Days after Justin Trudeau promoted an interview of himself with finance YouTuber “The Plain Bagel,” the host felt compelled to correct the Prime Minister’s explainer video of his capital gains tax hike.
Trudeau said Monday in a video posted to X that his tax increase would only affect the wealthiest in Canadian society.
“The very richest people are going to profit a little less off their assets,” Trudeau said. “Only 0.13% of Canadians, to be exact. These are people who have an average income of $1.4 million a year, and they’re mostly in their 60s or older.”
Instead of taxing people who make $250,000 or more in capital gains for half of their income, he will make them “pay their fair share” by taking two-thirds.
However, Richard Coffin, a self-proclaimed “finance nerd” who runs The Plain Bagel, pointed out a discrepancy in Trudeau’s explanation. The YouTuber noted that even the Liberals’ budget states the tax will not solely target the top 0.13% of Canadian earners.
“Yes, this does primarily target wealthier individuals with the $250,000 threshold, but there are cracks where the middle class can fall through,” Coffin said. “For one, the 0.13% (according to the budget) is how many people are affected per year, not how many people will ever see an impact. Estate transfers are one area someone outside the 1% could see an impact.”
Coffin also pointed out that Trudeau’s figure doesn’t include beneficiaries of trusts and corporations who are also captured by the tax increase without the $250,000 threshold.
“Self-employed individuals who have used corporations for retirement savings will likewise be impacted. That includes doctors, but also electricians, plumbers, and other individuals who may need to incorporate to do their job,” he said.
According to the 2024 federal budget, 307,000 corporations – 12.6% of all corporations in Canada – would be taxed 66.7% on their capital gains.
“That’s going to impact the people who own those corporations in addition to that 0.13%, and that amount is only who’s impacted in any given year. Not who will see an impact at some point over their lifetime, which would obviously be much higher,” Coffin said in a video explaining the capital gains tax.
He raised concerns over the inclusion of trusts in the tax hike.
“This really seems to punish using the trust structure, and there are going to be unintended consequences of that, such as with qualified disability trusts,” he said. “They’re naturally intended for beneficiaries with a disability, so if there’s no carve out or change for these special types of trusts. These people who aren’t inherently high-income earners could see a negative impact from this higher tax inclusion rate.”
Trudeau appears shocked in his video at all the press attention his tax has attracted.
“The conversation always seems to be dominated by the richest people in society. This is a tax policy change that impacts less than 1% of people. But look at how much attention it’s getting,” Trudeau said, with a backdrop of media headlines highlighting the flaws in the tax.
Franco Terrazzano, the federal director of the Canadian Taxpayers Federation, told True North in an email that the tax will impact more than those it directly takes from.
“The capital gains tax hike will encourage businesses to leave Canada and take jobs and tax revenues with them. It will make it harder for Canada to retain talent. It could also make homes more expensive by making people decide not to sell their properties and making developers decide not to invest their capital in Canada,” Terrazzano said.
He warned that with $535 billion of spending in the federal budget, the federal government will “blow through the extra cash in less than a week.”
“Trudeau’s tax hike won’t make life better for Canadians, it won’t make life more affordable, and it won’t fix the government’s finances,” he said. “The additional tax revenue will encourage Trudeau to blow more taxpayer cash. The government doesn’t need more money from Canadians. It needs to stop wasting so much and cut taxes.”
The capital gains tax hike will take effect June 25.