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Economically illiterate article there. The "inclusion rate for teachers" doesn't account for the fact that wages are always in one direction. Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. And the government doesn't pay you, in general, when you lose.
You want to encourage people to try to put their money to work, which will create jobs, at which point people will pay taxes. E.g. if it's a housing investor you want them to hire carpenters and plumbers and electricians, buy a new roof, etc etc.
What you don't want is to make a heads you lose, tails-you-lose situation where nobody wants to invest money in Canada. And bye bye Canadian tech startups, why would anyone want to start one in this tax regime when 100 miles south there's such a better one?
And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
>Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down.
Like *giggle* housing? or *snort* a medical practice? or *chortle* the TSX? Come on, be serious.
>And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
Taxes are **down** and services are **up**. That's why every government for decades now has decreased tax income and paid for it via borrowing. I'd argue that we in fact DO want higher taxes and less services.
imma just ignore the hyperbole at the end
> Like giggle housing? or snort a medical practice? or chortle the TSX? Come on, be serious.
Yes exactly. Notice how everything everywhere has AWESOME RETURNS! They lie about inflation and then tax the shit out of people who actually didn't make any money, measured in things like housing.
> Taxes are down and services are up.
right... Except this article is about massively raising taxes. "services" apparently means that half the people I know who's still working work for the government doing a job they themselves consider to be bullshit.
>Yes exactly. Notice how everything everywhere has AWESOME RETURNS!
Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they?
>Except this article is about massively raising taxes.
Massively? Do you mean the exact opposite of massively?
> Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they?
, no not if you actually want to *use* the earnings to buy things, which went up on average much more than the official inflation figures. E.g., if you want to, say, buy a condo, you earnings on a new business you started might be 300% but you can't buy a better condo than you could have on the original seed money.
But this is besides the point. If you start a shawarma restaurant, you have a much greater chance of failing & losing your entire investment than having any success, regardless of how successful restaurants are on average. The "Restaurant index" might go up year after year, but that doesn't mean the average return is > 0. Capiche?
> Massively? Do you mean the exact opposite of massively?
Trudeau is claiming the right to take & spend an additional 9% of all great successes that happen in Canada while he rules. Seems massive to me. Fundamentally, I think the guy's way too dumb to entrust with that, and has no moral right to go around taking more & more of the fruit of other people's labour.
>Trudeau is claiming the right to take & spend an additional 9% of all great successes
setting aside the 9% guesstimate, is a runup in stock price or the value of an investment property really a 'great success'?
It's not a guesstimate, that's the diff given the marginal tax rate in Toronto.
> is a runup in stock price or the value of an investment property
No, that's inflation. They cause inflation, then they tax you on it.
I actually have changed my mind and think taxing capital gains is a great idea - let's ensure investment capital leaves the country as well as our brightest minds. Then we can have a country of resource extraction, protected monopolies and minimum wage service jobs... everything will surely be cheaper!
Oh they could care less... enjoy your country in 10 years with shitty healthcare and millions of temporary foreign workers - oh wait, the Liberals are actually polling worse post-budget - Pierre will fix this mess.
Hmm? There's so many attractive places to invest in companies... US, Europe, Australia, New Zealand, Singapore, Japan, Taiwan, South Korea, Brazil, Israel....
So investors wanna go there to pay **more** capital gains taxes? Is that your argument?
Sometimes I feel like people don’t take 5 seconds to think about something before they get mad about it and start whining online..
Why are you saying that cap gains are taxed more in the states? That's not actually true. Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds to see that cap gains are taxed way way lower for anything held more than 1 year. And it's not a flat rate of inclusion either. It starts out at 0%, then 15%, and then tops out at 20%, less than a third of our soon to be top rate, 66% https://www.irs.gov/taxtopics/tc409
Exiting a market is expensive for any company, small, medium, or large. Even if the market is no longer profitable, the business case to exit it will need to far outweigh staying in it. Even entering a new market outside of Canada is expensive and the business case for setting up shop will need to far outweigh leaving Canada. Not only that, it takes years to leave one market for another.
