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Business

Federal government’s capital gains tax hike is worse than you think

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From the Fraser Institute

By Jake Fuss and Grady Munro

Following the recent plunge in Canadian and U.S. stock markets, many Canadians likely saw a sharp decline in the value of their investments. Yet as Canadians reckon with this sudden change, other factors help reduce the return on their investments—namely, higher capital gains taxes.

When an investor sells a capital asset (i.e. stocks) for a higher price than they originally bought it, they realize a capital gain. Prior to this year, investors would pay tax on 50 per cent of any gain (based on their highest marginal personal income tax rate), but the Trudeau government recently increased that inclusion rate to 66.7 per cent for capital gains above $250,000.

This increase will cause economic damage and increase taxes for many middle-class Canadians—despite being framed by the government as a tax increase on the wealthy. And the effect is even more harmful than it first appears because capital gains taxes don’t adjust for inflation.

Inflation, the general rise in the prices of goods and services in the economy, erodes the purchasing power of money. For example, if a basket of goods costs $100 in Year 1, and annual inflation is 4 per cent, that exact same basket would cost $104 in Year 2. The Bank of Canada maintains a target inflation rate of 2 per cent per year, but in recent years the rate has well-exceeded that target.

From 2021 to 2023, Canada experienced an average annual inflation rate of 4.7 per cent. And though inflation is easing and fell to 2.5 per cent last month, by the end of this year prices are still expected to be 17.5 per cent higher than they were in 2020. For comparison, prices increased 6.7 per cent from 2016 to 2020.

While inflation erodes the purchasing power of one dollar, it also erodes the returns people receive from their investments. If an asset increases in value by 5 per cent over one year, but inflation is 4 per cent, the asset’s real value has increased by just 1 percentage point. In other words, of the total 5 per cent gain, 4 percentage points are the “inflationary” gain while 1 percentage point is the “real” gain.

Which takes us back to the Trudeau government’s tax hike on capital gains. Unlike income thresholds for federal personal income taxes, which are adjusted to account for inflation, capital gains taxes don’t distinguish between “inflationary” and “real” gains. Therefore, even if a realized capital gain is solely inflationary—meaning there’s no increase in real wealth—the federal government will still levy the same amount of tax as it would if there was no inflation at all.

This is what’s happening right now. After years of high inflation, inflationary gains represent a significant share of the capital gains Canadians are currently realizing. For example, from the beginning of 2020 to the end of 2023, the S&P/TSX Composite Index (Canada’s benchmark stock market index) increased 22.6 per cent. However, after adjusting for inflation (a cumulative 14.7 per cent), that 22.6 per cent represents a real gain of less than 8.0 per cent. As such, a large portion of revenue the Trudeau government expects to generate from raising capital gains taxes will originate from inflationary gains rather than actual increases in asset values.

As Canadians struggle with a weak economy, the Trudeau government’s recent capital gains tax hike will only add to the problem. But after years of high inflation, the effect is even worse than you might think.

Automotive

Ford Files Patent to Surveil Drivers

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News release from Armstrong Economics

By Martin Armstrong

Governments are pushing the public to switch to smart vehicles to reduce fossil fuel consumption, but there is also a second motive – surveillance.

This September, Ford filed a new patent to eavesdrop on riders. They plan to share this information with third-parties to personalize the advertisements riders hear. Ford will also take the driver’s destination into consideration to determine location-specific advertisements and suggestions. The technology will factor in the weather, traffic, and all external sensors to fine tune when and what to market to passengers.

Advertisements are perhaps the least ominous use of voice data based on the plans that these car manufacturers have. Car insurance rates in the United States spiked 26% in the past year, which is partly due to car manufacturers sharing ride data with insurance companies. Even older cars with basic features like OnStar have tracking devices that report your driving behavior to the manufacturers who share your data with insurance companies and, ultimately, the government. LexisNexis, which tracks drivers’ behaviors and compiles risk profiles, has been sharing individual data with General Motors, who passes that information along to the insurance companies. General Motors.

One driver demanded that LexisNexis send him his personal report, which was a 258-page document containing every trip he or his wife took in his vehicle over a six-month period. LexisNexis said that this data will be used “for insurers to use as one factor of many to create more personalized insurance coverage.” They even reported small issues such as hard breaking and rapid acceleration, according to the report. “I don’t know the definition of hard brake. My passenger’s head isn’t hitting the dash,” an unnamed Cadillac driver enrolled in the OnStar Smart Driver subscription service told reporters.

“Cars have microphones and people have all kinds of sensitive conversations in them. Cars have cameras that face inward and outward,” a researcher with Mozilla Foundation told the Los Angeles Times. In fact, 19 automakers in 2023 admitted that they have the ability to sell your personal data without notice. Law enforcement may subpoena these records as well.

