Prime Minister Justin Trudeau’s capital gains tax will have far-reaching effects, including for the agriculture industry.
The Liberals’ upcoming capital gains tax hike will increase taxes by 30% on family farms, according to the Grain Growers of Canada.
The 2024 budget tabled by the Liberals raises the inclusion rate for capital gains tax from 50% to 66% for Canadians on amounts exceeding $250,000, coming into effect on June 25.
Finance Minister Chrystia Freeland claimed the capital gains tax increase is a “fair” way to fund Liberal spending that would minimize harm to low and middle-income Canadians.
The Grain Growers of Canada’s research says otherwise. The group found that the average grain farm in Canada is family-owned and operated. However, family-owned farms have already been decreasing, falling 2% between 2016 and 2021 and the capital gains tax increase could make it worse.
“The hike targets farmers’ retirement plans, complicates intergenerational transfers, and threatens the long-term viability of family farms across the country,” said Kyle Larkin, Executive Director of Grain Growers of Canada.
The national voice for Canada’s grain farmers partnered with farm tax accountants to highlight case studies from several provinces; however, they emphasized that there was no “average” farm.
Farmers who bought their land in 1996 and decided to sell in 2023 would face increased capital gains taxes of 31% in Alberta, Saskatchewan, Manitoba, Ontario, and 30% in Quebec.
The average capital gains tax paid by farms in the five provinces would be $4,621,903, an increase of $1,089,993 thanks to the Liberals’ change.
There will be a lifetime capital gains exemption for those who sell their small businesses or farms by up to $1.25 million.
“These farm profiles assume that the seller has their full lifetime capital gains exemption available for use. For many farmers, they may have already used up a portion of it in previous tax years,” reads the research.
Andre Harpe, the chair of the Grain Growers of Canada and an Albertan grain farmer, said that despite the Liberals labelling their 2024 budget as “Fairness for Every Generation,” the change would actually burden the next generation of farmers.
“With over 40% of farmers nearing retirement over the next decade, this tax increase introduces substantial uncertainty into their retirement planning,” said Harpe.
Grain Growers of Canada noted that farmers are often touted as “cash poor, asset rich.”
“Farmers regularly invest in their operations by expanding their acreage, upgrading grain bins, and purchasing the newest and most innovative equipment, such as tractors or combines,” said the Grain Growers of Canada.
Larkin said that the tax increase would also increase the cost of farms dramatically, pricing out many.
“This puts the family farm at risk, as the only ones that will be able to afford to pay millions of extra dollars will either be corporate farms or development companies,” said Larkin.
The number of farmers in Canada has already been decreasing drastically over the past few decades as they become older and fewer in number, according to research done by RBC.
In 2001, 346,000 Canadians, with an average age of 50, farmed 166 million acres. This number has decreased every five years, reaching its lowest point in 2021 of 262,000 farmers with an average age of 56 that farmed 153 million acres.
Furthermore, the research predicts that by 2033, 40% of Canadian farm operators will retire. All of these farmers’ retirements will be around 30% less valuable, thanks to the capital gains tax increase.
Leaders in the tech and healthcare industries have called on the Liberals to cancel their increase, warning that tech and healthcare professionals alike will flee the country. Alberta joined the chorus, warning that the policy would risk “weakening our standing in the world and the standard of living of our people,” according to Alberta’s Finance Minister Nate Horner.
Many Canadians added their voice to the growing opposition, fearful that the tax increase would affect their already poor access to healthcare.
Larkin requested that the Liberals exempt intergenerational transfers from the capital gains tax inclusion rate, allowing them to be taxed at the original rate.
“This will ensure that farmers’ retirement plans remain secure, and that the next generation can afford to take over, enabling family farms to continue being the backbone of Canada’s agricultural sector,” he said.
Canadians from coast to coast and various industries are calling on the Liberals to cancel their capital gains tax hike.
The Liberals don’t seem interested in answering the call.