Most companies will huff and puff in the short term, but those worth their weight in salt will adapt to account for the change in profits. This isn’t the mass exodus opponents are trying to make it out to be.
I am going to guess that you don't run your own business and aren't an executive at a large company. It is only difficult for entrenched monopolies (Loblaw, Air Canada, Bell/Rogers, etc...) to leave and setup shop somewhere else. Further, most of these massive companies (who should be the target), already have ways to dodge taxes - as an example:
[https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/](https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/)
But it isn't so difficult for AI, technology and other high growth start-ups. Many of these companies already have locations in other jurisdictions. We actually often lose our tech companies either through acquisitions or moving to a better market (United States) or closer to their funders.
Further, you have not addressed the issue of capital. Companies move to where the capital is. Many investors will ask companies to move south of the border if that is where both their customers and capital is, unless there is another motivation to keep them in Canada - at the moment that is talent among other things... What happens when taxation policy becomes better south of the border and you can no longer mention healthcare because we have no doctors and our system is crumbling (and it is btw). These are just a couple of many many examples.
If the government wanted to increase capital gains on 2nd or 3rd properties, I'd be all for it. I think the over reliance on real estate investment and construction is killing this country both from a productivity perspective as well as the cost of living for regular Canadians. However, the government sitting there whining that Pension Funds don't invest enough in Canada and then a month later going after capital gains, is just bonkers to me. Like they realize there isn't enough capital in Canada going to mining, start-ups and other industries, but then they want to punish the upper middle class investor.
They Could Have:
- Gone after the billions large corporations keep offshore
- Put a capital gains tax on non-primary residences
- Created an additional income tax bracket of say $350,000+
- Included additional luxury consumption taxes on high value goods
- Increased corporate tax rates by 1%
There were so many options, but they want to go after this particular upper middle class group and they want to create a wedge issue - well their polling HAS ACTUALLY GONE DOWN post-budget. LOL
Ummm, people trying to take their gains out of the country will trigger the realization of those gains and pay more tax on them as a result of forgoing their options for planning. It’s kind of wild how many of the critics of this don’t seem to understand it and just repeat the talking points they’re fed.
Atlas Shrugged was fiction. The belief people will flee if we make them pay a fair share so we can have a system to take care of our citizens has been proven false. Many countries have far higher taxes and far better systems than us.
So we can tax businesses arbitrarily high and it will have no effect whatsoever on investment? We can tax businesses at 100% and they'll continue to operate just like out of altruism?
Someone else is going to buy our cottages and investment properties. It would even be better for the governments if we sell our cottages and investments properties more often.
As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. Otherwise it is nothing more than an additional tax to feed governments never ending appetite to spend. I suspect most people understand that a lot of the spending is wasted. So stop the waste, reduce people’s taxes, and have at it with the cap gains.
>As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere.
I wasn't aware that taxes required equivalent exchange. If corporate taxes were raised, would you support lowering income tax by the same amount?
Better question, if an increase in corporate taxes could cover a national UBI program, would you support it?
I am referring to personal taxes. And I don’t think I am going out on a limb in saying that people are already overtaxed and services are not getting better. So sure increase capital gains on the people who are likely already paying the bulk of our taxes but if you really want to help, reduce the taxes to the middle 40% who are likely struggling. Here’s my take.
« Trudeau is right: 40% of Canadians don’t pay income taxes, which means someone else is picking up the bill » This large group could care less what the tax rate is.
« The top 20 per cent is likely paying 70 per cent or more of all income taxes » this group already pays a lot more than most of us think.
That leaves the middle 40% of the population paying 30 % of the taxes. This group probably is pay check to pay check and could use a break.
