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Ottawa’s capital gains tax hike—final nail in ‘business investment’ coffin

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4 minute read

From the Fraser Institute

By Tegan Hill and Jake Fuss

From 2014 to 2022, inflation-adjusted total business investment (in plants, machinery, equipment and new technologies but excluding residential construction) in Canada declined by C$34 billion. During the same period, after adjusting for inflation, business investment declined by a total of $3,748 per worker

According to the recent federal budget, the Trudeau government plans to increase the inclusion rate from 50 per cent to 66.7 per cent on capital gains over $250,000 for individuals and on all capital gains realized by corporations and trusts. Unfortunately, this tax hike will be the final nail in the coffin for business investment in Canada, which likely means even harder economic times ahead.

Canada already faces a business investment crisis. From 2014 to 2022, inflation-adjusted total business investment (in plants, machinery, equipment and new technologies but excluding residential construction) in Canada declined by C$34 billion. During the same period, after adjusting for inflation, business investment declined by a total of $3,748 per worker—from $20,264 per worker in 2014 to $16,515 per worker in 2022.

While business investment has declined in Canada since 2014, in other countries, including the United States, it’s continued to grow. This isn’t a post-COVID problem—this is a Canada problem.

And Canadians should be worried. Businesses investment is key for strong economic growth and higher living standards because when businesses invest in physical and intellectual capital they equip workers with the tools and technology (e.g. machinery, computer programs, artificial intelligence) to produce more and provide higher quality goods and services, which fuels innovation and higher productivity. And as firms become more efficient and increase profits, they’re able to pay higher wages, which is why business investment remains a key factor for higher incomes and living standards.

The Trudeau government’s policies—increased regulation, particularly in the energy and mining sectors (which makes Canada a relatively unattractive place to do business), higher and uncompetitive taxes, and massive federal deficits (which imply future tax increases)—have damaged business investment.

Unsurprisingly, weak business investment has correlated with a weak economy. In the fourth quarter of 2023, real economic growth per person ($58,111) officially fell below 2014 levels ($58,162). In other words, Canadian living standards have completely stagnated. In fact, over the last decade economic growth per person has been the weakest on record since the 1930s.

Instead of helping fix the problem, the Trudeau government’s capital gains tax hike will further damage Canada’s economy by reducing the return on investment and encouraging an exodus of capital from the country. Indeed, capital gains taxes are among the most economically-damaging forms of taxation because they reduce the incentive to invest.

Once again, the Trudeau government has enacted a policy that will deter business investment, which Canada desperately needs for strong economic growth. The key takeaway for Canadians? Barring a change in policy, you can expect harder times ahead.

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Business

WEF-linked Linda Yaccarino to step down as CEO of X

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From LifeSiteNews

By Doug Mainwaring

Yaccarino had raised concerns among conservatives and free speech advocates for previously serving as chairwoman of a World Economic Forum taskforce and promoting DEI and the COVID shots.

X CEO, Linda Yaccarino, announced today that she is departing from her position at the social media giant.

“After two incredible years, I’ve decided to step down as CEO of 𝕏,” wrote Yaccarino on X. 

“When Elon Musk and I first spoke of his vision for X, I knew it would be the opportunity of a lifetime to carry out the extraordinary mission of this company,” she continued. “I’m immensely grateful to him for entrusting me with the responsibility of protecting free speech, turning the company around, and transforming X into the Everything App.”

“I’m incredibly proud of the X team – the historic business turn around we have accomplished together has been nothing short of remarkable,” she said.

Musk hired Yaccarino in May 2023, seven months after his $44 billion purchase of the tech company, then known as “Twitter.”

At the time, Musk’s choice to take the helm at his newly acquired company raised eyebrows among conservative observers who had earlier rejoiced at the tech mogul’s intent to rescue free speech on the internet but now were troubled about the credentials of the digital platform’s new head.

Their concerns were not without good reason.

Yaccarino had previously served as chairwoman of the World Economic Forum’s “future of work” taskforce and sat on the globalist group’s “steering committee” for “media, entertainment, and culture industry.”

