Prime minister’s misleading capital gains video misses the point

According to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians”

This week, Prime Minister Trudeau released a video about his government’s decision to increase capital gains taxes. Unfortunately, he made several misleading claims while failing to acknowledge the harmful effects this tax increase will have on a broad swath of Canadians.

Right now, individuals and businesses who sell capital assets pay taxes on 50 per cent of the gain (based on their full marginal rate). Beginning on June 25, however, the Trudeau government will increase that share to 66.7 per cent for capital gains above $250,000. People with gains above that amount will again pay their full marginal rate, but now on two-thirds of the gain.

In the video, which you can view online, the prime minister claims that this tax increase will affect only the “very richest” people in Canada and will generate significant new revenue—$20 billion, according to him—to pay for social programs. But economic research and data on capital gains taxes reveal a different picture.

For starters, it simply isn’t true that capital gains taxes only affect the wealthy. Many Canadians who incur capital gains taxes, such as small business owners, may only do so once in their lifetimes.

For example, a plumber who makes $90,000 annually may choose to sell his business for $500,000 at retirement. In that year, the plumber’s income is exaggerated because it includes the capital gain rather than only his normal income. In fact, according to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians” with an “average income of $1.4 million a year.”

But this is a misleading statement. Why? Because it creates a distorted view of who will pay these capital gains taxes. Many Canadians with modest annual incomes own businesses, second homes or stocks and could end up paying these higher taxes following a onetime sale where the appreciation of their asset equals at least $250,000.

Moreover, economic research finds that capital taxes remain among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. By increasing them the government will deter investment in Canada and chase away capital at a time when we badly need it. Business investment, which is crucial to boost living standards and incomes for Canadians, is collapsing in Canada. This tax hike will make a bad economic situation worse.

Finally, as noted, in the video the prime minister claims that this tax increase will generate “almost $20 billion in new revenue.” But investors do not incur capital gains taxes until they sell an asset and realize a gain. A higher capital gains tax rate gives them an incentive to hold onto their investments, perhaps until the rate is reduced after a change in government. According to economists, this “lock-in” effect can stifle economic activity. The Trudeau government likely bases its “$20 billion” number on an assumption that investors will sell their assets sooner rather than later—perhaps before June 25, to take advantage of the old inclusion rate before it disappears (although because the government has not revealed exactly how the new rate will apply that seems less likely). Of course, if revenue from the tax hike does turn out to be less than anticipated, the government will incur larger budget deficits than planned and plunge us further into debt.

Contrary to Prime Minister Trudeau’s claims, raising capital gains taxes will not improve fairness. It’s bad for investment, the economy and the living standards of Canadians.

Authors:

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Alex Whalen

Associate Director, Atlantic Canada Prosperity, Fraser Institute

Related Topics:#AlexWhalen #CapitalGainsTax #FraserInstitute #JakeFuss #JustinTrudeau

Up Next

Enough With These Dangerous Calculations

Don't Miss

Tucker Carlson and NFL star Aaron Rodgers discuss Bill Gates, COVID-19, US Deep State

Todayville

Todayville is a digital media and technology company. We profile unique stories and events in our community. Register and promote your community event for free.

Follow Author

Andrew Scheer exposes the Mark Carney Canadians should know

Daily Caller / 3 hours ago

NEWT GINGRICH: Europe’s Elites Were Finally Told To Take A Look In The Mirror

armed forces / 3 hours ago

Trump fires chairman of Joint Chiefs of Staff, appoints new military leader

Business

Worst kept secret—red tape strangling Canada’s economy

Published on February 22, 2025

Todayville

From the Fraser Institute

By Matthew Lau

In the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S.

According to a new Statistics Canada report, government regulation has grown over the years and it’s hurting Canada’s economy. The report, which uses a regulatory burden measure devised by KPMG and Transport Canada, shows government regulatory requirements increased 2.1 per cent annually from 2006 to 2021, with the effect of reducing the business sector’s GDP, employment, labour productivity and investment.

Specifically, the growth in regulation over these years cut business-sector investment by an estimated nine per cent and “reduced business start-ups and business dynamism,” cut GDP in the business sector by 1.7 percentage points, cut employment growth by 1.3 percentage points, and labour productivity by 0.4 percentage points.

While the report only covered regulatory growth through 2021, in the past four years an avalanche of new regulations has made the already existing problem of overregulation worse.

The Trudeau government in particular has intensified its regulatory assault on the extraction sector with a greenhouse gas emissions cap, new fuel regulations and new methane emissions regulations. In the last few years, federal diktats and expansions of bureaucratic control have swept the auto industry, child care, supermarkets and many other sectors.