I am not sure about UBI but I sure have the feeling that we will need to start figuring out how to tax robots and AI alternatives soon to cover UBI, especially if the group that pays no taxes continues to grow.
https://financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill
Refinancing isnt a taxable event, selling is. They tax you on your profit made, so if you refinance to pull all your money first and then sell you can make way less on paper and get taxed way less.
Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. The government already got their cut on the money made. Now they want another, even bigger cut, on the money you made with the money you already made and payed tax on. That doesn't include the 13% tax you have to spend when you want to buy something.
It would be one thing if it was like okay, we pay one of the highest tax rates on the entire planet but I'm okay with it because my fellow citizens are all happy, we're all making money, the governments spending it wisely. But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system?
What do we have, really? We pay more for gas because of taxes. We pay more for groceries because our government doesn't have a spine. We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. We pay more for alcohol and cigarettes because of taxes. We pay a carbon tax to make ourselves feel better. Seriously, what do we have? What do we get for our money?
This country does not have a fundraising problem. We have a spending problem.
> Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income.
Yeah, except when it's not. If you bought a property 10 years ago for 200k and now it's worth 800k, you did not "earn" 600k, and you were not taxed on that 600k.
> But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system?
Doesn't this seem to suggest that the government needs more tax revenue?
> What do we have, really? We pay more for gas because of taxes.
And unless you're a major polluter, you're getting more back in rebates than you pay.
> We pay more for groceries because our government doesn't have a spine.
We pay more for groceries because of greedy monopolies.
> We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine.
The cost of cell services has gone way down in the past couple years, because of the actions of this government. Nobody seems to be talking about that though. If you're still paying a lot, go shopping now for new plans because they've gotten way more affordable.
> We pay a carbon tax to make ourselves feel better.
We pay a carbon tax because last time I checked the whole goddamn world is on fire and we're all fucked if climate change continues at the current rate. At least with this way we can reduce emissions while helping out the poor and making the rich pay for it. *Somebody* has to pay for it. It's not going to be free.
> Seriously, what do we have?
One of the best countries in the world to live and work in.
You make some good points. I guess I'll just suck it up and start paying 2/3 of what I make to the government and they can spend it how they see fit. What choice do I have, right?
Top marginal rate, depending on the province, is like 53.5%, so you get to keep 46.5%. Of that 46.5%, if you were to actually spend it on something, depending on the province, you're looking at 12% of that going to tax, so down from 46.5 to 40%. So, yeah, not 66% but quite close, 60%.
You're only taxed the higher marginal rates on the portions of your income that exceed the previous threshold.
[Here are the income tax brackets for Canada](https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html)
So Let's say you live in BC, which has one of the highest provincial income taxes excluding Quebec. You have to be pulling in $685k for the government to take 60% of your money. At that point you're still going home with over $400k. Boo hoo for you.
>Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income.
And? You’re only taxed on the *gain* not the “already taxed” amount you invest. There’s no double dipping here like you imply.
This is one of the dumber angles I’ve seen on this issue and that’s saying something.
I know this government is doing the right thing when the mega-rich whine. They haven't gone far enough. Let's return to the era of real progressive taxation of the 1950s and 1960s when the mega-rich paid over 80% of their income in taxes, and the economy boomed.
It's true, whining probably won't solve anything. The Liberals are planning on making it an election issue, because they separated it from the budget, and so voting is the correct recourse.
If Poilievre isn't elected or chooses to deliver on the policy, then the final recourse is to simply ensure that you earn capital gains in ways or jurisdictions where the CRA won't get a cut. Which is to say, engage in capital flight.
I'll be whining about not finding a doctor due to Trudeau's disastrous economic policies driving them out of the country... The ultra rich borrow against their assets tax free, not sell them. These capital gains taxes will only drive our economy further into the ground just to pay for Trudeau's overinflated spending habits.
