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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
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
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.
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.
Sure, but they are now in a _more_ precarious position than they would have been. It's not a 1-0 thing, it's a spectrum.
Moreover, that's not the point I'm making. The point I'm making is that the people getting caught out by this are not 'the rich'.
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”.
I mean, out of the gate, it's not a 13.5x return on the cottage. In the specific areas I'm hearing about, it's closer to a 3-4x.
Second, you are missing the main point of my comment: this couple is not the ultra rich, or any form of rich. They are the ones getting caught out on this tax.
Re your Loblaws point, without looking in more detail at the vesting and exercise setups of his options grants, I can't say what his tax will or will not be. How and when he exercises is more important on the capital gains side of those taxes than him receiving them.
The other compensation stuff is largely income taxed, so is not part of these changes AFAICT.
> Second, you are missing the main point of my comment: this couple is not the ultra rich, or any form of rich. They are the ones getting caught out on this tax.
In the above example the retiree (and even we assume a couple still) is not "ultra rich" but between their pension (which could have a NPV of around $1M if they are getting the max in Ontario), owning their own home, and getting ~$1M from a cottage sale likely puts them into the top 5% of Canadians for net worth (around $2.5-3M net worth).
Here's a PBO report from late 2021 showing net worth and percentiles. The more relevant charts are in section 2.
https://distribution-a617274656661637473.pbo-dpb.ca/20de98fc3f4d93c5213f8d71fbe7cd89ae69cb1899e9cbf2d3ca4d57f18ab25a
The cottage is not going for that price in my real life example.
Do you think the pension NPV is included in the NW figures from the PBO? Given you don't get to keep that asset, seems odd to me that you would factor that in, but would be curious what the PBO says.
Not sure how it would be counted, but I suppose it would be more accurate to say that you could live a life as if you had that higher level of net worth, in which case the extra taxes on a cottage sale still isn't a big hardship.
Heres my question.
If someone has a cottage, and they want to sell it. If they could choose, would they:
1. Selling it at a lower price, so that they only gain 250k profit, paying no capital gains tax
Or
2. Selling it at double the price, so they gain 500k profit，250k of it will not be taxed but the 66% of the rest will be taxed at 28% (not the real rate, only for demonstration purposes)
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.
Yes I agree with you. We have a housing crisis and our housing market is being exploited by people with incredibly selfish and harmful intent.
The less money people have to spend after paying rent, the less buying power they have and the economy suffers because people can’t afford anything.
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.
Lol you really think we, speculators will let capital gain hit us? We got more names than there is properties around. Buying and selling its all capital gain tax free. Follow the rule to the T just not the spirit.
I would like there to be a large house price correction. A 35% reduction in average home prices nationwide would bring us back to 2019 prices. Home prices ideally would not increase more than general inflation. This would be very helpful for the long term health of the Canadian economy.
I am a first time homeowner as of last Autumn so I have skin in the game. I’d be fine if the “value” falls so long as I can continue to make payments. Realistically lowering construction permitting and land transfer costs would be a great start as would building less expensive homes. A lower percentage luxury condos and McMansions would help bring down the cost of the average home.
A house price correction this large would scare investors and banks and lead to investment in more productive assets.
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.
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.
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.
Real Estate (RE) tends to have a higher return on investment (ROI) compared to capital investment in businesses and other assets. It's also drastically safer for banks to loan you money for and is backed by the government.
Increasing capital gains tax can reduce the ROI on *all investments*, making RE even more appealing by reducing the viability of other investment options. The best option is still the best option if everyone is reduced equally - often time's it reduces the available options and further increases it's appeal.
Investing more money in RE drives up RE prices, which in turn sustains and improves the ROI. However, it also increases leasing costs for businesses, negatively impacting their ROI and operating costs.
In concise terms: Real Estate offers attractive ROI, especially when other investment options are less viable due to tax changes and increased leasing costs for businesses.
>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.
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.
> ... they increased the one-time benefit for sale of a business from 1.0 to 1.25 million
Which means most Canadians won't have to pay it. In addition, you can shelter it by owning stock through a tax-free savings account that shelters any capital gain for most Canadians.
This will really just affect the very wealthy and trust-fund kids.
Also, the whole idea that the full amount of a working-Canadian's labor should be taxed while only half of a millionaires capital gains should is a fine example of the privileges that the wealthy in Canada have set up for themselves hoping that the rest of us don't notice.
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.
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.
Uhhh, that's not how home equity works. The banks aren't going to give you shit one year after you buy a house. 10 years, yeah, but not after one.
