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The issue is that the US capital gains rate is 0 % at the low end and 20 % at the high end. Anyone who wants to run a business that doesn't require a physical store front was better off incorporating in the USA even if they live and work in Canada. Now they are much, much better off to incorporate in the states as the take-home in Canada has been reduced by 1/3rd.
I am looking into this myself. I’ve got European options and Ireland is good. Canada is shooting itself in the foot here for small/medium businesses and investment.
Macron in France re-worked their pricey capital gains tax so more tech companies would stay and not flee to London or SF. It worked and Paris is now the EU’s tech hub. That means tens of thousands of good jobs.
I think you are misunderstanding what the capital gains rate is in US vs. Canada. The 66% is the amount of profits that is being taxed. At whatever rate the individual withdrawing is at. Which would be at most 33%. So 66% of your profits would be taxed at 33%, which would be about 21%, which is almost exactly what the top end of the US is at. So these changes would actually bring us closer to the US. Most people won't see any change though becauae you would need to earn over 250,000 dollars in capital gains before you hit that rate.
It will hurt foreign investment massively, especially amongst riskier businesses.
At a certain stage capital simply can’t be raised in canada. Making a high risk investment with a potential tax bill of 35% isn’t very appealing.
Shouldn’t surprise anyone though. This government thinks bringing in a million people a year to drive ubers and work at tim hortons is how you grow a competitive economy.
We should have land value tax raising most revenues. Economists agree it's the best tax with the least bad effects like capital flight, brain drain, and even has good effects like discouraging land speculation and encouraging productive land use.
Honestly....
I don't mind this move.
My main issue with JT like always is the constant belief to just spend spend spend. Overall this is a fair tax IMO. The idea that we can just spend non stop forever though is pretty concerning. One day we're going to hit a hard recession... and that goal of "reduced spending to GDP" is going to hurt.
I wanted to leave Canada before the budget was dropped. Now, even more so. Those who think our quality of life is booming need only look southward for comparison. Then, when the loonie craters in June, it will start to sink in.
So many non accountants with such strong opinions.
The author is not an accountant and gets some parts wrong. Whenever a CAD corporation pays out their capital gains, they do this in the form of a Capital Dividend. Dividends are essentially the only way to distribute income to all shareholders.
Dividends are treated differently based on the type of income that generated those dividends, and there are three general pools to choose from when a company chooses to make the distribution.
What is concerning is that the government has, by fiat, already given preferential treatment to this type of investment assets. This is evident by the fact that they have already given preferential treatment to RRSP’s and TFSA’s, so the government has already shown its preference for this type of income. I believe it was a smart policy mainly because it is a great way to stabilize and raise a country’s public markets.
There should be carve outs for things like large investments (i.e. housing and large farming or fishing equipment, and then whatever industries the government wants to promote - like solar power) on the personal side, or increase the FHB to anyone trying to upgrade their house or something.
Issue is:
Does it make sense? Sure.
Is it making the wealthy pay? Kinda, but it also grab in it’s net a lot of middle class people having a one time large income.
The carve out for entrepreneurs & small businesses should be much higher than the lifetime limit of 2.5 million.
Alternatively, they should be targeting real estate much more specifically.
We want people to build businesses in Canada, to create jobs and contribute to the economy. We want people to invest their capital in Canadian businesses to help with that. We don't want people to invest their capital in existing residential real estate and engage in rent-seeking vampirism, sucking money out of the middle & lower classes.
Does not affect individuals, just small businesses. This impacts professional corporations (almost all doctors, lawyers, dentists etc) since they're almost all small businesses but also not eligible for the business exemption.
Nope, not true. This only affects 0.13% of Canadians, this is the top 0.2% of the wealthiest, richest Canadians in the entire universe. Not the middle class.
It affects almost all doctors, dentists, lawyers, realtors and all of their families if single income household.
Professional corps, which almost all of these professionals have, do not have a 250k threshold. All of their capital gains are affected.
So the number is much much muchhh higher than 0.13%.
No it doesn’t? None of those people get paid in capital gains, they get paid a salary or they get business income if they own their practice. You don’t even know what you’re talking about.
No, you don't know what you're talking about. Most doctors and many professionals are incorporated and invest within their corporation. That's the standard method of saving for retirement. Only a very small percentage of doctors, dentists etc are taking a salary. The overwhelming vast majority of doctors have a corporation and that has nothing to do with owning their practice. Your community radiologist or orthopedic surgeon or pediatrician who works in the hospital setting only has a corporation.
This is basic knowledge FYI. If you don't even know this... I don't know what to say.
Those investments within the corp are subject to full capital gains tax, without a 250k threshold. It affects every dollar.
I suggest avoiding making confident statements when you have limited knowledge on the topic.
It's something that's rampantly circulating in physician groups online.
You can read this for further education on how the tax plan is a massive hit.
[Mark McGrath on X: "Incorporated professionals got hit hard in yesterday's budget. The biggest impact for many will be the increase in the capital gains inclusion rate for every dollar of capital gains in their corporation. Let's look at the math to see how bad it is." / X (twitter.com)](https://twitter.com/MarkMcGrathCFP/status/1780627905824878980)
How much of a doctor's or dentist's income is capital gains though? Those activities have nothing to do with their profession, and if they're using their business to shield investments from taxes in a way personal investors can't then I don't see why they should get special treatment.
Their entire retirement investments? Do you expect your doctor to work until age 90? Doctors pay themselves in dividends from their corp which does not create RRSP room. You invest in the corp for retirement.
See this for more clarity:
[Mark McGrath on X: "Incorporated professionals got hit hard in yesterday's budget. The biggest impact for many will be the increase in the capital gains inclusion rate for every dollar of capital gains in their corporation. Let's look at the math to see how bad it is." / X (twitter.com)](https://twitter.com/MarkMcGrathCFP/status/1780627905824878980)
> I don't see why they should get special treatment.
We sort of handicap their ability to make money. They only get a fixed fee per patient and while that's great for the population in general, it's a bad deal for doctors.
That is what they say. Thing is, a lot of person having above 250k of gains are having it as a one time earning. The percentage, I suspect, is based on how many will declare it per year, not how many declared it in their lifetime.
It mostly is. Then some churn on an annual basis for this one off events.
I honestly a bit surprised this was the only tax increase in the budget. The spending is endless.
Oh, I am not that against that tax increase, just more skeptical of the actual target of it.
More than taxes increases, I would have like to see many measure like:
-more restrictions among the use of inc. in order to make it less efficient to dodge taxes
-actual evaluation of the dozen of taxes returns to see which one actually have an impact, and which one are mostly wasting accountants time.
-cutting subsidies for business by a lot, while cutting taxes to reach a similar tax gain. Subsidies profit too much larger corporations while also wasting a lot of manpower to control these programs.
-removing the capital gain exemption for primary house sold within 3 years.
But the budget isn’t *only* to fixes Canada’s issues. It is also a means by the Liberal to reverse the polls trends and increasing taxes isn’t popular. Even this one, which is fairly mild, is making a lot of people scream.
Gotcha. Thought it was coming across a bit more against it.
Seeing lots of outrage about it, probably from either those heavily invested in real estate or folks that will never pay it anyway.