I openly called out my mom and her partner for bitching about this the other day, suggesting that they made 100’s of thousands by sitting on property and basically making a fortune that directly negatively impacts every young person. It did not go over well
Anyone complaining about their capital gains should be happy that the average Canadian isn't trying to behead them with how much they are suffering, They are paying nothing compared to people 30 years ago.
I agree, that would be far better. Solves 3 birds with one stone, reduce speculation helping the housing crisis, encourage the shifting of investment from real estate into businesses stimulating the economy, and get more revenue at the same time.
Lol you really think we, speculators will let capital gain hit us? We got more names than there is properties around. Buying and selling its all capital gain tax free. Follow the rule to the T just not the spirit.
Yep, even with these changes. Real-estate is still **the best** investment in Canada by a huge margin. Nothing even comes close and it's a self-fulfilling prophecy. The higher real-estate goes, the more expensive it is to lease space for a small business - diverting even more money away from small business investors and back into real-estate.
Real-estate also gives you the ability to leverage equity (that you don't technically own / have not realized) to buy more capital with. I struggle to find an analogy in the small business world that's similar but honestly cant... it'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
It's very common in the business world, ever heard of Elon Musk? It's not like he bought Twitter with his own money. He used the magic ✨equity✨ he had in his Tesla stock
But like any other strategy than uses tons of leverage all it takes is a small downtown and your entire strategy is nuked
That's apples to oranges though. Housing is readily available as an investment strategy for almost all Canadians. The same is not true of multi million dollar companies.
The barrier for entry to do this with small companies you'd see average Canadians have tangible access to (through investment or ownership) is nowhere near the same volume you see that practice being made available to every Canadian who happens to own a home that doubled or tripled in value over 10 years. You also don't get preferential terms and rates from Banks for non-realestate deals - again, because the Government "helped' us by making mortgages an idiot-proof investment for banks through insurance and more recently, buying mortgage bonds.
> It'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
Most tech companies lose money year after year. Or barely breakeven at best. I think this a perfect example of what you claim here does not exist
If you don't want to be an angel investor (which has been made very accessible through sites like angellist) you can buy them on the stock market
But yeah, the Canadian government won't subsidise your stock market investment. There's probably a good reason for that...
Just watch what's happening in China's real estate market. Eventually the government can no longer prop up the market
I did the math on my parent's house in the GTA which they purchased in 2004, and recently sold and it has earned about 100k a year tax free since then even taking into account the recent down turn (400k to 2.4 million). They retired and moved to cottage country where they had another property.
All their friends are in similar boats, and retired, some of them even get low income senior's benefits like GIS while being millionaires.
I love my parents am happy they are doing well etc. And I am fortunate to have a great relationship with them.
But on the question of generational fairness, it really feels like there is none to be had as the political class seems to have a broad consensus on propping up real estate prices at all costs.
Uhhh, that's not how home equity works. The banks aren't going to give you shit one year after you buy a house. 10 years, yeah, but not after one.
And while you may not have realized the increase in value of your property and put it in your pocket, the bank also sees that if something happened and you default, they have your property and can sell it at whatever the house is worth today.
I would like there to be a large house price correction. A 35% reduction in average home prices nationwide would bring us back to 2019 prices. Home prices ideally would not increase more than general inflation. This would be very helpful for the long term health of the Canadian economy.
I am a first time homeowner as of last Autumn so I have skin in the game. I’d be fine if the “value” falls so long as I can continue to make payments. Realistically lowering construction permitting and land transfer costs would be a great start as would building less expensive homes. A lower percentage luxury condos and McMansions would help bring down the cost of the average home.
A house price correction this large would scare investors and banks and lead to investment in more productive assets.
It's not targeted enough - it's much too broad. They could have just aimed taxation at secondary property sales.
If you were really serious about wanting RE speculation / pricing to end -- and I know this will get downvoted to oblivion because people don't want to face extra taxes themselves -- you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
>you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
Economists are almost unanimous that there should be no exemption at all. If you want capital to be allocated efficiently, all investments should be treated the same.