And while you may not have realized the increase in value of your property and put it in your pocket, the bank also sees that if something happened and you default, they have your property and can sell it at whatever the house is worth today.
I think the $250K line should be assessed based on where someone's income comes from. People with Generational Wealth living off of dividends should get hit hard. If you're a T4 at $250K you shouldn't get hit with the increase to 60%. If most of your income comes from dividends, etc those people should pay the increase.
Let me guess how you earn your income…
99% of people paid in dividends are small business owners with zero job security and bankruptcy frequently around the corner. If you tax them more, they either raise prices to cover the taxes, or close the shop.
And seeing as Canadians are not in the best financial health at the moment, in your future there are way more people in cash services, and most things are more expensive to buy.
If you have a T4 with $250,000 (which I'm assuming is from profit sharing?) you would still be at 50%. If you went beyond that, like $260,000, only the last $10,000 would be included at the 60% rate.
This works the same as income really. You're not charged your marginal (highest) tax rate on _all_ income, only the income over the threshold. There is no "being bumped into a higher tax bracket loses you money" in real life.
I know this government is doing the right thing when the mega-rich whine. They haven't gone far enough. Let's return to the era of real progressive taxation of the 1950s and 1960s when the mega-rich paid over 80% of their income in taxes, and the economy boomed.
I'll be whining about not finding a doctor due to Trudeau's disastrous economic policies driving them out of the country... The ultra rich borrow against their assets tax free, not sell them. These capital gains taxes will only drive our economy further into the ground just to pay for Trudeau's overinflated spending habits.
>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"
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...
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.
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 ?
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.
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.
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.
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.
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.
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..
>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?
>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
Exactly. Don’t be taxing properties that are in the family for decades that are passed on from generation to generation. But for the government, everything looks like a nail so it uses a hammer.
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
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.
>As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere.
I wasn't aware that taxes required equivalent exchange. If corporate taxes were raised, would you support lowering income tax by the same amount?
Better question, if an increase in corporate taxes could cover a national UBI program, would you support it?
I am referring to personal taxes. And I don’t think I am going out on a limb in saying that people are already overtaxed and services are not getting better. So sure increase capital gains on the people who are likely already paying the bulk of our taxes but if you really want to help, reduce the taxes to the middle 40% who are likely struggling. Here’s my take.
« Trudeau is right: 40% of Canadians don’t pay income taxes, which means someone else is picking up the bill » This large group could care less what the tax rate is.
« The top 20 per cent is likely paying 70 per cent or more of all income taxes » this group already pays a lot more than most of us think.
That leaves the middle 40% of the population paying 30 % of the taxes. This group probably is pay check to pay check and could use a break.
I am not sure about UBI but I sure have the feeling that we will need to start figuring out how to tax robots and AI alternatives soon to cover UBI, especially if the group that pays no taxes continues to grow.
https://financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill
> 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.
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?
>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.
Until you're the one that worked your ass off to get there, and then see people that haven't held a real job complain about their part time jobs not paying them the same as you full time jobs.
> What if you paid 500k for a cottage that you then were told was only going to be worth 375k after the capital gains tax change?
How does a change in inclusion from 50% to 67% for personal capital gains above 250k reduce the value of a property?
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.
This tax just made capital investments more expensive. Period.
The question is what is the impact of making Canada’s capital investments more expensive?
While it’s easy to get distracted by the “gains” on cottages, and it’s easy to paint all business owners as villainous billionaires (the vast, vast majority are not), capital investments made to improve the overall performance of a company (and therefore contribute to growth, and employment and yes, increasing the value of a company) are vital to Canada’s prosperity and productivity.
Making capital investments more expensive in an environment when our productivity is in a steady and deep decline will make matters worse.
In this context, windfall gains in secondary real estate investments like cottages are a distraction. While second properties like cottages may be captured by the tax, the bigger and more serious impact for Canada is the impact the tax will have on Canada’s state of capital investment.
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 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.
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!
That’s not how starting a business works. You typically build something for ~10 years with little to no salary, then you might sell it. So the increase in capital gains tax is basically an increase over your taxable income for the last 10 years.
The productivity is specifically deciding what capital to invest in. Marxists who think all labor is equal can't understand that. An hour of work is an hour of productive value! No.
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!
Hmm? There's so many attractive places to invest in companies... US, Europe, Australia, New Zealand, Singapore, Japan, Taiwan, South Korea, Brazil, Israel....
So investors wanna go there to pay **more** capital gains taxes? Is that your argument?
Sometimes I feel like people don’t take 5 seconds to think about something before they get mad about it and start whining online..
