Big changes are coming to the way the federal government taxes the profits of the super-rich in Canada. As of June 25, what’s known as the capital gains inclusion rate will increase from 50% to 67% on capital gains realized annually above $250,000 for individuals and all capital gains for corporations.
What exactly does that mean?
In short, it means the amount of profit that already-rich individuals and corporations pay tax on is increasing from half to two-thirds. So, when a landlord sells their rental property at a profit, or when an investor sells stocks at a profit, two-thirds of the profit on those sales is now taxable, instead of 50%.
And no, this doesn’t mean two-thirds of those profits are going to the CRA. It means two-thirds of those profits are taxable; remember, if you’re like most Canadians, then 100% of your income is taxable. This measure just levels the field a bit and puts CEOs and rich investors on a slightly more even plane with everyday people.
This measure will only affect 0.13% of Canadians but it will raise an expected $19.4 billion over the next five years to invest in public services and important social programs like pharmacare and dental care.
CUPE and many progressive economists and labour allies believe the capital gains inclusion rate should be at least 75%, and ideally 100%. After all, bus drivers, long-term care workers, and early childhood educators all pay tax on 100% of their income - why shouldn’t wealthy landlords and rich CEOs?
Ironically, the capital gains inclusion rate used to be 75% under Prime Minister Brian Mulroney, but the Chretien Liberal government reduced it to 50% in the early 2000s. Nevertheless, this week’s policy change by the federal government – thanks in large part to the advocacy of organized labour and our friends in the NDP – is welcome news.