Conservative leader Pierre Poilievre might be riding high in the polls and making hay with simplistic promises to “ax the tax” and “get rid of the gatekeepers”, but he is disappointing some who might otherwise favour the Conservatives.
Who are those unhappy folks? They are a big segment of Canada’s business community – and their vocal, mainstream media acolytes.
And why are they unhappy?
Because while Poilievre is fervently against taxes, in principle, and especially the carbon tax, there is one tax hike about which the Conservative leader has maintained a resolutely non-committal position.
That is the increase in the capital gains tax the Liberals included in their most recent budget.
This past April, finance minister Chrystia Freeland announced a tax hike on capital gains over $250,000 for individuals and on all capital gains for corporations. Those increases will take effect on June 24.
Capital gains are profits gained from selling assets. Those can include property (aside from a principal residence, the sale of which is not taxed) and shares in corporations.
As it stands now, Canadian individuals and corporations only pay tax on 50 per cent, half, of such gains.
The new rules mean corporations will pay tax on two-thirds of their capital gains.
Individuals will pay tax on two-thirds of only those capital gains in excess of $250,000. Up to $250,000 the so-called inclusion rate for capital gains, for individuals, will remain 50 per cent.
Many individual Canadians, even of modest means, earn some capital gains in a given year, most often through the sale of assets in their retirement investment portfolios or by the sale of a vacation home or other property.
Only a tiny proportion, however, realize over a quarter million dollars in capital gains in a single year.
The Trudeau government estimates fewer than one per cent of Canadians will be affected by the increase in the inclusion rate. But the revenue benefit for the government will be significant, to the tune of $7 billion.
That’s a fair bit of change. To cite just one example of what $7 billion would mean in terms of government spending: that sum is about five times the annual federal allotment for the CBC.
Major push back from big business
Business groups and other critics of the increase in the capital gains tax challenge the Trudeau government’s numbers.
A high-powered team of six business groups, ranging from the Canadian Chamber of Commerce to the Canadian Canola Growers Association, sent an open letter to the finance minister. They make the claim that one in five Canadians will be “directly impacted” by the new capital gains rules, over the next decade.
The groups don’t say how they came up with that figure, but do mention that the new tax measures “threaten the retirement plans of millions of Canadians who pinned their plans on the proceeds of selling a family cottage or a small business.”
Reading that argument, one might imagine the government was planning to confiscate 100 percent of the earnings from such sales.
The truth is, of course, that after June 24 Canadians who sell their cottages will still pay tax on just half of the first quarter-million they realize in excess of the original purchase price. To repeat – they will have to pay tax on two-thirds of their profits only on the portion exceeding $250,000.
Not such a bad deal.
If you have a cottage for sale, you can still make a healthy profit, a good part of it tax free. By contrast, if you support yourself and your family by working for a living, as opposed to selling assets, you must pay taxes on 100 per cent of your earnings.
The business organizations’ letter to the finance minister seems to significantly exaggerate the financial jeopardy for middle class cottage owners. But that is la bonne guerre.
It is easier to paint a sympathetic figure of ordinary, everyday folks with country homes to sell than of high-rolling members of the investment class, for whom $250,000 in capital gains would be a paltry amount.
The letter writers employ a different argument to convince the government to spare those deep pocket investors.
They say the central issue is not some (very wealthy) people’s profits. What is at stake, they say, is much bigger and more important.
The central issue is – wait for it – the economy.
Canada cannot afford these additional taxes, the business folks write in their letter, because they will make this country “less competitive and less innovative.”
Then the letter goes further and waxes dramatic, indeed melodramatic.
It warns that “at a time when we are already urgently struggling to reignite our nation’s lagging productivity, increasing taxes on productive investments and throttling Canadian potential will have profound, long-lasting and potentially irreversible repercussions.”
Take that you tax-and-spend Liberals and NDPers.
You think you’re introducing a modest tax measure that will tilt the playing field just a tiny bit away from the rich and entitled and toward people who work for a living.
Well, not so fast.
That modest tax increase will cause irreversible and permanent harm to the Canadian economy – or so we business lobbyists say, although we provide neither facts nor figures to back up our claim.
Where’s Pierre?
Some commentators, such as reliably small-c conservative John Ivison of the National Post, have been urging Pierre Poilievre to be true to his anti-tax identity. The Conservative leader should get off the fence and unambiguously slam the capital gains tax increase.
And if, by chance, Poilievre might be concerned the new tax measure aimed at the richest of the rich is popular with most Canadians, Ivison points to some polls that “indicate voters have not been taken in by the government’s ‘fairness’ argument” – an argument Ivison describes as “a blatant cash grab designed to finance runaway spending.”
Poilievre might be seeing other polling data that tell a different story – or he does not want to dilute his carefully crafted populist, I’m-for-the-little-guy image.
Sooner or later, Poilievre will have to show his colours on the capital gains issue. The Liberals cleverly carved that measure out of the 2024 budget. There will be a stand-alone vote on the capital gains tax, possibly before the House rises for the summer.
But even if the Conservatives hold their noses and vote for the tax increase – as they did for the NDP initiative banning scabs in federally-regulated workplaces – many fear what Poilievre’s team will do if they take power after the next election.
Among those are Doug Ford’s Ontario Conservatives.
There are reports premier Ford and his colleagues are seriously considering an early election, which would happen before the federal election, now slated for the fall of 2025. The last Ontario election was in 2022, and the next one is not, officially, scheduled until 2026.
It seems the Ontario Conservatives are tempted to trigger a vote in the coming months because they fear a Poilievre government would initiate deep and unpopular cuts to federal transfers for health, social services, and education.
Ford and his team also worry a federal Conservative government would cancel billions in subsidies both the Ontario and current federal governments have pledged to major green energy projects, such as an electric vehicle battery plant in Windsor.
It seems a good many Canadians – even some who, today, tell pollsters they’ll vote Conservative – share Ford’s apprehensions about Poilvre’s true intentions.
Polling company Abacus shows a big lead in the political horserace for the Poilievre team, but, paradoxically, much concern, even fear, over what the Conservatives might actually do once elected.
Voters, sadly, seem to agree with killing the carbon tax. And they have a vague sense the Conservatives will do something to increase the housing supply. (The Conservatives have yet to say with any precision how they’ll cause more homes to be built.)
But other potential policy initiatives – which might motivate the Conservative base – are not generally popular with Canadians at large.
Those include: cutting the CBC, ending the pharmacare and dental care plans, curtailing the national childcare program, and restricting access to abortion and reproductive health services.
As well, while Canadians might not like the carbon tax, they do tell pollsters they want their governments to take concrete and effective actions to counter climate change. The Conservatives have yet to put forward anything resembling a climate change plan.
Poilievre has gotten away with prattling simplistic slogans and making promises without substance for many months now.
The coming vote on the capital gains tax measure will be one occasion when he cannot rely on rhetoric and will have to say definitively where he stands.
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