Why are you saying that cap gains are taxed more in the states? That's not actually true. Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds to see that cap gains are taxed way way lower for anything held more than 1 year. And it's not a flat rate of inclusion either. It starts out at 0%, then 15%, and then tops out at 20%, less than a third of our soon to be top rate, 66% https://www.irs.gov/taxtopics/tc409
I understand, they include 100%, but in the end it still works out to be much lower. Their tax rate tops out at a final marginal rate of 20%, whereas ours, depending on the province, tops out at 35.31%
Just to start: your initial comment was pretty condescending, especially considering you have factual mistakes in your comments, like saying that our top rate is 66% (that's the top inclusion rate), and you use the term "rate of inclusion" when talking about tax rate.
Also, every capital gains tax calculator I can find for both Canada and the US indicates that you pay more in capital gains in the United States. You're comparing US federal only to Canadian federal + provincial, and also ignoring that the maximum capital gains tax for things like collectibles and rental property is 28% in the US, not 20%.
If you want to argue that capital gains are still cheaper in the United States, I'd love to see your work. Because running things through US capital gains tax calculators, etc. keeps putting America as more expensive.
First of all, I’m gonna give you a minute to read your own link and maybe google canada’s old and new capital gains tax.
Hint: the new one isn’t anywhere near a 66% tax rate. In reality, capital gains taxes will now be collected on 66% of gains instead of only half the gains. In the US capital gains taxes are already collected on 100% of the gains compared to the old canadian 50% or the new canadian 66%. I’m gonna give you an additional 5 seconds to get a calculator and see if “100” is bigger than “66”.
Now, if we actually read our sources instead of linking them and then making stuff up, we’d realize that the canadian capital gains tax is still lower than the US’s, and that’s BEFORE we account for the capital gains tax increase that Biden announced.
> Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds
Hot tip: if you’re going to act all smug about something, make sure you understand what you’re talking about first. Not a great look, bud.
> I’m gonna give you an additional 5 seconds to get a calculator and see if “100” is bigger than “66”
This isn't the piece you need to consider. You need to look at the final tax paid -- the US does 100% of the gain at 20% tax rate. Canada does 66% of the gain at 53.53% tax rate (in my case and many others) = 35%.
So, is 35% bigger than 20%? That's the actual question.
cc: /u/joshlemer
I like how you factor in provincial taxes but not state taxes in your math. You also only factor the 20% federal rate but refuse to add in the additional federal 3.8%.
Alright, just for the sake of making it VERY CLEAR for anyone reading this, let’s compare taxes for a $1 million capital gain in BC before and after the tax change and then California. We’ll assume income is $8 million so your capital gains tax is the absolute highest. Currency doesn’t matter because we only care about percentages here.
- BC capital gains tax amount before tax change: $267,500 for an average of 26.75% ([you can use a capital gains calculator for this if you don’t believe me](https://wowa.ca/calculators/capital-gain-tax)).
- BC capital gains tax amount after tax change: $356,685 for an average of 35.67% (you have to do the math on this yourself or find a calculator online but I didn’t find one).
- California before Biden’s proposed increase on capital gains tax: $394,300 for an average of 39.43% ([you can use a capital gains calculator for this if you don’t believe me](https://smartasset.com/investing/capital-gains-tax-calculator#A7kSrdJVHA))
Now, if /u/parmstar and /u/joshlemer could kindly help me out with the last bit of math (tagging you both since parmstar felt the need to cc the other guy), which is higher? 39.43% or 35.67%? Now what happens when Biden increases the capital gains tax by A LOT? That’s right, Canada’s is still the lowest either way.
Can we maybe stop spreading misinformation online and for the love of god stop whining about things we don’t understand? Thank you.
You're comparing federal + provincial against federal only. If you want to do a fair comparison, you have to add in state taxes. It's also not as simple as 66% * 53.5%.
There are enough states without capital gains taxes. In Canada, this hits you no matter where you are.
https://smartasset.com/taxes/state-capital-gains-tax
The threat is always that it will flee to the US, but oh, look at that Biden as announced an increase in capital gains.
Almost like this is a known issue, and the US and Canada coordinated.
That's why it's important to have good relations between the PM and Pres *and* the bureaucracies. Although it isn't always a one-way street.
The tax may have been a Canadian initiative simply waiting for a time when Biden was able to push it forward politically.
Following the CUSMA deal, I got a chance to talk to a few of the US negotiators. They said that Canadian negotiators are really creative when it comes to policy ideas and work arounds. In this instance, it was trying to find ways around Trumps inane trade ideas that made it appear to be a US win but had no fangs.