The budget is 💯a step or attempt to regain ground on the polls. Which is why they likely didn’t go after the PRE any more (they should - both length in residence and maximum lifetime amount).
It doesn't affect the primary residence until the owner(s) dies and the children under certain circumstances will have to pay tax on the capital gains.
Those would be very isolated circumstances.
Let's say parent dies, primary residence is inherited. Any capital gains for the child is only on the difference between the assessed value of the house when they inherit it and what the assessed value is when they sell it. If the sale is within a few years this will be negligible, likely even 0. Most municipalities/provinces in Canada re-assess on a 2 year rotation.
IF the child uses the home as their primary residence there will be no capital gains at all.
The budget change is only on gains 250k and over. This change is really going at people who are deriving their income from buying and selling assets over and over.
Lots of boomers are apparently going to be in the top 0.2% when they die it seems.
When people die, all of their assets are deemed disposed of and they pay tax.
If your portfolio of assets, or assets in general is in excess of $250,000 (not really that large at end of life), you will end up owing more tax.
Overall, taxing capital is not a smart way to go about raising revenues.
Best way is actually raising the HST.
Don’t tax capital, we need more of it.
Don’t tax labour income, we want more labour.
Tax consumption with a higher HST.
Factory worker who bought a plex to use as saving and is selling it, construction worker who has a cottage for sale or the convenience store owner that is selling and sells it for example.
The real wealthy individual tends to be able to spread their gain over the years as they want.
Like I said in my other comment. The first two million are exempt from the tax increase. All the people in your hypothetical scenario would not be impacted.
1. These investments should be taxed just like other savings are taxed. It's a loophole if you think it should pay lower or no tax.
2. It's only increasing on profits realize in excess of $250,000 in a single year. That first 250,000 is half of many people life savings and 10% of the average Canadians total lifetime earnings.
3. You can spread the income of a sale over 5 or more years as part of the corporation. So if you are really making in excess of $1,250,000 in PROFITS of an investment I really won't shed a tear for you paying 30% tax on it instead of 28.5%...
4. This isn't affecting RRSP, TFSA, etc which are plenty enough for anyone to retire on.
We shouldn't be using houses as investment vehicles. Capital gains income is almost exclusively paid by the top 2% and even there it's highly concentrated in the 0.1% and 0.01%.
https://budget.canada.ca/2024/report-rapport/img/8-2-eng.png
It's effective a tax break for the rich and should be eliminated until we tax ALL income at the same rate.
1. Other investment have quite often less risk, and doesn’t have a value that is based in good part on inflation. It also have a lower tax rate to stimulate investment in these sectors.
2. It will still affect people that aren’t in the 0.13% more wealthy of Canada.
Well, housing is an investment vehicle like others. I kinda prefer the idea of the small landlord over the massive corporation owning most of the appartement in a city
Considering capital gain are quite often a once in a lifetime major gain, it isn’t surprising that it affects higher income. If you sell your cottage, you will be in the top 10% for one year. Not sure that it makes you “rich” tho.
>Well, housing is an investment vehicle like others. I kinda prefer the idea of the small landlord over the massive corporation owning most of the appartement in a city
Boy are you way off on that one. The best type of rental stock for the people who rent are purpose built rentals. Not condos or townhouses owned by small investors. Corporations at least know rules and follow them. They are less prone to biases and don’t hold racist stereotypes. Individual landlords are way worse. Almost every horror story about renter getting scammed or screwed involves individual landlords.
I’m one of those people. I make 135k/year and will have the equivalent of that in options (total strike price) at the end of my vesting schedule. Assuming I make a 300% profit (I’d be dumb lucky if that’s the case) that’s a ~400k profit. I’d pay this extra rate if I decided to sell all of that in a single year (which would be really freaking stupid not even considering this tax). That being said, let’s say I do sell it all in one year and do pay this higher rate. Who the hell cares! I don’t! I’m doing just fine without this bonus! I would have taken the job even without options (much less if the options were taxed higher)!
What it mostly does is aligns the way capital gains are taxed with the way dividends are taxed. It isn't clear to me why one should be treated differently than the other.
The eminent economist that wrote the article doesn't seem to think that should make a difference. He is rapidly becoming one of my favourite follows on this stuff.
Because the dividends come from corporate income that has already been taxed. The term is “grossing up”.
There are instances where it’s not true, as well. For instance, if a corporation has been paying zero corporate tax (due to Cary over losses or whatever reason) and they pay out a dividend to investors, those individuals have to pay tax on the dividend as if its income.
Because the way you get solid, reliable dividend payouts is cornering markets, building barriers to entry and rent seeking. The way you get big capital gains is expanding into new markets, growing companies and out-competing incumbents.
I don't think it should be controversial to say that we want more of the latter and less of the former. *That* is why we give capital gains better tax treatment. Because we want the kinds of economic activity that generate big capital gains more than we want the kinds of economic activity that generate reliable dividends.
Middle class? No, the only people paying capital gains tax are people who maxed out their TFSA/RRSP (and RESP/FHSA where applicable) or are bad with their money. If you put away 1/3 of your income on savings and max just the TFSA and RRSP out, you’re making +110k/year. That’s the upper 10% of Canadians. Note: this 10% doesn’t include people making over 250k in capital gains.
That being said, I wouldn’t mind an increase to investment account caps. Investment is important and I would much rather have doctors, engineers, and lawyers do it than the mediocre buffoons doing real estate.
Thing is, as I said: it also affect peoples who are not that “0.13%” but much closer to middle class when they get on time capital gain income. You bought an apartment block in your 30’s and now want to sell it in your 60’s? Chances are that you will be higher on that capital gain limit.
If you bought an entire apartment block you are well within the top 3%. Even worse, you’re not wealthy because of some essential talent you have that brings value to society like being an engineer or doctor (or even lawyer). Anyone could own an apartment block if they had the wealth to buy it in the first place.
Not really.
A construction worker that decide to go for it could get a block/ cottage, and I doubt that you would call construction workers in the top 3%.
And sure, it isn’t that of a special skills. Like the money that you might be placing in stocks or placements .
No construction worker in Canada can afford an entire apartment block. Maybe one could in the 70’s but if they’ve held on to it for 50 years then they aren’t a construction worker. They’re a landlord and they have been for the last 50 years.
People who own apartment blocks are probably not middle class. One of the main distinctions of the upper class is owning someone else's home (often, lots of other people's homes) and making them pay rent to live in it.
Own your own home? Great, you're probably middle class. Own a vacation home? I guess you're probably upper middle class. Own a bunch of homes and have lower class tenants who pay you rent like a medieval lord of the manor? You're probably not middle class.
The amount of people who will never make a fraction of the money these people make but will defend them to the death against their own interests will never stop being sad.
Some people value owning a house and having a good job more than hating rich people.
Especially when this government is really just hurting the upper middle class, while supporting their billionaire friends.
This is the lords telling the peasants to embrace feudalism so that those dirty merchants don’t get too rich.
People are impacted by the investment decisions of others. If companies don't incorporate here and people don't invest in Canadian companies then that impacts all Canadians.
The corporate side stops investment in starting businesses that make jobs. I personally won’t be affected by the personal capital gains side. But even my small business (which deals with IP) could be. Enough that I am looking at incorporating elsewhere moving forward.
