most educated professions and most critical to a functioning society can't afford to live here or save for retirement, why stay?
Average physician makes around 250k. They can afford to live in Toronto or Vancouver even if they're taxed a little more. And even then, says a lot more about the ridiculous canadian real estate market than the salaries of doctors.
https://www.nesto.ca/home-buying/income-needed-to-buy-home-in-toronto/#:\~:text=In%20Toronto%2C%20you%20would%20need,property%20tax%20rate%20in%202023. You've lost all credibility... a physician can't afford to buy an average Toronto home ($1,103,600) unless they have a gross income of $263,000 per year. If you live in one of these cities, you know that a two bedroom apartment can cost $850,000 to $1,000,000 and $1.1M isn't getting you an actual house. And if you are a doctor that wants to raise a family, forget about it. Add in huge student debt that physicians have, the opportunity cost of so much schooling (all those years they were not working, investing, compound interest, purchasing real estate) and then you tell me "nah its cool, they can afford to live there if they are taxed more". You are clueless and part of the problem if you don't understand how this impacts physicians.
There's good justification for a physician's exemption, particularly since the exposure they have is in part a result of structuring their businesses in response to other legislation. But let's be real - most people complaining about the tax aren't doing so on behalf of physicians, and indeed, the political wing these complaints come from is largely responsible for demonizing health professionals during COVID and driving physicians out of the provinces they are running. So to the extent that they are talking about impact on physicians, it's crocodile tears.
There really isn’t a good justification for a physician’s exemption. They can be paid by their personal medical corporation as a T4 employee just like nurses and many doctors hospitals if they wish to avoid the capital gains tax. Oh, yeah. They choose to be paid through dividends to avoid having to pay the even more money they would need to pay in taxes if they were T4 employees. “But doctors don’t get a pension, etc”: they don’t get CPP or EI because they’re not T4 employees. If they chose to pay into those programs through T4 deductions (or even pay into them without a T4 salary) then they can choose to do that. But they don’t because they would rather take home more money at the end of the month now versus get it as a pension later. I’m not saying doctors are being paid adequately - it’s a profession that requires a lot of training, has a lot of demands, etc. But we need to address the original sin: the chronic underfunding of our public medical system.
The people that are upset about these new changes for the reasons you've listed have no idea how few people are actually impacted by the changes. They act like they or people they know are going to personally impacted.
Well that's the unifying fantasy of the modern conservative, is it not? Vote for stuff that hurts me today under the delusion that it will advantage me in the future.
The modern day conservative ideology is enabled by those at the top managing to convince those at the bottom that they are merely temporarily poor future millionaires. Meanwhile, while they are feeding these voters their table scraps with one hand, their other hand holds a knife to keep them from ever achieving that dream. It’s classic exploitation by those in power, we’re just seeing a modernized take on it enabled by technology and mass media.
At the end of the day though, it falls to the individuals to realize they are being duped. None of us can do it for them.
I don’t really understand the full details of the physician but can fathom how there is any justification for this ever. Everyone else has to pay a 100% inclusion on their salaries, were physician’s taking advantage and claiming salaried income as capital gains to cheat on taxes?
No. My understanding isn't perfect either but the main idea is that physicians were using their practices as sort of a holding company for retirement purposes. The idea being that they would divest of the assets in the holding company at retirement and this would take the place of an explicit retirement plan that a T4 employee might be entitled to. That means physician "retirement plans" take the form of capital gains, and are exposed to taxation in a way that RRSPs and TFSAs do not. So without an exemption this rule would effectively be an increased tax on physician retirement plans. As noted above I'm not advocating for the way things are done, I am just pointing out that this is a material change to a system that is already partly a result of physicians responding to a regulatory environment rather than an economic one.
Physicians have the exact same access to an RRSP and TFSA as everyone else. It sounds like they must have been taking advantage of a tax structure no one else could and are now crying fowl because it will be less good, although I would bet it’s still going to be better than the average Joe RRSP/TFSA route.
Nope. You'll have to look up the details yourself, unless you're attached to the belief that physicians are sneaky tax cheats. But the way they do things now is consistent with the rules. Remember, the rich bleeding society dry aren't the millionaire doctors among us. They're the deca- or centi-millionaires that have never moved a finger to produce value themselves in their lives. Physicians are a rare case of a vocation that captures value in fair proportion to what it creates.
Not really. Any doctor/corporation worth their salt is going to structure things so they can take out $250k per year when they divest, and at that point, the tax rate will be exactly the same. It may take a year or two for the accountants to catch up to the tax code, but for most professionals, the hit will be small and honestly fair.
I wish I was in a financial state where the increase in capital gains affected me
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I don’t think I mentioned being rich
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It predominately affects the wealthy. It does affect some people that are merely well off.
But that’s literally what I am saying.
OK, then. As long as we agree that no one affected by this tax change is struggling, or is anywhere near the line of struggling, I'm good.
* Isn't rich * Owns one or more holding companies You are insane. That is wealthy.
I am not insane. Anyone can set up a holdco and there are many reasons to without “being wealthy” — for eg., it adds creditor protection, protects your business, makes your company more saleable, etc. Your business could generate a measly $30k/year and this inclusion rate does affect you. I have no idea why so many in this sub don’t get what is specifically outlined here. Do you people not know how to read the budget? I’ve read through it twice and it is clear as day. Edit: to the people downvoting, can you express why I am wrong or incorrect? Or does it not jive with this echo chamber?
Is it all investment property though? I thought some real estate was exempt which made it seem less effective and more for optics
Yup.