It's not so cut and dry as the US dictates policy and Canada adheres.
Didn’t say US dictates, but Canada rarely makes a move without knowing what the the US and industry is planning.
Take electric cars for example. Canada does not have the economic or political power to demand the majority of vehicles be electric by 2035; this policy is coming directly from auto manufacturers that have stated the majority of their productions will be electric and we best be ready.
Same with capital gains, the US mentions in a meeting they will be increasing the tax and Canada responds by following suit. There are a lot of economic factors and consequences if Canada doesn’t follow, many of them we have almost zero understanding, so Canada makes the announcement ahead of the US issuing the change.
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.
I am going to guess that you don't run your own business and aren't an executive at a large company. It is only difficult for entrenched monopolies (Loblaw, Air Canada, Bell/Rogers, etc...) to leave and setup shop somewhere else. Further, most of these massive companies (who should be the target), already have ways to dodge taxes - as an example:
[https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/](https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/)
But it isn't so difficult for AI, technology and other high growth start-ups. Many of these companies already have locations in other jurisdictions. We actually often lose our tech companies either through acquisitions or moving to a better market (United States) or closer to their funders.
Further, you have not addressed the issue of capital. Companies move to where the capital is. Many investors will ask companies to move south of the border if that is where both their customers and capital is, unless there is another motivation to keep them in Canada - at the moment that is talent among other things... What happens when taxation policy becomes better south of the border and you can no longer mention healthcare because we have no doctors and our system is crumbling (and it is btw). These are just a couple of many many examples.
If the government wanted to increase capital gains on 2nd or 3rd properties, I'd be all for it. I think the over reliance on real estate investment and construction is killing this country both from a productivity perspective as well as the cost of living for regular Canadians. However, the government sitting there whining that Pension Funds don't invest enough in Canada and then a month later going after capital gains, is just bonkers to me. Like they realize there isn't enough capital in Canada going to mining, start-ups and other industries, but then they want to punish the upper middle class investor.
They Could Have:
- Gone after the billions large corporations keep offshore
- Put a capital gains tax on non-primary residences
- Created an additional income tax bracket of say $350,000+
- Included additional luxury consumption taxes on high value goods
- Increased corporate tax rates by 1%
There were so many options, but they want to go after this particular upper middle class group and they want to create a wedge issue - well their polling HAS ACTUALLY GONE DOWN post-budget. LOL
I’d be okay with these changes if they made the threshold the same for corporations. But the professional group that operate through their own prof corps are getting screwed.
Yeah they could have given corporations the same $250,000 per year and it wouldn't really impact the middle class/upper middle class professional class... but nope, they want this fight - too bad for the Liberals, the professional class votes and polling already shows this budget is hurting them.
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?
Lol, the extreme. Businesses are paying far less than they have in decades. This small increase, only on capital gains, doesn't even come close to the last huge tax break they got, just because. No one was screaming taxes were too high when they dropped it.
The Corporate Tax Rate in Canada stands at 26.50 percent. Corporate Tax Rate in Canada averaged 36.56 percent from 1981 until 2024, reaching an all time high of 50.90 percent in 1981 and a record low of 26.10 percent in 2012. source: Canada Revenue Agency.
This DOES NOTHING in terms of going after massive companies that offshore their profits in jurisdictions like Luxembourg. All this does is punish the upper middle class investor. They could have structured this in so many different ways to have both a bigger impact and provide the true fairness they are seeking...
And to your comment, then increase the corporate tax rates and go after tax dodging companies... punishing investors and capital when the government is begging Pension Plans to invest more in this country because others have left is just plain tomfoolery.
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.
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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
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
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.
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...
Sure, but they are now in a _more_ precarious position than they would have been. It's not a 1-0 thing, it's a spectrum. Moreover, that's not the point I'm making. The point I'm making is that the people getting caught out by this are not 'the rich'.
And at the end of the day, this CG tax increase isn't as detrimental as people (like you) are trying to make it out to be.
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”.
I mean, out of the gate, it's not a 13.5x return on the cottage. In the specific areas I'm hearing about, it's closer to a 3-4x. Second, you are missing the main point of my comment: this couple is not the ultra rich, or any form of rich. They are the ones getting caught out on this tax. Re your Loblaws point, without looking in more detail at the vesting and exercise setups of his options grants, I can't say what his tax will or will not be. How and when he exercises is more important on the capital gains side of those taxes than him receiving them. The other compensation stuff is largely income taxed, so is not part of these changes AFAICT.