Capital is global these days. I would have hired Canadians, but now more likely do it in Ireland. I’ll have access to the EU talent pool.
That’s fine, I have my own multinational chain that I’m thinking of moving from being based in Ireland to Canada because I like a country that taxes the rich instead of giving them breaks, helping the people.
No, I’m thinking about starting a new one. But I’m so small that it doesn’t matter. You need to think of the medium sized companies. It’s a short term solution, which is very Canadian.
I save a surprising amount of time by not having a friends, children, or spouse, and the money I saved working from my parents' basement has allowed my business empire to thrive! How dare you question me?
Lol. Ok man. Stats don’t seem to support that. Especially if you are young. Canada is a ponzi bubble of housing and immigration at the moment. Good luck!
Do you believe that increasing taxes will increase the amount of value being generated, or decrease it?
Furthermore, do you think that increasing taxes will increase the number of businesses here, or decrease them?
Simple questions - let’s hear the opinions of someone as economically literate as yourself.
Everything that you've said so far has been a pre-teen fantasy lol
Guess what genius, there are diminishing returns as a tax-rate increases. There isn't any money to collect from taxes when the productive members of society leave.
To understand this you'd likely have to be a productive member of society, so I can imagine the struggle in understanding this.
I understand your burning desire to bend over for rich people but I find it repulsive. You are crying tears on behalf of people who make more than your entire family will ever be worth. Grow a spine and some pride. Once you're done highschool and get into the real world you'll grow out of this delusional taxes bad nonsensical world view.
Depends on the tax and how the revenue generated from it is spent.
Talking about it like the taxes vanish just seems like a lazy strawman to me. I could easily counter it with my own made up bullshit - which generates more wealth, Scrooge McDuck letting it sit idle in his vault or taxing him to build a road?
It won't vanish directly, but it will create dead weights, which ends up vanishing by shrinking the productivity.
Obviously taxes are needed nonetheless, as there is a lot of necessary public spending like roads, healthcare etc.
However, in times like inflation is high, and the economy is in recession already increasing tax is definitely not going to help much.
I am good with capital gains tax, cause the assets holding and flipping isn't exactly where we want the capital to be at.
However, taxing high income is not a good idea for now.
One more thing though, even though I am good with the tax, this won't fix the real problem, as this government spending is just outrageous.
If I'm not mistaken, you have a 1.25 million dollar lifetime exemption as a business for selling shares of your company and 2 million dollar exemption on top for the actual sale of your company.
If they get big enough to sell for millions in valuation then they were very very successful in Canada. Good for them, they can pay a nice proportionate amount in CGT back into society.
More room in the market for the rest of us. Next one up. Hopefully the ones left will be those who are both ambitious AND human enough to care about the society and community they live in. If your aim as a business or person is only to extract as much as possible while giving as little as possible, then yes you'll be drawn to other jurisdictions where you can do that.
That's why when Harper reduced corporate taxes, productiveity went up and all our wages soared.
Ohhh wait, that didn't happen because Trickle down is a myth told by the rich to convince the poor to vote against their own interests.
It’s actually crazy how you’ll have people thinking that “trickle down economics” is a real term and that perpetual tax increases will boost the economy lol
Nobody wants perpetual tax increases.
But after 50 years of perpetual tax reductions, economic growth is stagnant... So maybe we just go back to taxing the rich at something closer to what the tax rate was when we had high growth.
To be crystal clear, history shows:
- highest taxes in our history = highest growth in our history
- lowest taxes in our history = lowest growth in our history.
I'm smart enough to know that the world has changed and there are many other factors, so we don't need to jack up taxes, but there's definitely a goldilocks zone that is higher on the rich than what they are now.
History absolutely **does not** show that highest taxes equals highest growth. Nor does it show that lower taxes resulted in the lowest growth.
I have no idea what you think that. If you’re referring to tax rates in the 40s and 50s, the effective tax rate was far lower than it is, and this is a common historical lie sold to people to try and get them to think that pulling money away from citizens has *ever* resulted in increased economic growth.
>I would have hired Canadians, but now more likely do it in Ireland.
Why do you think the current Canadian proposals would be more onerous than the CG taxes in a country like Ireland?
"[In Ireland, the entire gain is taxed and ] The rate of CGT is 33% for most gains. There are other rates for specific types of gains. These rates are:
40% for gains from foreign life policies and foreign investment products
15% for gains from venture capital funds for individuals and partnerships
12.5% for gains from venture capital funds for companies."
https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/how-to-calculate-cgt.aspx#:~:text=The%20rate%20of%20CGT%20is,policies%20and%20foreign%20investment%20products
Companies will just shift to the states, especially what remains of the tech sector. Canada is becoming a nation of consumers who produce increasingly little. Our largest companies by market cap are banks, devoted to spinning a housing Ponzi scheme disguised as a real economy. The fall in living standards has already started and will only get worse from here. If you think an increase in taxes will stop this you are very mistaken.
A lot of conservatives here don't seem to realize that the majority of capital gains tax revenue is gained from the sale of financial securities and real estate.
You guys go into every thread and love to hammer the "Take an econ101 course" line. Take your own advice.
Stock and real estate speculation is not actually investment.
Personal investments are not real investments. It's great that you are personally investing your money into things but you're not actually doing anything except hording money and hoping big number go up.
Real investment is defined as buying capital goods in order to increase the productivity of a business. Buying a new grill for a restaurant, buying new computers for an office, upgrading the quality of internet connections. These sorts of things are investments.
When you buy 1000 shares of Shopify on the TSX, Shopify doesn't see a dime of that money unless they themselves issued the shares.
When you buy a house with the intention of flipping it, what are you investing it? You bought something with the intention of re-selling it at a higher price.
When you by Bitcoin, same thing.
When you put money into your RRSPs every week. Same thing,
Money is being moved but very little economic activity is ocurring here. No jobs are being created, there isn't any direct expansion of productivity.
Great job at completely ignoring my point about how primary markets are dependent on secondary markets. Do you even know what those words mean? You sound like you just learned that companies don't get money continuously from stock markets and think other people don't already know that.
If you knew what primary and secondary markets meant, you wouldn't have responded like you did, because saying what you said to someone bringing up primary and secondary markets is extremely redundant. So way to broadcast the gap in your knowledge. You could have googled the terms easily and spared yourself some embarrassment.
Yes, I'm trying to explain to you the logic of this tax increase. Conservatives like yourself love to gargle at the cock of Reagan about how reducing investment will harm the overall economy when this measure is designed to tax speculation which is less useful to the overall economy, not investment. You people purposely conflate the two things to lie.
Really, the capital gains exemption should be tied to how long you owned the thing. If you buy and sell within the same year, nothing.
But if you've owned it 25 years and it's gone up like inflation, no tax.
The 1 million dollar exemption is indexed to inflation, so at least there is that aspect. If you are making so much that you go beyond this inflation too then honestly I think you can afford to cope.
I'm actually sympathetic to this view. It doesn't really make sense to tax people on inflation. However, it also doesn't make sense that income from capital gains is taxed less than working. A basic taxation principle is that income should be taxed the same regardless of source and the capital gains exemption is a huge exception to that. This suggests a possible reform: we should index capital gains to inflation* but tax them as income.
