Freeland's Capital Gains Tax Hike Slammed as Desperate Move to Cover Fiscal Failures
Image courtesy x.com/@cafreeland
The House of Commons voted Tuesday to approve the Liberal government's controversial capital gains tax changes despite strong opposition from the Conservative Party.
Prime Minister Justin Trudeau voted in person alongside his government, securing the measure to increase the inclusion rate for taxable capital gains. The new rate is set to take effect on June 25. The NDP, Bloc Québécois, and Greens also supported the measure, aligning with the Liberals to push the motion through.
Finance Minister Chrystia Freeland, visibly pleased after the vote, had introduced the measure as a stand-alone motion on Monday, challenging the Conservatives to vote against “generational fairness.”
“We are stepping up for Canadians, the Conservatives are stepping up for the rich,” Trudeau shouted in question period.
“If it did not have real-world impacts on Canadians, it would almost be amusing to watch the Conservative leader tie himself in knots to try and justify voting in favour of advantages for the wealthy Canadians when they sell really profitable investments.”
Conservative Leader Pierre Poilievre responded, insisting that the wealthy will find ways to move their money out of Canada to avoid paying the tax, which will negatively affect farmers, small businesses, doctors, and home builders.
“Why is it that every time the prime minister mentions the middle class, they get poorer,” Poilievre exclaimed.
The Conservatives, who had not taken a stance on the tax change until Tuesday, released a statement just over an hour before the vote, indicating they would not support it, pointing to its impact on farmers, homebuilders, small business owners, and doctors.
“It is incredible that during a housing shortage, he wants to tax homebuilders,” Poilievre said in the House.
“During a health care shortage, he wants to tax away our doctors. During a food crisis, he wants to tax our farmers. And while our economy is shrinking more than any other economy in the G7, he wants to tax our small business job creators. Is this not the definition of insanity?”
Currently, Canadians pay tax on 50% of their capital gains, or the profits they make on the sale of assets like secondary residences and stock options. The change means corporations will now pay tax on 66% of capital gains. Individuals will pay 66% on any capital gains that exceed $250,000 in a single year. Freeland insists the move is to level the playing field between wealthy Canadians who earn most of their income from the sale of investments and middle and lower-income Canadians who earn most of their income from jobs.
“We are asking them to pay a little more so we can invest more in housing for young people to be able to have the same kinds of opportunities previous generations did,” Trudeau said.
A statement by the International Monetary Fund on Tuesday was positive about the capital gains change.
The preliminary concluding statement said the change “improves the tax system’s neutrality concerning different forms of capital income and is likely to have no significant impact on investment or productivity growth.”
However, critics argue that the changes could have far-reaching negative consequences.
The Canadian Medical Association (CMA) has expressed "deep disappointment," warning that the tax hike will add financial strain on physicians and further destabilize the already struggling healthcare system.
"The reality is that the federal government is putting at risk its own healthcare agenda, which is contingent on broadening access to family medicine, the foundation of our healthcare system," said CMA President Dr. Kathleen Ross.
The Canadian Federation of Independent Business (CFIB) also voiced concerns, noting that more than half of small business owners believe the change will negatively impact the sale of their businesses and investments. Similarly, the Council of Canadian Innovators criticized the move, suggesting it could deter investment in Canadian firms and harm the economy.
Freeland, however, remains firm, asserting that the tax changes are necessary to fund the Liberal government's extensive spending plans, which Freeland says include building four million homes, investing in research, and enhancing healthcare. She emphasized that the alternative — incurring more government debt — would unfairly burden future generations.
Yet, critics argue that this so-called "tax fairness" is a facade to cover up the Liberals' fiscal mismanagement, with many suggesting the move is an attempt to fund extravagant spending while ignoring the underlying issues of government waste and inefficiency.
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Freeland also dismissed concerns about Canada's tax competitiveness, noting that the new capital gains tax rate is still lower than in jurisdictions like California or New York City, and lower than it was throughout the 1990s. She further pointed to recent reductions in inflation and interest rates as indicators of economic stability.
"Canada could finance these critical investments by taking on more debt. But that would place an unfair burden on younger generations. Fiscal responsibility matters," Freeland said.
"We know we need to make these investments in a fiscally responsible way based on a fiscally responsible foundation. And so the fair way to finance them is with tax fairness."
The Grain Growers of Canada say that with more than one-third of farmers likely to retire in the next decade, the capital gains tax increase is extremely harmful.
“This hike targets farmers’ retirement plans, complicates intergenerational transfers, and threatens the long-term viability of family farms across the country,” executive director Kyle Larkin said.
The CFIB wanted the government to put the changes on hold until small businesses could better understand the impact, with more than half of its members fearing the changes would affect them should they choose to sell their business.
Bea Bruske, the president of the Canadian Labour Congress, was critical of Poilievre’s decision to vote against the motion, calling it “fundamentally unfair.”
“With this vote, Mr. Poilievre has shown that he believes that an ordinary worker flipping burgers for a living should be taxed on 100% of their income while his CEO friends making millions of dollars from flipping stocks should be taxed only on half of that income,” she said.
While the government and its supporters call the motion’s passage a step toward fiscal responsibility, critics see it as Liberal overreach that could harm economic growth and hurt ordinary Canadians.
Coastal Front has extensively reported on the federal government's spending mismanagement. You can read more here, here, and here.