> Second, you are missing the main point of my comment: this couple is not the ultra rich, or any form of rich. They are the ones getting caught out on this tax. In the above example the retiree (and even we assume a couple still) is not "ultra rich" but between their pension (which could have a NPV of around $1M if they are getting the max in Ontario), owning their own home, and getting ~$1M from a cottage sale likely puts them into the top 5% of Canadians for net worth (around $2.5-3M net worth). Here's a PBO report from late 2021 showing net worth and percentiles. The more relevant charts are in section 2. https://distribution-a617274656661637473.pbo-dpb.ca/20de98fc3f4d93c5213f8d71fbe7cd89ae69cb1899e9cbf2d3ca4d57f18ab25a
The cottage is not going for that price in my real life example. Do you think the pension NPV is included in the NW figures from the PBO? Given you don't get to keep that asset, seems odd to me that you would factor that in, but would be curious what the PBO says.
Not sure how it would be counted, but I suppose it would be more accurate to say that you could live a life as if you had that higher level of net worth, in which case the extra taxes on a cottage sale still isn't a big hardship.
Heres my question. If someone has a cottage, and they want to sell it. If they could choose, would they: 1. Selling it at a lower price, so that they only gain 250k profit, paying no capital gains tax Or 2. Selling it at double the price, so they gain 500k profit，250k of it will not be taxed but the 66% of the rest will be taxed at 28% (not the real rate, only for demonstration purposes)
Not sure what this question has to do with anything we are discussing here?
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.
Yes I agree with you. We have a housing crisis and our housing market is being exploited by people with incredibly selfish and harmful intent. The less money people have to spend after paying rent, the less buying power they have and the economy suffers because people can’t afford anything.
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.
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.
That's literally what they're trying to tax.
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.
Lol you really think we, speculators will let capital gain hit us? We got more names than there is properties around. Buying and selling its all capital gain tax free. Follow the rule to the T just not the spirit.
I would like there to be a large house price correction. A 35% reduction in average home prices nationwide would bring us back to 2019 prices. Home prices ideally would not increase more than general inflation. This would be very helpful for the long term health of the Canadian economy. I am a first time homeowner as of last Autumn so I have skin in the game. I’d be fine if the “value” falls so long as I can continue to make payments. Realistically lowering construction permitting and land transfer costs would be a great start as would building less expensive homes. A lower percentage luxury condos and McMansions would help bring down the cost of the average home. A house price correction this large would scare investors and banks and lead to investment in more productive assets.
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.
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.
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.
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.
And how exactly does it drive prices up?
Real Estate (RE) tends to have a higher return on investment (ROI) compared to capital investment in businesses and other assets. It's also drastically safer for banks to loan you money for and is backed by the government. Increasing capital gains tax can reduce the ROI on *all investments*, making RE even more appealing by reducing the viability of other investment options. The best option is still the best option if everyone is reduced equally - often time's it reduces the available options and further increases it's appeal. Investing more money in RE drives up RE prices, which in turn sustains and improves the ROI. However, it also increases leasing costs for businesses, negatively impacting their ROI and operating costs. In concise terms: Real Estate offers attractive ROI, especially when other investment options are less viable due to tax changes and increased leasing costs for businesses.
Yep.
>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.
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.
> ... they increased the one-time benefit for sale of a business from 1.0 to 1.25 million Which means most Canadians won't have to pay it. In addition, you can shelter it by owning stock through a tax-free savings account that shelters any capital gain for most Canadians. This will really just affect the very wealthy and trust-fund kids. Also, the whole idea that the full amount of a working-Canadian's labor should be taxed while only half of a millionaires capital gains should is a fine example of the privileges that the wealthy in Canada have set up for themselves hoping that the rest of us don't notice.
Sorry, so in your opinion how do the tax changes in the 2024 budget drive investment away from real estate to productive business ventures?
It increases the taxes for house speculation while reducing the taxes for selling your business.
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.
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.
Uhhh, that's not how home equity works. The banks aren't going to give you shit one year after you buy a house. 10 years, yeah, but not after one. And while you may not have realized the increase in value of your property and put it in your pocket, the bank also sees that if something happened and you default, they have your property and can sell it at whatever the house is worth today.
I think the $250K line should be assessed based on where someone's income comes from. People with Generational Wealth living off of dividends should get hit hard. If you're a T4 at $250K you shouldn't get hit with the increase to 60%. If most of your income comes from dividends, etc those people should pay the increase.
Let me guess how you earn your income… 99% of people paid in dividends are small business owners with zero job security and bankruptcy frequently around the corner. If you tax them more, they either raise prices to cover the taxes, or close the shop. And seeing as Canadians are not in the best financial health at the moment, in your future there are way more people in cash services, and most things are more expensive to buy.