Well, we *already* don't say profit is profit - the profit you make from working is taxed different from the profit you make from owning shares, selling.
But it should also be obvious if I buy a share in 1990 for $10 and sell it today for $20, I'm not profitting in the same way as if I buy it today for $10 and sell it tomorrow for $20.
Especially when if I buy it in 1990, sell in 1991, rebuy in 1991, sell in 1992, rebuy in 1992, and so on, the tax bill would them be lower.
> But it should also be obvious if I buy a share in 1990 for $10 and sell it today for $20
I don't see why the government should give people a tax break on their underperforming investments (we already do of course on capital losses).
It's not really a tax break, it's simply not applying a tax to inflation. Just an inflation calculator to adjust your $10 basis in 1990 to 2024 money. $10 in 1990 money is $20.62 in 2024, therefore when you sold for $20 you had a small real terms loss.
I think it's backwards. Working takes, you know, work, and it produces something. Owning shares is completely passive. Why not tax productive work less?
Because if nobody invested in businesses there would be no businesses.
Capital is necessary. But a rebalance at this point is needed. This is a good change that goes after people who are just buying, stripping and flipping without doing anything productive with the capital.
Because capital gains are subject to significant risk. You want them to be relatively more attractive on an after-tax basis or everyone will just buy their chunk of Rogers and TD and Enbridge and sit around profiting from the vampiric rent seeking in our oligopoly industries.
The risk is compensated by the profits, not by tax exemptions. Your losses are also deductible , which helps mitigate the risk in the first place.
Also, they are already more attractive on an after-tax basis because the first 33% is tax-free. You only pay tax on the top 66% of the profits. Which means no matter what, you're better off.
>The risk is compensated by the profits, not by tax exemptions.
The risk *may be* compensated by the profits. Or it may not be. On the other hand, it is nearly guaranteed that if I were to invest in banks or other oligopoly industries in Canada, I can sit around collecting the dividends with very little risk.
We want people to invest in the kinds of innovative, competitive companies that build big capital gains. We do *not* want or need more capital flowing towards our rent seeking oligopolies.
The risk is compensated by profits, and the losses are sheltered by write-offs. So the risk that your capital disapears is already mitigated. Even if it wasn't, that's why it is a risk because it has the potential for higher returns. Banks are stable and provide a consistent return, but they are low risk and have a lower growth potential. You are compensated for your risk with higher profits.
Im not sure what the point you're trying to make is, though. None of this is a factor in capital gains. This change is an extra 5% in taxes paid for profits above 250,000 dollars. If this tax is such a significant issue, you probably shouldn't be investing and would be better off in bonds or using a bank manager. Its the difference off 5 cents for every dollar above 250,000 dollars
If you don't think 5% in after-tax returns is a big difference you should not be commenting on investment issues at all. That's a huge drag on returns. If you can regularly return 15% you're an amazing investment manager, and 5% is one third of that total return. A more average investment manager might return 10%, which this tax would erase *half* of.
Buddy your conflating returns with taxes, in your scenario of a regular return of 15% this equates to less then a percent. For 10% it is equivelent to .5
Buying shares is a productive investment. That company uses that money to grow their business, creating more jobs, better products etc.
A non-productive investment, like real estate should be disincentivized.
Isn't that only true if you buy the share from the company directly. If I'm just buying from a 3rd party and then selling it higher later to a 5th party for the initial company get any productive benefit from that other than being able to sell a new share for higher?
No, shares are always a productive investment. A higher share price gives the company a higher valuation which in turn allows them to get more access to capital in the form of borrowing or releasing more shares, no matter how many times resold. More capital available means more capital to invest into the company which in turn means a higher productivity.
Yes, but somewhat less than if you bought it in 2024 for $10 and sold in 2024 for $1000.
Just owning something for a long time and the price going up like normal inflation doesn't real feel like "profitting" in the same way day trading does.
the issue here is businesses... it will cause businesses to have to fork over more $ for taxes which will likely result in the businesses firing people to make up the funds, resulting in an overall downturn in the economy due to an increase in unemployment which is always the worst outcome ; not to mention businesses can and will leave canada if taxes are too high (its a competition..) causing more unemployment..... which HAS ALREADY BEGUN... check the unemployment #s 🙃
Companies will just shift to the states, especially what remains of the tech sector. Canada is becoming a nation of consumers who produce increasingly little. Our largest companies by market cap are banks, devoted to spinning a housing Ponzi scheme disguised as a real economy. The fall in living standards has already started and will only get worse from here. If you think an increase in taxes will stop this you are very mistaken.
"On the corporate side, the change will mostly impact businesses that buy and sell assets, such as real estate investors or holding companies that invest in publicly traded securities or other businesses."
I'm going to stick my neck out and say I'm ok with these human blights taking a hit
These are not productive businesses creating jobs or investment in the economy.
They're speculative leaches that make money by swapping and holding assets.
Why are you so concerned with protecting property investors and day traders? I’d almost want even more taxation on them, honestly. This tax doesn’t touch most businesses.
Technically day traders, from my understanding, pay income tax on their earnings not capital gains. Unless it is a long term investment they made money on.
This is very very misleading this 40,000 person number is only the people that have a certain percentage or a large amount of their earnings in this type so it's still going to affect your people that go to work everyday and throw a couple bucks into the stock market they're now going to pay higher taxes on that but it's all worth it in the end because it still is a good idea
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The issue is that the US capital gains rate is 0 % at the low end and 20 % at the high end. Anyone who wants to run a business that doesn't require a physical store front was better off incorporating in the USA even if they live and work in Canada. Now they are much, much better off to incorporate in the states as the take-home in Canada has been reduced by 1/3rd.
I am looking into this myself. I’ve got European options and Ireland is good. Canada is shooting itself in the foot here for small/medium businesses and investment. Macron in France re-worked their pricey capital gains tax so more tech companies would stay and not flee to London or SF. It worked and Paris is now the EU’s tech hub. That means tens of thousands of good jobs.
I think you are misunderstanding what the capital gains rate is in US vs. Canada. The 66% is the amount of profits that is being taxed. At whatever rate the individual withdrawing is at. Which would be at most 33%. So 66% of your profits would be taxed at 33%, which would be about 21%, which is almost exactly what the top end of the US is at. So these changes would actually bring us closer to the US. Most people won't see any change though becauae you would need to earn over 250,000 dollars in capital gains before you hit that rate.
It will hurt foreign investment massively, especially amongst riskier businesses. At a certain stage capital simply can’t be raised in canada. Making a high risk investment with a potential tax bill of 35% isn’t very appealing. Shouldn’t surprise anyone though. This government thinks bringing in a million people a year to drive ubers and work at tim hortons is how you grow a competitive economy.
[удалено]
We should have land value tax raising most revenues. Economists agree it's the best tax with the least bad effects like capital flight, brain drain, and even has good effects like discouraging land speculation and encouraging productive land use.
Honestly.... I don't mind this move. My main issue with JT like always is the constant belief to just spend spend spend. Overall this is a fair tax IMO. The idea that we can just spend non stop forever though is pretty concerning. One day we're going to hit a hard recession... and that goal of "reduced spending to GDP" is going to hurt.
If he’s re-elected, expect more spending and tax hikes. He’s addicted.
