Freeland says capital gains tax is “fair” way to fund Liberal spending

By Clayton DeMaine

Deputy Prime Minister and Finance Minister Chrystia Freeland wants Canadians to be grateful for the capital gains tax which she says will help the federal government pay for its extra spending in the latest budget. Freeland pointed out that the alternative to a tax hike was the government going further into debt.

Freeland introduced her plan to increase Canada’s capital gains inclusion rate on Monday.
She submitted her “Notice of Ways and Means Motion” outlining the details of the tax hike. MPs are expected to vote on the motion this week.

The capital gains tax hike will take effect on June 25 and will force Canadians who make more than $250,000 in capital gains in a year to pay two-thirds of that profit to the state instead of half.

Canadians who are selling their primary residence won’t be affected by the capital gains tax hike, however.

“We know now is the time to invest in Canada and in Canadians, and we know that the fair way, the responsible way, to pay for those investments is to ask those at the top to contribute a little bit more,” Freeland said to reporters. “Canada could finance these critical investments by taking on more debt. But that would place an unfair burden on younger generations. Fiscal Responsibility matters.”

She said there will be a lifetime capital gains exemption for people who sell their small business or farm by up to $1.25 million and the government is introducing similar “incentives” for entrepreneurs. 

According to Freeland, the capital gains tax hikes will only affect 0.13% of Canadians, but critics have warned that tax hikes that punish the excessively productive and shrewd investors might cause them to divest from and leave Canada altogether, which would hurt the economy.

Another critic warned that the claim that only 0.13% of Canadians would be affected by the tax hike is inaccurate as it doesn’t include beneficiaries of trusts and corporations.

Freeland said all of the spending in their budget was “important” so it’s only fair to “ask” the highest earners in Canada to pay up.

“We believe in fairness for every generation. And that means we recognize we need to make some really important investments right now in Canada,” she said.

Freeland said the money is required to pay for the Liberal’s commitments to build four million homes, fund dental care, the National School Food Program, early learning and childcare, $5 billion dollars to research investments into universities, and handouts for the AI industry, $200 billion into healthcare and more.

The federal government also needs tax revenue to invest in humanitarian aid for other countries, foreign wars, corporate welfare, and the nation’s ever-growing bureaucracy.  

“We know we need to make these investments in a fiscally responsible way based on fiscally responsible foundation. And so the fair way to finance them is with tax fairness,” Freeland said.

On top of not affecting most Canadians, she said the tax hike would not affect Canada’s tax competitiveness in the global market.

“Even after this change in the capital gains inclusion rate, capital gains remain taxed in Canada at a lower level than in jurisdictions like California, or New York City, and the rate remains lower than it was throughout the 1990s a period I might add of strong economic growth in Canada,” she said.

Telling Canadians that the economy is in good hands, Freeland lauded the Bank of Canada’s decision to cut interest rates for the first time since 2020, making Canada the first G7 country to do so.

“Interest rates are coming down because inflation is falling. Inflation fell to 2.7% in April, down from 2.9% in March,” she said.

The rate at which the Canadian dollar is being devalued has been reduced, yet it’s still inflating. 

“That’s four months in a row that inflation has been within the Bank of Canada’s target range. That is good news. In fact, inflation has fallen to its lowest level in three years,” Freeland said.

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