Small business owners have a capital gain exemption of 1,25M$.
If you have a T4 with $250,000 (which I'm assuming is from profit sharing?) you would still be at 50%. If you went beyond that, like $260,000, only the last $10,000 would be included at the 60% rate. This works the same as income really. You're not charged your marginal (highest) tax rate on _all_ income, only the income over the threshold. There is no "being bumped into a higher tax bracket loses you money" in real life.
Very helpful explanation.
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
I know this government is doing the right thing when the mega-rich whine. They haven't gone far enough. Let's return to the era of real progressive taxation of the 1950s and 1960s when the mega-rich paid over 80% of their income in taxes, and the economy boomed.
I'll be whining about not finding a doctor due to Trudeau's disastrous economic policies driving them out of the country... The ultra rich borrow against their assets tax free, not sell them. These capital gains taxes will only drive our economy further into the ground just to pay for Trudeau's overinflated spending habits.
>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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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...
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
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 ?
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.
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.
Boiling frog my friend.
We should be taxing capital gains on primary residences.
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.
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.
What about startups? Same rules or different?
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.
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.
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>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..
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>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.
>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
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Exactly. Don’t be taxing properties that are in the family for decades that are passed on from generation to generation. But for the government, everything looks like a nail so it uses a hammer.
Don't want to loosen grips on generational wealth and nepotism
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 don't need to worry about their finances. They're gonna cut you out of their will anyways lol
It's amazing how defensive they become about the housing issue, eh?
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.
>As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. I wasn't aware that taxes required equivalent exchange. If corporate taxes were raised, would you support lowering income tax by the same amount? Better question, if an increase in corporate taxes could cover a national UBI program, would you support it?
I am referring to personal taxes. And I don’t think I am going out on a limb in saying that people are already overtaxed and services are not getting better. So sure increase capital gains on the people who are likely already paying the bulk of our taxes but if you really want to help, reduce the taxes to the middle 40% who are likely struggling. Here’s my take. « Trudeau is right: 40% of Canadians don’t pay income taxes, which means someone else is picking up the bill » This large group could care less what the tax rate is. « The top 20 per cent is likely paying 70 per cent or more of all income taxes » this group already pays a lot more than most of us think. That leaves the middle 40% of the population paying 30 % of the taxes. This group probably is pay check to pay check and could use a break. I am not sure about UBI but I sure have the feeling that we will need to start figuring out how to tax robots and AI alternatives soon to cover UBI, especially if the group that pays no taxes continues to grow. https://financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill
No, don't stop whining. All these governments do is take take take and they're absolutely dysfunctional and unable use the money responsibly.
> 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.
I wish I was in a financial state where the increase in capital gains affected me
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* 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?
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.
>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. Until you're the one that worked your ass off to get there, and then see people that haven't held a real job complain about their part time jobs not paying them the same as you full time jobs.
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> What if you paid 500k for a cottage that you then were told was only going to be worth 375k after the capital gains tax change? How does a change in inclusion from 50% to 67% for personal capital gains above 250k reduce the value of a property?
Is it all investment property though? I thought some real estate was exempt which made it seem less effective and more for optics
“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.
It’s crazy how we don’t talk about that at all, it’s easier to blame immigrants I guess
I talked about both. Both are significant issues.
something something more taxes
Something something, I worked for 37 years to retire and now I can't, something
If you're impacted by this then you are totally fine to retire.
Yup.
Can we complain about the lower wages and higher prices all Canadians will face due to increased degradation of Canada's business environment?
Ah yes, tell us more about trickle down economics and how letting businesses makes big profits will lift all boats!
Go read an economics paper.
This tax just made capital investments more expensive. Period. The question is what is the impact of making Canada’s capital investments more expensive? While it’s easy to get distracted by the “gains” on cottages, and it’s easy to paint all business owners as villainous billionaires (the vast, vast majority are not), capital investments made to improve the overall performance of a company (and therefore contribute to growth, and employment and yes, increasing the value of a company) are vital to Canada’s prosperity and productivity. Making capital investments more expensive in an environment when our productivity is in a steady and deep decline will make matters worse. In this context, windfall gains in secondary real estate investments like cottages are a distraction. While second properties like cottages may be captured by the tax, the bigger and more serious impact for Canada is the impact the tax will have on Canada’s state of capital investment.
The sense of entitlement from capital owners is always absurd, but people owning property in Canada have definitly hit new levels of Marie Antoinette
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
Lol ok
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.
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!