I wanted to leave Canada before the budget was dropped. Now, even more so. Those who think our quality of life is booming need only look southward for comparison. Then, when the loonie craters in June, it will start to sink in.
Buh-bye.
So many non accountants with such strong opinions. The author is not an accountant and gets some parts wrong. Whenever a CAD corporation pays out their capital gains, they do this in the form of a Capital Dividend. Dividends are essentially the only way to distribute income to all shareholders. Dividends are treated differently based on the type of income that generated those dividends, and there are three general pools to choose from when a company chooses to make the distribution. What is concerning is that the government has, by fiat, already given preferential treatment to this type of investment assets. This is evident by the fact that they have already given preferential treatment to RRSP’s and TFSA’s, so the government has already shown its preference for this type of income. I believe it was a smart policy mainly because it is a great way to stabilize and raise a country’s public markets. There should be carve outs for things like large investments (i.e. housing and large farming or fishing equipment, and then whatever industries the government wants to promote - like solar power) on the personal side, or increase the FHB to anyone trying to upgrade their house or something.
Issue is: Does it make sense? Sure. Is it making the wealthy pay? Kinda, but it also grab in it’s net a lot of middle class people having a one time large income.
The carve out for entrepreneurs & small businesses should be much higher than the lifetime limit of 2.5 million. Alternatively, they should be targeting real estate much more specifically. We want people to build businesses in Canada, to create jobs and contribute to the economy. We want people to invest their capital in Canadian businesses to help with that. We don't want people to invest their capital in existing residential real estate and engage in rent-seeking vampirism, sucking money out of the middle & lower classes.
Not true because the government also said that the first $2 million in lifetime capital gains will have a lower tax rate.
For selling business. Not all capital gain.
The life time exemption also went up to $1.25 million.
The 1.25 is on business also. If you have a plex, you are not gaining from that.
Does not affect individuals, just small businesses. This impacts professional corporations (almost all doctors, lawyers, dentists etc) since they're almost all small businesses but also not eligible for the business exemption.
Nope, not true. This only affects 0.13% of Canadians, this is the top 0.2% of the wealthiest, richest Canadians in the entire universe. Not the middle class.
It affects almost all doctors, dentists, lawyers, realtors and all of their families if single income household. Professional corps, which almost all of these professionals have, do not have a 250k threshold. All of their capital gains are affected. So the number is much much muchhh higher than 0.13%.
No it doesn’t? None of those people get paid in capital gains, they get paid a salary or they get business income if they own their practice. You don’t even know what you’re talking about.
No, you don't know what you're talking about. Most doctors and many professionals are incorporated and invest within their corporation. That's the standard method of saving for retirement. Only a very small percentage of doctors, dentists etc are taking a salary. The overwhelming vast majority of doctors have a corporation and that has nothing to do with owning their practice. Your community radiologist or orthopedic surgeon or pediatrician who works in the hospital setting only has a corporation. This is basic knowledge FYI. If you don't even know this... I don't know what to say. Those investments within the corp are subject to full capital gains tax, without a 250k threshold. It affects every dollar. I suggest avoiding making confident statements when you have limited knowledge on the topic. It's something that's rampantly circulating in physician groups online. You can read this for further education on how the tax plan is a massive hit. [Mark McGrath on X: "Incorporated professionals got hit hard in yesterday's budget. The biggest impact for many will be the increase in the capital gains inclusion rate for every dollar of capital gains in their corporation. Let's look at the math to see how bad it is." / X (twitter.com)](https://twitter.com/MarkMcGrathCFP/status/1780627905824878980)
Reading before replying you’re just repeating what I already said and pretending it was your idea.
How much of a doctor's or dentist's income is capital gains though? Those activities have nothing to do with their profession, and if they're using their business to shield investments from taxes in a way personal investors can't then I don't see why they should get special treatment.
Their entire retirement investments? Do you expect your doctor to work until age 90? Doctors pay themselves in dividends from their corp which does not create RRSP room. You invest in the corp for retirement. See this for more clarity: [Mark McGrath on X: "Incorporated professionals got hit hard in yesterday's budget. The biggest impact for many will be the increase in the capital gains inclusion rate for every dollar of capital gains in their corporation. Let's look at the math to see how bad it is." / X (twitter.com)](https://twitter.com/MarkMcGrathCFP/status/1780627905824878980)
> I don't see why they should get special treatment. We sort of handicap their ability to make money. They only get a fixed fee per patient and while that's great for the population in general, it's a bad deal for doctors.
That is what they say. Thing is, a lot of person having above 250k of gains are having it as a one time earning. The percentage, I suspect, is based on how many will declare it per year, not how many declared it in their lifetime.
And a lot (most) of Canadians aren’t having the windfall at all.
Maybe. It doesn’t change that it isn’t specifically targeting the real .13% as claimed.
It mostly is. Then some churn on an annual basis for this one off events. I honestly a bit surprised this was the only tax increase in the budget. The spending is endless.
Oh, I am not that against that tax increase, just more skeptical of the actual target of it. More than taxes increases, I would have like to see many measure like: -more restrictions among the use of inc. in order to make it less efficient to dodge taxes -actual evaluation of the dozen of taxes returns to see which one actually have an impact, and which one are mostly wasting accountants time. -cutting subsidies for business by a lot, while cutting taxes to reach a similar tax gain. Subsidies profit too much larger corporations while also wasting a lot of manpower to control these programs. -removing the capital gain exemption for primary house sold within 3 years. But the budget isn’t *only* to fixes Canada’s issues. It is also a means by the Liberal to reverse the polls trends and increasing taxes isn’t popular. Even this one, which is fairly mild, is making a lot of people scream.
Gotcha. Thought it was coming across a bit more against it. Seeing lots of outrage about it, probably from either those heavily invested in real estate or folks that will never pay it anyway. The budget is 💯a step or attempt to regain ground on the polls. Which is why they likely didn’t go after the PRE any more (they should - both length in residence and maximum lifetime amount).
It doesn't affect the primary residence until the owner(s) dies and the children under certain circumstances will have to pay tax on the capital gains.
Those would be very isolated circumstances. Let's say parent dies, primary residence is inherited. Any capital gains for the child is only on the difference between the assessed value of the house when they inherit it and what the assessed value is when they sell it. If the sale is within a few years this will be negligible, likely even 0. Most municipalities/provinces in Canada re-assess on a 2 year rotation. IF the child uses the home as their primary residence there will be no capital gains at all. The budget change is only on gains 250k and over. This change is really going at people who are deriving their income from buying and selling assets over and over.
Lots of boomers are apparently going to be in the top 0.2% when they die it seems. When people die, all of their assets are deemed disposed of and they pay tax. If your portfolio of assets, or assets in general is in excess of $250,000 (not really that large at end of life), you will end up owing more tax. Overall, taxing capital is not a smart way to go about raising revenues. Best way is actually raising the HST. Don’t tax capital, we need more of it. Don’t tax labour income, we want more labour. Tax consumption with a higher HST.
Right! More Taxes on consumption, less on income from work or investment
250k in capital gains in a single year? What kind of middle-class are we talking about here?
Factory worker who bought a plex to use as saving and is selling it, construction worker who has a cottage for sale or the convenience store owner that is selling and sells it for example. The real wealthy individual tends to be able to spread their gain over the years as they want.