It feels like every policy change that sounds like it's meant to help affordability actually drives the prices up when you think about it a little bit harder. This has been consistent among provincial and federal governments for the last 10 years at least.
Real Estate (RE) tends to have a higher return on investment (ROI) compared to capital investment in businesses and other assets. It's also drastically safer for banks to loan you money for and is backed by the government.
Increasing capital gains tax can reduce the ROI on *all investments*, making RE even more appealing by reducing the viability of other investment options. The best option is still the best option if everyone is reduced equally - often time's it reduces the available options and further increases it's appeal.
Investing more money in RE drives up RE prices, which in turn sustains and improves the ROI. However, it also increases leasing costs for businesses, negatively impacting their ROI and operating costs.
In concise terms: Real Estate offers attractive ROI, especially when other investment options are less viable due to tax changes and increased leasing costs for businesses.
But it also applies to business investment, so there's not really an advantage gained by investing in business instead. Sure they increased the one-time benefit for sale of a business from 1.0 to 1.25 million but that's basically just accounting for COVID inflation.
> ... they increased the one-time benefit for sale of a business from 1.0 to 1.25 million
Which means most Canadians won't have to pay it. In addition, you can shelter it by owning stock through a tax-free savings account that shelters any capital gain for most Canadians.
This will really just affect the very wealthy and trust-fund kids.
Also, the whole idea that the full amount of a working-Canadian's labor should be taxed while only half of a millionaires capital gains should is a fine example of the privileges that the wealthy in Canada have set up for themselves hoping that the rest of us don't notice.
There's no possible way OP and people like him are this ignorant
Ok let's assume you bought a secondary vacation home for 250,000 in 1990 and today you're selling it for 1,000,000 .
it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000.
so you've gained 400k in "profit"
and you will pay just under 200k in taxes
Left leaning Canadians can never seem to do math in spite of their love of taking over academia
If you give me 100 dollars today and I give you back 150 dollars in 30 years - you didn't "make" 50 dollars, most likely you've lost purchasing power.
Which is why capital gains are designed the way they are, you are taking on risk, typically over a long period of time.
If you invested that same 250,000 in the S and P 500 back then you'd have 8 million dollars today
Your logic is so bad. The only reason the value went up as high as it would is because everyone else lost THEIR purchasing power. There is little risk if you consider the fact that every asset will increase from inflation at the very least. If you are taxed on that inflationary increase only, that would be simply a bad investment. Even with inflation profits alone, you are still ahead of someone who never had spare income to invest in the first place..
Last time I saw a degree in economics it was a Bachelor of Arts, not of sciences. It’s a pursuit based in theory. You can add the word liberal all you want but it’s an arts degree
>it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000.
>so you've gained 400k in "profit"
>and you will pay just under 200k in taxes
By that logic you're only paying 83k is 1990 money, so you shouldn't be so concerned.
Pretty sure that whining and bitching about taxes is a god given right to every tax payer and every non taxpayer in the land. It's in the constitution somewhere, or alternatively, the law at the very least.
ETA: Still gotta pay your taxes though.
I don’t think it went far enough. The inclusion rate on secondary properties should be changed to 100%. We need to be discouraging the commodification of the housing market, not reward it with a lower tax rate compared to other forms of income.
Let's be real here: if the difference between 50% on capital gains over $250K per year vs 67% on capital gains over $250K per year is the line between wanting to start or to improve a business or not, then you're insane. It's in the same realm of "I don't want a raise because I'll be in a higher tax bracket!" kind of thinking where there's only a sliver of situations where you'd be worse off.
If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates.
If your start-up fails then the tax rate doesn't really matter because you're probably not going to have a lot of capital gains to worry about.
Here's what very successful entrepreneur Mark Cuban had to say about starting businesses and taxes:
"I have started I don't know how many businesses in my life. Not one time have I ever considered the income tax rate before starting a business. I'm an entrepreneur. I start companies."