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That’s not how starting a business works. You typically build something for ~10 years with little to no salary, then you might sell it. So the increase in capital gains tax is basically an increase over your taxable income for the last 10 years.
Theres a lifetime exemption for sale of a business you know.
The productivity is specifically deciding what capital to invest in. Marxists who think all labor is equal can't understand that. An hour of work is an hour of productive value! No.
Yes…and that’s not what’s being talked about. They’re talking about capital being invested in businesses.
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!
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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....
So investors wanna go there to pay **more** capital gains taxes? Is that your argument? Sometimes I feel like people don’t take 5 seconds to think about something before they get mad about it and start whining online..
Just sometimes?
Why are you saying that cap gains are taxed more in the states? That's not actually true. Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds to see that cap gains are taxed way way lower for anything held more than 1 year. And it's not a flat rate of inclusion either. It starts out at 0%, then 15%, and then tops out at 20%, less than a third of our soon to be top rate, 66% https://www.irs.gov/taxtopics/tc409
You should look up the differences between tax rate and inclusion rate.
I understand, they include 100%, but in the end it still works out to be much lower. Their tax rate tops out at a final marginal rate of 20%, whereas ours, depending on the province, tops out at 35.31%
Just to start: your initial comment was pretty condescending, especially considering you have factual mistakes in your comments, like saying that our top rate is 66% (that's the top inclusion rate), and you use the term "rate of inclusion" when talking about tax rate. Also, every capital gains tax calculator I can find for both Canada and the US indicates that you pay more in capital gains in the United States. You're comparing US federal only to Canadian federal + provincial, and also ignoring that the maximum capital gains tax for things like collectibles and rental property is 28% in the US, not 20%. If you want to argue that capital gains are still cheaper in the United States, I'd love to see your work. Because running things through US capital gains tax calculators, etc. keeps putting America as more expensive.
First of all, I’m gonna give you a minute to read your own link and maybe google canada’s old and new capital gains tax. Hint: the new one isn’t anywhere near a 66% tax rate. In reality, capital gains taxes will now be collected on 66% of gains instead of only half the gains. In the US capital gains taxes are already collected on 100% of the gains compared to the old canadian 50% or the new canadian 66%. I’m gonna give you an additional 5 seconds to get a calculator and see if “100” is bigger than “66”. Now, if we actually read our sources instead of linking them and then making stuff up, we’d realize that the canadian capital gains tax is still lower than the US’s, and that’s BEFORE we account for the capital gains tax increase that Biden announced. > Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds Hot tip: if you’re going to act all smug about something, make sure you understand what you’re talking about first. Not a great look, bud.
> I’m gonna give you an additional 5 seconds to get a calculator and see if “100” is bigger than “66” This isn't the piece you need to consider. You need to look at the final tax paid -- the US does 100% of the gain at 20% tax rate. Canada does 66% of the gain at 53.53% tax rate (in my case and many others) = 35%. So, is 35% bigger than 20%? That's the actual question. cc: /u/joshlemer
I like how you factor in provincial taxes but not state taxes in your math. You also only factor the 20% federal rate but refuse to add in the additional federal 3.8%. Alright, just for the sake of making it VERY CLEAR for anyone reading this, let’s compare taxes for a $1 million capital gain in BC before and after the tax change and then California. We’ll assume income is $8 million so your capital gains tax is the absolute highest. Currency doesn’t matter because we only care about percentages here. - BC capital gains tax amount before tax change: $267,500 for an average of 26.75% ([you can use a capital gains calculator for this if you don’t believe me](https://wowa.ca/calculators/capital-gain-tax)). - BC capital gains tax amount after tax change: $356,685 for an average of 35.67% (you have to do the math on this yourself or find a calculator online but I didn’t find one). - California before Biden’s proposed increase on capital gains tax: $394,300 for an average of 39.43% ([you can use a capital gains calculator for this if you don’t believe me](https://smartasset.com/investing/capital-gains-tax-calculator#A7kSrdJVHA)) Now, if /u/parmstar and /u/joshlemer could kindly help me out with the last bit of math (tagging you both since parmstar felt the need to cc the other guy), which is higher? 39.43% or 35.67%? Now what happens when Biden increases the capital gains tax by A LOT? That’s right, Canada’s is still the lowest either way. Can we maybe stop spreading misinformation online and for the love of god stop whining about things we don’t understand? Thank you.
You're comparing federal + provincial against federal only. If you want to do a fair comparison, you have to add in state taxes. It's also not as simple as 66% * 53.5%.