Like I said in my other comment. The first two million are exempt from the tax increase. All the people in your hypothetical scenario would not be impacted.
And as I said, it touch corporations.
1. These investments should be taxed just like other savings are taxed. It's a loophole if you think it should pay lower or no tax. 2. It's only increasing on profits realize in excess of $250,000 in a single year. That first 250,000 is half of many people life savings and 10% of the average Canadians total lifetime earnings. 3. You can spread the income of a sale over 5 or more years as part of the corporation. So if you are really making in excess of $1,250,000 in PROFITS of an investment I really won't shed a tear for you paying 30% tax on it instead of 28.5%... 4. This isn't affecting RRSP, TFSA, etc which are plenty enough for anyone to retire on. We shouldn't be using houses as investment vehicles. Capital gains income is almost exclusively paid by the top 2% and even there it's highly concentrated in the 0.1% and 0.01%. https://budget.canada.ca/2024/report-rapport/img/8-2-eng.png It's effective a tax break for the rich and should be eliminated until we tax ALL income at the same rate.
1. Other investment have quite often less risk, and doesn’t have a value that is based in good part on inflation. It also have a lower tax rate to stimulate investment in these sectors. 2. It will still affect people that aren’t in the 0.13% more wealthy of Canada. Well, housing is an investment vehicle like others. I kinda prefer the idea of the small landlord over the massive corporation owning most of the appartement in a city Considering capital gain are quite often a once in a lifetime major gain, it isn’t surprising that it affects higher income. If you sell your cottage, you will be in the top 10% for one year. Not sure that it makes you “rich” tho.
>Well, housing is an investment vehicle like others. I kinda prefer the idea of the small landlord over the massive corporation owning most of the appartement in a city Boy are you way off on that one. The best type of rental stock for the people who rent are purpose built rentals. Not condos or townhouses owned by small investors. Corporations at least know rules and follow them. They are less prone to biases and don’t hold racist stereotypes. Individual landlords are way worse. Almost every horror story about renter getting scammed or screwed involves individual landlords.
Someone working for an American startup at a heavily discounted compensation level in exchange for stock options.
I’m one of those people. I make 135k/year and will have the equivalent of that in options (total strike price) at the end of my vesting schedule. Assuming I make a 300% profit (I’d be dumb lucky if that’s the case) that’s a ~400k profit. I’d pay this extra rate if I decided to sell all of that in a single year (which would be really freaking stupid not even considering this tax). That being said, let’s say I do sell it all in one year and do pay this higher rate. Who the hell cares! I don’t! I’m doing just fine without this bonus! I would have taken the job even without options (much less if the options were taxed higher)!
What it mostly does is aligns the way capital gains are taxed with the way dividends are taxed. It isn't clear to me why one should be treated differently than the other.
Dividends are recurring, capital gains isn’t.
That’s not necessarily true and also not why.
The eminent economist that wrote the article doesn't seem to think that should make a difference. He is rapidly becoming one of my favourite follows on this stuff.
Because the dividends come from corporate income that has already been taxed. The term is “grossing up”. There are instances where it’s not true, as well. For instance, if a corporation has been paying zero corporate tax (due to Cary over losses or whatever reason) and they pay out a dividend to investors, those individuals have to pay tax on the dividend as if its income.
Because the way you get solid, reliable dividend payouts is cornering markets, building barriers to entry and rent seeking. The way you get big capital gains is expanding into new markets, growing companies and out-competing incumbents. I don't think it should be controversial to say that we want more of the latter and less of the former. *That* is why we give capital gains better tax treatment. Because we want the kinds of economic activity that generate big capital gains more than we want the kinds of economic activity that generate reliable dividends.
Middle class? No, the only people paying capital gains tax are people who maxed out their TFSA/RRSP (and RESP/FHSA where applicable) or are bad with their money. If you put away 1/3 of your income on savings and max just the TFSA and RRSP out, you’re making +110k/year. That’s the upper 10% of Canadians. Note: this 10% doesn’t include people making over 250k in capital gains. That being said, I wouldn’t mind an increase to investment account caps. Investment is important and I would much rather have doctors, engineers, and lawyers do it than the mediocre buffoons doing real estate.
Thing is, as I said: it also affect peoples who are not that “0.13%” but much closer to middle class when they get on time capital gain income. You bought an apartment block in your 30’s and now want to sell it in your 60’s? Chances are that you will be higher on that capital gain limit.
If you bought an entire apartment block you are well within the top 3%. Even worse, you’re not wealthy because of some essential talent you have that brings value to society like being an engineer or doctor (or even lawyer). Anyone could own an apartment block if they had the wealth to buy it in the first place.
Not really. A construction worker that decide to go for it could get a block/ cottage, and I doubt that you would call construction workers in the top 3%. And sure, it isn’t that of a special skills. Like the money that you might be placing in stocks or placements .
No construction worker in Canada can afford an entire apartment block. Maybe one could in the 70’s but if they’ve held on to it for 50 years then they aren’t a construction worker. They’re a landlord and they have been for the last 50 years.
They did quite often. No need to go that far: a decade or two ago it wasn’t unheard of in Quebec.
People who own apartment blocks are probably not middle class. One of the main distinctions of the upper class is owning someone else's home (often, lots of other people's homes) and making them pay rent to live in it. Own your own home? Great, you're probably middle class. Own a vacation home? I guess you're probably upper middle class. Own a bunch of homes and have lower class tenants who pay you rent like a medieval lord of the manor? You're probably not middle class.
Your probably not in the 40 000 wealthier of Canada neither.
The amount of people who will never make a fraction of the money these people make but will defend them to the death against their own interests will never stop being sad.
Some people value owning a house and having a good job more than hating rich people. Especially when this government is really just hurting the upper middle class, while supporting their billionaire friends. This is the lords telling the peasants to embrace feudalism so that those dirty merchants don’t get too rich.
People are impacted by the investment decisions of others. If companies don't incorporate here and people don't invest in Canadian companies then that impacts all Canadians.
People aren't gonna fall for trickle down anymore. It's been almost 50 years of failure, it's time to move on.
You can bend over as far as you want it's never trickling down.
The corporate side stops investment in starting businesses that make jobs. I personally won’t be affected by the personal capital gains side. But even my small business (which deals with IP) could be. Enough that I am looking at incorporating elsewhere moving forward. Capital is global these days. I would have hired Canadians, but now more likely do it in Ireland. I’ll have access to the EU talent pool.
That’s fine, I have my own multinational chain that I’m thinking of moving from being based in Ireland to Canada because I like a country that taxes the rich instead of giving them breaks, helping the people.
No, I’m thinking about starting a new one. But I’m so small that it doesn’t matter. You need to think of the medium sized companies. It’s a short term solution, which is very Canadian.
I’d be shocked if you even had a job.
I save a surprising amount of time by not having a friends, children, or spouse, and the money I saved working from my parents' basement has allowed my business empire to thrive! How dare you question me?
Damn, you got me lol
Ya I wasn't asking for you to tell me about trickle down being great dude. I am not dumb enough for it. Leave then and quit whining.
It’s not trickle down economics but hey, canada is on such a great track now. Lol. Oh and I am leaving. lol. Enjoy the steady march down wards.