Ford claims that the patent was submitted, but they do not necessarily plan to use the technology. “Submitting patent applications is a normal part of any strong business as the process protects new ideas and helps us build a robust portfolio of intellectual property. The ideas described within a patent application should not be viewed as an indication of our business or product plans. No matter what the patent application outlines, we will always put the customer first in the decision-making behind the development and marketing of new products and services,” Ford said in a statement released to MotorTrend.

Now, the US Department of Transportation is permitted to mandate that certain manufacturers provide them with vehicle data. Sens. Ron Wyden of Oregon and Edward Markey of Massachusetts testified that all vehicles in the United States with a GPS or emergency call system are collecting travel data that car manufacturers have remote access to via the computer chips. The computer chips are compiling data on vehicle speed, movement, travel, and even using exterior sensors and cameras to record the vehicle’s location.

All of this violates the Fourth Amendment which protects against unreasonable searches and seizures without probable cause. These car manufacturers are surpassing what anyone would consider a reasonable expectation of privacy. Governments, third-party advertisement companies, and insurance companies all have warrantless access to personal data, and drivers are largely unaware they are being spied on. Section 702 of the Foreign Intelligence Surveillance Act permits the government to have backdoor access to this data.

The aforementioned senators’ concerns fell on deaf ears at the Federal Trade Commission. The Department of Transportation clearly is not listed within the US Constitution. People are already experiencing stiff consequences from autos sharing data with the sharp uptick in insurance rates.

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Business

Companies Are Getting Back To Business And Backing Away From DEI

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From the Daily Caller News Foundation

By Devon Westhill

 

Classic American companies like John DeereHarley Davidson and Tractor Supply Co. are finally reevaluating Diversity, Equity, and Inclusion (DEI) initiatives. They are realizing that their consumers, many from rural, midwestern and working-class communities, don’t care for the DEI practices of corporate elites. They just want good service, reliable tractors and badass motorcycles.

The about-face is especially timely as the Supreme Court’s 2023 affirmative action decision prohibiting race-based college admissions has increased scrutiny of private sector DEI practices. This new legal climate, combined with the discovery of problematic DEI programs at major American companies, means that corporations are at long last feeling significant pressure to prioritize excellence and efficiency over faddish diversity metrics.

Companies operating in the free market have one purpose: to provide quality goods and services to consumers in order to make a profit. For too long, much of corporate America has focused on virtue signaling to appease the left’s cultural mandates. Now, business incentives are forcing a return to the bottom line.

The change began in June when conservative commentator Robby Starbuck took to social media to expose companies masquerading as all-American brands with traditional values. He first exposed Tractor Supply’s DEI practices and announced that he would be investigating a list of other companies considered exemplars of Americana.

In response, Tractor Supply customers began boycotting the company, resulting in an 8% decrease in its stock price (a $2.8 billion market value loss) over five days. This led Tractor Supply to announce later that month the termination of its DEI programming. The company promised to stop submitting data for the Human Rights Campaign’s Corporate Equality Index and withdrew sponsorship of LGBTQ+ pride events and voting campaigns, calling them “nonbusiness activities.”

Starbuck’s later exposure of John Deere’s DEI policies also caused the company to issue a statement announcing major cutbacks to their DEI programs. Harley DavidsonJack Daniels and Lowe’s followed suit, preemptively terminating their DEI programs and standards.

All of these companies should be commended for abandoning excessive DEI and getting back to business.

Now, instead of requiring costly, time-intensive programs to prove their liberal bona fides, they can focus on delivering results for their customers. Free from worry about optics and bureaucratic compliance, they can hire the most qualified employees and let them rise to the top.

But these decisions are not without their naysayers. DEI proponents have labeled these moves as bullying from far-right extremists and claim that terminating these policies will encourage gender and race discrimination in the workplace.

This hysteria is unwarranted and relies on the absurd claim that without DEI standards, there can be no equality, inclusion or respect in the workplace. Of course, it is crucial that businesses cultivate a culture of respect and dignity. Employees should be educated on their protections and duties regarding civil rights and basic civility in the workplace. All of the companies reversing on DEI have remained committed to fostering respectful, safe cultures for their employees.

In fact, too much corporate DEI can wreak havoc on a company’s morale. In many cases, it can result in scapegoating certain groups of people for grievous wrongs none of them had a hand in committing. It can also lead to damaging intellectual conformity and groupthink. DEI hiring quotas, in particular, can lead to serious legal risk. All of this results in the complete opposite of DEI’s purported goals. Instead, it increases workplace disunity and harms true diversity.

Ultimately, the DEI policies at these classic American companies have proven to only burden corporations, frustrate employees and confuse customers. Companies should prioritize producing better quality products, lowering prices, and offering attractive wages and benefits for all employees, instead of pouring time and money into ineffective policies that do not represent the American values of their customer base. So long, discrimination disguised as diversity.

Devon Westhill is the president and general counsel for the Center for Equal Opportunity.

 

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