Prime Minister Justin Trudeau released a video to X on Monday, explaining and defending the increase in capital gains, claiming that the policy change affects a minimal number of Canadians.
Aaron Wudrick, director of the Macdonald-Laurier Institute’s domestic policy program, isn’t convinced. He highlighted the flaws with the policy change in an interview with True North.
“We all know that old saying about if you’re explaining, you’re losing,” said Wudrick.
He said that Trudeau had to release a three-and-a-half-minute video explaining the increase because it’s not obvious to Canadians how taxing residents who pay the most taxes, take the most risks, and contribute the most to the economy will build more houses or pay for programs.
Finance Minister Chrystia Freeland announced plans alongside the 2024 federal budget to tax Canadian companies and individuals on two-thirds of their capital gains, an increase from 50%.
Trudeau claimed that this tax change would only affect 0.13% of Canadians.
“At a time when the richest are only getting richer, I think it’s fair to ask those people to pay a little more,” said Trudeau.
He said the tax increase would generate $20 billion in new revenue, which would pay for building housing, a national school food program, prescription contraception and insulin, and a national dental care program.
Wudrick said the richest Canadians already pay a “massively disproportionate share of income taxes in this country… And his changes are going to cause some of those people to divest or not invest further or leave Canada… You can’t build a tax system around the ultra-wealthy and then not care if they leave, so I find it a little bit contradictory.”
Trudeau did differentiate between taxation on income and assets, said Wudrick. But, he should want people to invest in assets and not make it harder for them to do so.
“He’s trying to make assets less attractive. This is completely contradictory for a government that says it wants to encourage risk-taking, entrepreneurship, and economic growth; taxing wealth is a way to discourage that,” said Wudrick.
The lawyer and director at the Macdonald-Laurier Institute said he believes this is not so much a policy as a campaign wedge.
“He wants to be seen as soaking the rich. In so doing, he’s actually sending a very dangerous message to a lot of entrepreneurs and business types that he’s saying, I’ll throw you under the bus if I need to scoop a few votes,” said Wudrick.
“This is not a serious policy. This is just a campaign tactic. If there’s any good news, it doesn’t appear that most Canadians are even listening to it anymore,” he said.
Healthcare leaders, tech entrepreneurs and CEOs, and Canada’s largest business groups have pleaded for the Liberals to reverse their capital gains policy, warning that it will force entrepreneurship out of the country and cause “irreparable harm.”
While Trudeau claimed this would only affect 0.13% of Canadians, Wudrick warned that it’s not the 0.13% complaining about the change.
He said that if 0.13% of these Canadians decide to leave Canada, then regular Canadians will have to shoulder the added burden.
The capital gains tax change was not included in the 2024 federal budget; it will be presented as a separate bill.
“Part of the reason they separated these measures from the main budget bill is they know they have to tweak it. It’s going to hit groups that they never thought of, and that’s going to be very damaging to them. I think they came up with this on the back of a napkin,” said Wudrick.
“If you have apple seeds, the government is entitled to tax you on your seeds. They can take their share of the seeds, but when you plant the seeds, and they grow into other things, they’re coming back for more. They’re coming back for another round of tax based on the same assets that you built up,” said Wudrick.
He added that the Liberals have it backwards with their housing model, thinking they need public money for housing.
“They don’t. They just need to allow and encourage. Lots of people are willing to invest their own money in housing, but the government’s getting in the way of that.”
Wudrick explained that many Canadians will be surprised they fall into the “0.13%.” For example, this capital gains tax will affect a person whose entire life savings is in a family cottage.
“These are not people flying around on private jets. These are people who spent decades investing in a single property but are now going to get hammered by this,” said Wudrick.
The lawyer said he doesn’t expect the Liberals to back off now. He said he expects some adjustments, at which point Trudeau will reveal who he thinks the real villains are.
“Unfortunately, it’s a cheap political gambit that isn’t even going to pay off political dividends and will do a lot of economic damage in the process. So, basically a zero out of ten, pretty bad policy,” concluded Wudrick.
