Conservative to oppose capital gains tax hike

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‘Trudeau is hiking taxes on homebuilding during a housing shortage. He is raising taxes on doctors during a doctor shortage’

Published Jun 11, 2024  •  Last updated 2 hours ago  •  5 minute read

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Pierre PoilievreLeader of the Conservative Party Pierre Poilievre rises during Question Period, May 29, in Ottawa. Photo by Adrian Wyld /THE CANADIAN PRESS

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OTTAWA — The Liberal motion endorsing a hike to the capital gains tax passed Tuesday afternoon despite the federal Conservatives voting against it, arguing the changes will kill innovation in the country’s economy and punish farmers, retirees, entrepreneurs and doctors.

Together, the Liberals, Bloc Québécois, and the NDP supported the ways-and-means motion, which was enough to carry it, although the legislation has yet to be tabled despite the tax hike scheduled to come into effect on June 25th. The government has promised legislation on the tax increase this fall.

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Conservative Leader, Pierre Poilievre announced his MPs would not be supporting the tax changes ahead of a vote on Tuesday afternoon, ending weeks of ambiguity.

“Trudeau is hiking taxes on homebuilding during a housing shortage. He is raising taxes on doctors during a doctor shortage. He’s hiking taxes again on farmers during a food cost crisis. And he’s hiking taxes on small business while Canadians’ paycheques are shrinking,” Poilievre said in a statement.

“This job-killing Trudeau tax will drive billions of dollars of machines, technology, business and paycheques out of our country.”

The Liberals proposed the new capital gains tax rules in their spring budget, but rather than include them in the budget bill, which is making its way through the House of Commons, they separated the tax hike and tabled a standalone motion that was voted on Tuesday afternoon, purportedly as a strategic move to isolate the Conservatives who have dominated the Liberals in polls.

The change meant the Conservatives were forced to vote for or against the tax hike alone.

Finance Minister Chrystia Freeland on Sunday said that opposing the tax hike would benefit the top earners “living lives of luxury… while the wrath of the vast majority of their lesser privileged compatriots burns so hot,” and would lead to copious social ills, including a rise in teen pregnancy.

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She said it was not uncommon to have major tax changes voted on separately and denied that making the tax changes a standalone vote was meant to wedge the Conservatives — although she did encourage Canadians to “pay attention” to any MPs voting against her motion and to “consider their motivation.”

The Conservatives had in the past criticized the tax hike, but as of Monday afternoon had not indicated how they would vote.

Currently, capital gains are taxed at 50 per cent of the profit after selling an asset. The Liberals’ changes would increase that to 66 per cent for all business capital gains and on annual capital gains over $250,000 for individuals.

The Liberals have estimated the tax will raise roughly $20 billion over the next five years. They have said it will impact only 0.13 per cent of tax filers, who earn on average $1.4 million a year.

Poilievre disputed that estimate, as have some economists. The Conservative leader said billionaires who have been given two months warning this change is coming will find ways to avoid the tax, but average Canadians will pay it because they have no other option.

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“So, who will pay for this tax? Firstly, people who have one-time sales or disposal of long-term assets like a grandmother trying to give some of her farmland to her children for homes. Secondly, 300,000 businesses, and indirectly, their workers will pay this tax hike, based on the government’s own numbers,” he said in a statement Tuesday.

The Canadian Medical Association has argued that by hurting doctors, who incorporate their practices and thus pay capital gains, the tax will damage health care in Canada. Several business groups have also spoken out against the tax change.

“This policy will disincentivize risk-taking and tax Canadian ambition at a time when we need more entrepreneurs, not fewer. The OECD predicts Canada will be the worst-performing advanced economy for per-person GDP growth until 2060. Killing our tax competitiveness is not the way to fix this,” Shopify president Harley Finkelstein said on the social media site X. “We need to change course, and fast.”

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The Conservative leader also promised a tax-reform task force if he become prime minister, with farmers, inventors, entrepreneurs and workers recommending changes to the tax code. He said the goal will be to bring home more production, reduce the share of taxes paid by the poor and middle class, and reduce paperwork.

Poilievre defended his opposition to the tax in question period, arguing Liberal policies had only made Canadians poorer over their nine years in power. Prime Minister Justin Trudeau accused Poilievre of defending the interests of wealthy Canadians over people who need the help the most.

“If it didn’t have real world impacts on Canadians, it would always be amusing to watch the Conservative leader tie himself in knots to try and justify voting in favor of advantages for the wealthy Canadians,” Trudeau said. “The reality is they have an opportunity to vote with middle class Canadians and they’re choosing to vote against them.”

Poilievre said this tax change would hurt middle-class Canadians.

“The vast majority of Canadians and 100 per cent of middle class are paying a higher carbon tax and his last round of small business tax hikes hit plumbers and electricians not the rich. Why is it that every time he mentions the middle class, they get poor?” Poilievre said in the House of Commons.

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Before Poilievre’s announcement, Freeland said the tax changes would pay for her government’s spending program, including plans to ramp up housing construction, fund its nascent pharmacare program and expand daycare funding.

“Truly what we are doing now in terms of getting more homes built faster, is a historic plan for Canada and it costs money,” she said.

Freeland said the government wanted to pay for these new programs with new tax revenue, not with new debt.

“We knew as a government that we had to make that investment in a fiscally responsible way, for a number of reasons, partly because we didn’t want to pass on a bigger, ballooning debt to younger generations.”

She argued the plan was paying off, because the government not taking on as much new debt this year was part of the reason why the Bank of Canada was able to lower interest rates.

The federal debt has more than doubled from $619.3 billion in 2015-16, when the Liberals were first elected, to $1.3 trillion last year.

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