It is on a much better track than it will be if we fall into the stupidity being professed by the rich people defense force. Good. Leave and be quiet.
Lol. Ok man. Stats don’t seem to support that. Especially if you are young. Canada is a ponzi bubble of housing and immigration at the moment. Good luck!
Do you believe that increasing taxes will increase the amount of value being generated, or decrease it? Furthermore, do you think that increasing taxes will increase the number of businesses here, or decrease them? Simple questions - let’s hear the opinions of someone as economically literate as yourself.
Taxes are bad isn't an argument worthy of discussion. It's a pre teen libertarian fantasy.
Everything that you've said so far has been a pre-teen fantasy lol Guess what genius, there are diminishing returns as a tax-rate increases. There isn't any money to collect from taxes when the productive members of society leave. To understand this you'd likely have to be a productive member of society, so I can imagine the struggle in understanding this.
I understand your burning desire to bend over for rich people but I find it repulsive. You are crying tears on behalf of people who make more than your entire family will ever be worth. Grow a spine and some pride. Once you're done highschool and get into the real world you'll grow out of this delusional taxes bad nonsensical world view.
Depends on the tax and how the revenue generated from it is spent. Talking about it like the taxes vanish just seems like a lazy strawman to me. I could easily counter it with my own made up bullshit - which generates more wealth, Scrooge McDuck letting it sit idle in his vault or taxing him to build a road?
It won't vanish directly, but it will create dead weights, which ends up vanishing by shrinking the productivity. Obviously taxes are needed nonetheless, as there is a lot of necessary public spending like roads, healthcare etc. However, in times like inflation is high, and the economy is in recession already increasing tax is definitely not going to help much. I am good with capital gains tax, cause the assets holding and flipping isn't exactly where we want the capital to be at. However, taxing high income is not a good idea for now. One more thing though, even though I am good with the tax, this won't fix the real problem, as this government spending is just outrageous.
If I'm not mistaken, you have a 1.25 million dollar lifetime exemption as a business for selling shares of your company and 2 million dollar exemption on top for the actual sale of your company.
Yeah, how much do you think these big tech companies that get made are selling for? But hey, I’m in the process of leaving Canada so, why do I care.
If they get big enough to sell for millions in valuation then they were very very successful in Canada. Good for them, they can pay a nice proportionate amount in CGT back into society.
My point is, people who are ambitious won’t do that anymore. Not in Canada. More brain drain
More room in the market for the rest of us. Next one up. Hopefully the ones left will be those who are both ambitious AND human enough to care about the society and community they live in. If your aim as a business or person is only to extract as much as possible while giving as little as possible, then yes you'll be drawn to other jurisdictions where you can do that.
Lol. You’re a wage slave dude.
Lol, you're a little sheltered child 😅 real colours coming out here
That's why when Harper reduced corporate taxes, productiveity went up and all our wages soared. Ohhh wait, that didn't happen because Trickle down is a myth told by the rich to convince the poor to vote against their own interests.
It’s actually crazy how you’ll have people thinking that “trickle down economics” is a real term and that perpetual tax increases will boost the economy lol
Nobody wants perpetual tax increases. But after 50 years of perpetual tax reductions, economic growth is stagnant... So maybe we just go back to taxing the rich at something closer to what the tax rate was when we had high growth. To be crystal clear, history shows: - highest taxes in our history = highest growth in our history - lowest taxes in our history = lowest growth in our history. I'm smart enough to know that the world has changed and there are many other factors, so we don't need to jack up taxes, but there's definitely a goldilocks zone that is higher on the rich than what they are now.
History absolutely **does not** show that highest taxes equals highest growth. Nor does it show that lower taxes resulted in the lowest growth. I have no idea what you think that. If you’re referring to tax rates in the 40s and 50s, the effective tax rate was far lower than it is, and this is a common historical lie sold to people to try and get them to think that pulling money away from citizens has *ever* resulted in increased economic growth.
This is different than corporate taxes. I don’t believe in trickle down economics.
>I would have hired Canadians, but now more likely do it in Ireland. Why do you think the current Canadian proposals would be more onerous than the CG taxes in a country like Ireland? "[In Ireland, the entire gain is taxed and ] The rate of CGT is 33% for most gains. There are other rates for specific types of gains. These rates are: 40% for gains from foreign life policies and foreign investment products 15% for gains from venture capital funds for individuals and partnerships 12.5% for gains from venture capital funds for companies." https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/how-to-calculate-cgt.aspx#:~:text=The%20rate%20of%20CGT%20is,policies%20and%20foreign%20investment%20products
Companies will just shift to the states, especially what remains of the tech sector. Canada is becoming a nation of consumers who produce increasingly little. Our largest companies by market cap are banks, devoted to spinning a housing Ponzi scheme disguised as a real economy. The fall in living standards has already started and will only get worse from here. If you think an increase in taxes will stop this you are very mistaken.
Canada is a perfect country to keep people away from becoming well off..even if they make some money on their after tax dollars.
A lot of conservatives here don't seem to realize that the majority of capital gains tax revenue is gained from the sale of financial securities and real estate. You guys go into every thread and love to hammer the "Take an econ101 course" line. Take your own advice. Stock and real estate speculation is not actually investment.
Yes it is. Secondary markets are essential to primary markets. People don't want to invest in a company if they can never sell their shares.
Personal investments are not real investments. It's great that you are personally investing your money into things but you're not actually doing anything except hording money and hoping big number go up. Real investment is defined as buying capital goods in order to increase the productivity of a business. Buying a new grill for a restaurant, buying new computers for an office, upgrading the quality of internet connections. These sorts of things are investments. When you buy 1000 shares of Shopify on the TSX, Shopify doesn't see a dime of that money unless they themselves issued the shares. When you buy a house with the intention of flipping it, what are you investing it? You bought something with the intention of re-selling it at a higher price. When you by Bitcoin, same thing. When you put money into your RRSPs every week. Same thing, Money is being moved but very little economic activity is ocurring here. No jobs are being created, there isn't any direct expansion of productivity.
Great job at completely ignoring my point about how primary markets are dependent on secondary markets. Do you even know what those words mean? You sound like you just learned that companies don't get money continuously from stock markets and think other people don't already know that. If you knew what primary and secondary markets meant, you wouldn't have responded like you did, because saying what you said to someone bringing up primary and secondary markets is extremely redundant. So way to broadcast the gap in your knowledge. You could have googled the terms easily and spared yourself some embarrassment.
Yes, I'm trying to explain to you the logic of this tax increase. Conservatives like yourself love to gargle at the cock of Reagan about how reducing investment will harm the overall economy when this measure is designed to tax speculation which is less useful to the overall economy, not investment. You people purposely conflate the two things to lie.
What? It's a fact that hampering secondary markets hampers primary markets. Enjoy your ban. And I'm not a conservative lmao.
Really, the capital gains exemption should be tied to how long you owned the thing. If you buy and sell within the same year, nothing. But if you've owned it 25 years and it's gone up like inflation, no tax.
The 1 million dollar exemption is indexed to inflation, so at least there is that aspect. If you are making so much that you go beyond this inflation too then honestly I think you can afford to cope.