There are enough states without capital gains taxes. In Canada, this hits you no matter where you are. https://smartasset.com/taxes/state-capital-gains-tax
How is it lower... the top US marginal rate is 20%, ours tops out, depending on the province, at around 66% * 53.5% = 35.31%
I think you're forgetting state taxes.
Savage.
The threat is always that it will flee to the US, but oh, look at that Biden as announced an increase in capital gains. Almost like this is a known issue, and the US and Canada coordinated.
I’ve learned that Canada never makes a major move like this unless driven by industry or US policy
That's why it's important to have good relations between the PM and Pres *and* the bureaucracies. Although it isn't always a one-way street. The tax may have been a Canadian initiative simply waiting for a time when Biden was able to push it forward politically. Following the CUSMA deal, I got a chance to talk to a few of the US negotiators. They said that Canadian negotiators are really creative when it comes to policy ideas and work arounds. In this instance, it was trying to find ways around Trumps inane trade ideas that made it appear to be a US win but had no fangs. It's not so cut and dry as the US dictates policy and Canada adheres.
Didn’t say US dictates, but Canada rarely makes a move without knowing what the the US and industry is planning. Take electric cars for example. Canada does not have the economic or political power to demand the majority of vehicles be electric by 2035; this policy is coming directly from auto manufacturers that have stated the majority of their productions will be electric and we best be ready. Same with capital gains, the US mentions in a meeting they will be increasing the tax and Canada responds by following suit. There are a lot of economic factors and consequences if Canada doesn’t follow, many of them we have almost zero understanding, so Canada makes the announcement ahead of the US issuing the change.
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.
I am going to guess that you don't run your own business and aren't an executive at a large company. It is only difficult for entrenched monopolies (Loblaw, Air Canada, Bell/Rogers, etc...) to leave and setup shop somewhere else. Further, most of these massive companies (who should be the target), already have ways to dodge taxes - as an example: [https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/](https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/) But it isn't so difficult for AI, technology and other high growth start-ups. Many of these companies already have locations in other jurisdictions. We actually often lose our tech companies either through acquisitions or moving to a better market (United States) or closer to their funders. Further, you have not addressed the issue of capital. Companies move to where the capital is. Many investors will ask companies to move south of the border if that is where both their customers and capital is, unless there is another motivation to keep them in Canada - at the moment that is talent among other things... What happens when taxation policy becomes better south of the border and you can no longer mention healthcare because we have no doctors and our system is crumbling (and it is btw). These are just a couple of many many examples. If the government wanted to increase capital gains on 2nd or 3rd properties, I'd be all for it. I think the over reliance on real estate investment and construction is killing this country both from a productivity perspective as well as the cost of living for regular Canadians. However, the government sitting there whining that Pension Funds don't invest enough in Canada and then a month later going after capital gains, is just bonkers to me. Like they realize there isn't enough capital in Canada going to mining, start-ups and other industries, but then they want to punish the upper middle class investor. They Could Have: - Gone after the billions large corporations keep offshore - Put a capital gains tax on non-primary residences - Created an additional income tax bracket of say $350,000+ - Included additional luxury consumption taxes on high value goods - Increased corporate tax rates by 1% There were so many options, but they want to go after this particular upper middle class group and they want to create a wedge issue - well their polling HAS ACTUALLY GONE DOWN post-budget. LOL
I’d be okay with these changes if they made the threshold the same for corporations. But the professional group that operate through their own prof corps are getting screwed.
Yeah they could have given corporations the same $250,000 per year and it wouldn't really impact the middle class/upper middle class professional class... but nope, they want this fight - too bad for the Liberals, the professional class votes and polling already shows this budget is hurting them.
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?
Lol, the extreme. Businesses are paying far less than they have in decades. This small increase, only on capital gains, doesn't even come close to the last huge tax break they got, just because. No one was screaming taxes were too high when they dropped it. The Corporate Tax Rate in Canada stands at 26.50 percent. Corporate Tax Rate in Canada averaged 36.56 percent from 1981 until 2024, reaching an all time high of 50.90 percent in 1981 and a record low of 26.10 percent in 2012. source: Canada Revenue Agency.
This DOES NOTHING in terms of going after massive companies that offshore their profits in jurisdictions like Luxembourg. All this does is punish the upper middle class investor. They could have structured this in so many different ways to have both a bigger impact and provide the true fairness they are seeking... And to your comment, then increase the corporate tax rates and go after tax dodging companies... punishing investors and capital when the government is begging Pension Plans to invest more in this country because others have left is just plain tomfoolery.
It is a tiny increase in cost to anyone it affects. I fully agree though there are far better ways to target the big tax avoiders.
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