Again, the negative results are evident. Over the past nine years, Canada’s cumulative real growth in per-person GDP (an indicator of incomes and living standards) has been a paltry 1.7 per cent and trending downward, compared to 18.6 per cent and trending upward in the United States. Put differently, if the Canadian economy had tracked with the U.S. economy over the past nine years, average incomes in Canada would be much higher today.

Also in the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S., and only about two-thirds as much new capital (on average) as workers in other developed countries.

Consequently, Canada is mired in an economic growth crisis—a fact that even the Trudeau government does not deny. “We have more work to do,” said Anita Anand, then-president of the Treasury Board, last August, “to examine the causes of low productivity levels.” The Statistics Canada report, if nothing else, confirms what economists and the business community already knew—the regulatory burden is much of the problem.

Of course, regulation is not the only factor hurting Canada’s economy. Higher federal carbon taxes, higher payroll taxes and higher top marginal income tax rates are also weakening Canada’s productivity, GDP, business investment and entrepreneurship.

Finally, while the Statistics Canada report shows significant economic costs of regulation, the authors note that their estimate of the effect of regulatory accumulation on GDP is “much smaller” than the effect estimated in an American study published several years ago in the Review of Economic Dynamics. In other words, the negative effects of regulation in Canada may be even higher than StatsCan suggests.

Whether Statistics Canada has underestimated the economic costs of regulation or not, one thing is clear: reducing regulation and reversing the policy course of recent years would help get Canada out of its current economic rut. The country is effectively in a recession even if, as a result of rapid population growth fuelled by record levels of immigration, the GDP statistics do not meet the technical definition of a recession.

With dismal GDP and business investment numbers, a turnaround—both in policy and outcomes—can’t come quickly enough for Canadians.

Matthew Lau

Adjunct Scholar, Fraser Institute

Business

‘Out and out fraud’: DOGE questions $2 billion Biden grant to left-wing ‘green energy’ nonprofit`

Published on February 22, 2025

Todayville

From LifeSiteNews

By Calvin Freiburger

The EPA under the Biden administration awarded $2 billion to a ‘green energy’ group that appears to have been little more than a means to enrich left-wing activists.

The U.S. Environmental Protection Agency (EPA) under the Biden administration awarded $2 billion to a “green energy” nonprofit that appears to have been little more than a means to enrich left-wing activists such as former Democratic candidate Stacey Abrams.

Founded in 2023 as a coalition of nonprofits, corporations, unions, municipalities, and other groups, Power Forward Communities (PFC) bills itself as “the first national program to finance home energy efficiency upgrades at scale, saving Americans thousands of dollars on their utility bills every year.” It says it “will help homeowners, developers, and renters swap outdated, inefficient appliances with more efficient and modernized options, saving money for years ahead and ensuring our kids can grow up with cleaner, pollutant-free air.”

The organization’s website boasts more than 300 member organizations across 46 states but does not detail actual activities. It does have job postings for three open positions and a form for people to sign up for more information.

The Washington Free Beacon reported that the Trump administration’s Department of Government Efficiency (DOGE) project, along with new EPA administrator Lee Zeldin, are raising questions about the $2 billion grant PFC received from the Biden EPA’s National Clean Investment Fund (NCIF), ostensibly for the “affordable decarbonization of homes and apartments throughout the country, with a particular focus on low-income and disadvantaged communities.”

PFC’s announcement of the grant is the organization’s only press release to date and is alarming given that the organization had somehow reported only $100 in revenue at the end of 2023.

“I made a commitment to members of Congress and to the American people to be a good steward of tax dollars and I’ve wasted no time in keeping my word,” Zeldin said. “When we learned about the Biden administration’s scheme to quickly park $20 billion outside the agency, we suspected that some organizations were created out of thin air just to take advantage of this.” Zeldin previously announced the Biden EPA had deposited the $20 billion in a Citibank account, apparently to make it harder for the next administration to retrieve and review it.

“As we continue to learn more about where some of this money went, it is even more apparent how far-reaching and widely accepted this waste and abuse has been,” he added. “It’s extremely concerning that an organization that reported just $100 in revenue in 2023 was chosen to receive $2 billion. That’s 20 million times the organization’s reported revenue.”

Daniel Turner, executive director of energy advocacy group Power the Future, told the Beacon that in his opinion “for an organization that has no experience in this, that was literally just established, and had $100 in the bank to receive a $2 billion grant — it doesn’t just fly in the face of common sense, it’s out and out fraud.”

Prominent among PFC’s insiders is Abrams, the former Georgia House minority leader best known for persistent false claims about having the state’s gubernatorial election stolen from her in 2018. Abrams founded two of PFC’s partner organizations (Southern Economic Advancement Project and Fair Count) and serves as lead counsel for a third group (Rewiring America) in the coalition. A longtime advocate of left-wing environmental policies, Abrams is also a member of the national advisory board for advocacy group Climate Power.