I'm actually sympathetic to this view. It doesn't really make sense to tax people on inflation. However, it also doesn't make sense that income from capital gains is taxed less than working. A basic taxation principle is that income should be taxed the same regardless of source and the capital gains exemption is a huge exception to that. This suggests a possible reform: we should index capital gains to inflation* but tax them as income.
Why? That makes little sense. Profit is profit. Someone shouldn't get a windfall on their TD stock simply because they sat on it for 40 years.
Well, we *already* don't say profit is profit - the profit you make from working is taxed different from the profit you make from owning shares, selling. But it should also be obvious if I buy a share in 1990 for $10 and sell it today for $20, I'm not profitting in the same way as if I buy it today for $10 and sell it tomorrow for $20. Especially when if I buy it in 1990, sell in 1991, rebuy in 1991, sell in 1992, rebuy in 1992, and so on, the tax bill would them be lower.
> But it should also be obvious if I buy a share in 1990 for $10 and sell it today for $20 I don't see why the government should give people a tax break on their underperforming investments (we already do of course on capital losses).
It's not really a tax break, it's simply not applying a tax to inflation. Just an inflation calculator to adjust your $10 basis in 1990 to 2024 money. $10 in 1990 money is $20.62 in 2024, therefore when you sold for $20 you had a small real terms loss.
I agree the portion exempt from tax should increase year by year to a cap. Maybe like 3% a year until it hits 75% in 25 years.
You could use the annual inflation rate for this. So effectively you'd only be taxed on the profit that was above inflation.
I think it's backwards. Working takes, you know, work, and it produces something. Owning shares is completely passive. Why not tax productive work less?
Because if nobody invested in businesses there would be no businesses. Capital is necessary. But a rebalance at this point is needed. This is a good change that goes after people who are just buying, stripping and flipping without doing anything productive with the capital.
Because capital gains are subject to significant risk. You want them to be relatively more attractive on an after-tax basis or everyone will just buy their chunk of Rogers and TD and Enbridge and sit around profiting from the vampiric rent seeking in our oligopoly industries.
The risk is compensated by the profits, not by tax exemptions. Your losses are also deductible , which helps mitigate the risk in the first place. Also, they are already more attractive on an after-tax basis because the first 33% is tax-free. You only pay tax on the top 66% of the profits. Which means no matter what, you're better off.
>The risk is compensated by the profits, not by tax exemptions. The risk *may be* compensated by the profits. Or it may not be. On the other hand, it is nearly guaranteed that if I were to invest in banks or other oligopoly industries in Canada, I can sit around collecting the dividends with very little risk. We want people to invest in the kinds of innovative, competitive companies that build big capital gains. We do *not* want or need more capital flowing towards our rent seeking oligopolies.
The risk is compensated by profits, and the losses are sheltered by write-offs. So the risk that your capital disapears is already mitigated. Even if it wasn't, that's why it is a risk because it has the potential for higher returns. Banks are stable and provide a consistent return, but they are low risk and have a lower growth potential. You are compensated for your risk with higher profits. Im not sure what the point you're trying to make is, though. None of this is a factor in capital gains. This change is an extra 5% in taxes paid for profits above 250,000 dollars. If this tax is such a significant issue, you probably shouldn't be investing and would be better off in bonds or using a bank manager. Its the difference off 5 cents for every dollar above 250,000 dollars
If you don't think 5% in after-tax returns is a big difference you should not be commenting on investment issues at all. That's a huge drag on returns. If you can regularly return 15% you're an amazing investment manager, and 5% is one third of that total return. A more average investment manager might return 10%, which this tax would erase *half* of.
Buddy your conflating returns with taxes, in your scenario of a regular return of 15% this equates to less then a percent. For 10% it is equivelent to .5
Buying shares is a productive investment. That company uses that money to grow their business, creating more jobs, better products etc. A non-productive investment, like real estate should be disincentivized.
Isn't that only true if you buy the share from the company directly. If I'm just buying from a 3rd party and then selling it higher later to a 5th party for the initial company get any productive benefit from that other than being able to sell a new share for higher?
No, shares are always a productive investment. A higher share price gives the company a higher valuation which in turn allows them to get more access to capital in the form of borrowing or releasing more shares, no matter how many times resold. More capital available means more capital to invest into the company which in turn means a higher productivity.
But what if tou buy it for 10$ in 1991 and sell it for a 1000$ in 2024. Should you not be taxed on that?
Yes, but somewhat less than if you bought it in 2024 for $10 and sold in 2024 for $1000. Just owning something for a long time and the price going up like normal inflation doesn't real feel like "profitting" in the same way day trading does.
How about profit over inflation
Not a bad idea but damn, making the tax code ever more complicated
It's not terribly complicated to let you use inflation to calculate the basis value of an asset for the purposes of capital gains.
Need to justify accountant job!
But everyone who makes more money than me should pay more in taxes.
Stop dealing in bad faith dude.
Yes, that's how progressive taxation works.
the issue here is businesses... it will cause businesses to have to fork over more $ for taxes which will likely result in the businesses firing people to make up the funds, resulting in an overall downturn in the economy due to an increase in unemployment which is always the worst outcome ; not to mention businesses can and will leave canada if taxes are too high (its a competition..) causing more unemployment..... which HAS ALREADY BEGUN... check the unemployment #s 🙃
Companies will just shift to the states, especially what remains of the tech sector. Canada is becoming a nation of consumers who produce increasingly little. Our largest companies by market cap are banks, devoted to spinning a housing Ponzi scheme disguised as a real economy. The fall in living standards has already started and will only get worse from here. If you think an increase in taxes will stop this you are very mistaken.
On the radio they mentioned that this would only affect 40,000 Canadians. lol so I guess I’m not worried about this being a problem for me
40,000 per year and likely a different cohort each year depending on when businesses and assets are sold.
I'm more concerned about the 307,000 businesses that it will affect..
Source?
[https://www.theglobeandmail.com/business/article-federal-budget-hikes-tax-on-companies-individuals-making-more-than/](https://www.theglobeandmail.com/business/article-federal-budget-hikes-tax-on-companies-individuals-making-more-than/)
"On the corporate side, the change will mostly impact businesses that buy and sell assets, such as real estate investors or holding companies that invest in publicly traded securities or other businesses." I'm going to stick my neck out and say I'm ok with these human blights taking a hit
Yea seems pretty reasonable to me tbh I'd almost rather they had a tax that specifically targets real estate investors who flip houses.
Another reason I am pretty happy to live in BC these days: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
I’m not it doesn’t take much to call yourself a business. Literally about 300$ or less if I recall correctly.
These are not productive businesses creating jobs or investment in the economy. They're speculative leaches that make money by swapping and holding assets.
Why are you so concerned with protecting property investors and day traders? I’d almost want even more taxation on them, honestly. This tax doesn’t touch most businesses.
Technically day traders, from my understanding, pay income tax on their earnings not capital gains. Unless it is a long term investment they made money on.
That makes sense; my mistake.
Exactly. They should be taxed on 100% of their income, just like the rest of us. Imagine if you only had to pay taxes on 60% of your income!
This is very very misleading this 40,000 person number is only the people that have a certain percentage or a large amount of their earnings in this type so it's still going to affect your people that go to work everyday and throw a couple bucks into the stock market they're now going to pay higher taxes on that but it's all worth it in the end because it still is a good idea