She had also boasted about her role as an early cheerleader for the untested COVID-19 jab.

While at NBCUniversal, she also pushed discriminatory, equity-based hiring practices, based on “diversity” characteristics such as gender and race.

“At NBCU, she uses the power of media to advance equity and helps to launch DEI [Diversity, Equity, Inclusion]-focused initiatives,” recounted her online biography.

For the most part, over the last two years, Yaccarino’s performance at X allayed suspicions free speech activists at first harbored.

“Honestly, I was worried when she was hired but she didn’t burn down the house,” quipped popular conservative X account, @amuse.

Mike Benz, who serves as executive director of the Foundation For Freedom Online, a free speech watchdog organization dedicated to restoring the promise of a free and open internet, was far more effusive in his praise of Yaccarino.

“Linda stood up and fought for free speech during arguably its most acute crisis moment in world history when we were almost on the brink of losing it,” said Benz in an X post. “She stepped up for all of us in the face of what seemed like insurmountable pressure from governments, advertisers, boycotters, banking institutions, and astroturfed lynch mobs.”

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Automotive

Federal government should swiftly axe foolish EV mandate

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From the Fraser Institute

By Kenneth P. Green

Two recent events exemplify the fundamental irrationality that is Canada’s electric vehicle (EV) policy.

First, the Carney government re-committed to Justin Trudeau’s EV transition mandate that by 2035 all (that’s 100 per cent) of new car sales in Canada consist of “zero emission vehicles” including battery EVs, plug-in hybrid EVs and fuel-cell powered vehicles (which are virtually non-existent in today’s market). This policy has been a foolish idea since inception. The mass of car-buyers in Canada showed little desire to buy them in 2022, when the government announced the plan, and they still don’t want them.

Second, President Trump’s “Big Beautiful” budget bill has slashed taxpayer subsidies for buying new and used EVs, ended federal support for EV charging stations, and limited the ability of states to use fuel standards to force EVs onto the sales lot. Of course, Canada should not craft policy to simply match U.S. policy, but in light of policy changes south of the border Canadian policymakers would be wise to give their own EV policies a rethink.

And in this case, a rethink—that is, scrapping Ottawa’s mandate—would only benefit most Canadians. Indeed, most Canadians disapprove of the mandate; most do not want to buy EVs; most can’t afford to buy EVs (which are more expensive than traditional internal combustion vehicles and more expensive to insure and repair); and if they do manage to swing the cost of an EV, most will likely find it difficult to find public charging stations.

Also, consider this. Globally, the mining sector likely lacks the ability to keep up with the supply of metals needed to produce EVs and satisfy government mandates like we have in Canada, potentially further driving up production costs and ultimately sticker prices.

Finally, if you’re worried about losing the climate and environmental benefits of an EV transition, you should, well, not worry that much. The benefits of vehicle electrification for climate/environmental risk reduction have been oversold. In some circumstances EVs can help reduce GHG emissions—in others, they can make them worse. It depends on the fuel used to generate electricity used to charge them. And EVs have environmental negatives of their own—their fancy tires cause a lot of fine particulate pollution, one of the more harmful types of air pollution that can affect our health. And when they burst into flames (which they do with disturbing regularity) they spew toxic metals and plastics into the air with abandon.

So, to sum up in point form. Prime Minister Carney’s government has re-upped its commitment to the Trudeau-era 2035 EV mandate even while Canadians have shown for years that most don’t want to buy them. EVs don’t provide meaningful environmental benefits. They represent the worst of public policy (picking winning or losing technologies in mass markets). They are unjust (tax-robbing people who can’t afford them to subsidize those who can). And taxpayer-funded “investments” in EVs and EV-battery technology will likely be wasted in light of the diminishing U.S. market for Canadian EV tech.

If ever there was a policy so justifiably axed on its failed merits, it’s Ottawa’s EV mandate. Hopefully, the pragmatists we’ve heard much about since Carney’s election victory will acknowledge EV reality.

Kenneth P. Green

Senior Fellow, Fraser Institute
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