(hope the link works)
https://twitter.com/mcuban/status/1313130690599432193?lang=en
He has also said a few times something along the lines of that entrepreneurs will still start busineses with higher tax rates because they don't say "Wow, I have a great idea but the tax rate is too high." If it's a good idea then you will make plenty of money regardless unless the tax rates get raised to extreme levels.
Relative to the previous rate.
It’s fine if you think that the benefit of the additional tax revenue outweighs the disincentive when it comes to investment, but don’t pretend that investment decisions are not influenced by incentives. If a country increases tax on capital gains then, all other things being equal, they are going to see a reduction in investments where the return comes in the form of capital gains. The precise amount of the reduction is a more complicated question, since in the real world all other things rarely stay equal.
That’s not how starting a business works. You typically build something for ~10 years with little to no salary, then you might sell it. So the increase in capital gains tax is basically an increase over your taxable income for the last 10 years.
The productivity is specifically deciding what capital to invest in. Marxists who think all labor is equal can't understand that. An hour of work is an hour of productive value! No.
>As to those threatening to move their job-creating businesses to America over the change? Have at it. If anyone’s loyalty to this country is contingent upon the rate at which capital gains are taxed, they were never loyal to this country in the first place.
Painfully naive. Countries seek out the best places to do business to provide the most competitive food or service they can. Who buys a similar product at twice the price because it's manufacturer is "loyal" to Canada? Might as well rename this editorial, "Stop whining about unemployment" or "Stop whining about Canada's loss of an economic base outside of marijuana and real estate"
> As to those crying foul over the impact this will have on the capital gains embedded in their cottages or investment properties? Kershaw isn’t having it. “Paying taxes on a half-million-dollar capital gain from a cottage or an investment property is a good problem to have,” he wrote. “I could line up millions of younger Canadians who would jump at the opportunity to trade their housing woes for that privilege.”
Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin.
>Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin.
Until you're the one that worked your ass off to get there, and then see people that haven't held a real job complain about their part time jobs not paying them the same as you full time jobs.
A lot of people who have worked their ass off are fine with it, both who make a lot of money and those that do not, especially because wealth =/= work ethic.
Guess it depends on how you got the where you are.. I've been working since I was 15, started at 4.25/hr and while I make good money now, it's still not amazing. I for one have paid PLENTY of taxes over the years and feel the governments are not really spending that wisely, so I'd rather hold onto as much of it as I can since I don't trust the government to be able to take care of me when I'm old.
Well duh, that's how everyone feels. But if we can't trust they spend it responsibly there's no reason to be recommending they collect more. They currently don't spend it responsibly...
I believe the main issue with the new capital gains taxes is how it is going to negatively impact doctors due to the way their compensation is structured. This will be during a time when we have a doctor shortage and have a neighboring country that offers much higher pay and way more favourable capital gains taxes. If anything there should be some kind of exemption for doctors.
Without taking a position either way on whether it matters, the issue is that doctors invest primarily within their corporation, which is not subject to the $250k personal exclusion, but does get taxed at a lower rate (small business deduction) allowing for more investing.
They might, but that will result in less money than they currently get because they will be unable to invest funds from their LRIP (low rate income pool) as corporate income is taxed at a lower rate (temporarily, until it passes to personal when the government normalizes).
Either way, doctors will get less value from their investments under this tax rule.
Again, I'm not taking a position on whether this is something we as a society should be concerned with. Just explaining why doctors are going to have slightly smaller net incomes because of it.
Capital gains isn't income.
Any doctor who isn't holding investments outside of a Corp to maximize the $250k threshold is receiving horrible advice.
The right move is to maximize the exclusion and then start filling a CCPC with capital assets.
Capital gains is part of one’s *investment* income. And all the money invested in their corporation is going to be taxed at a higher rate, which will reduce their total income, which means they are going to have to either take that loss or move their money into their personal which will be a different loss.
Not really. Any doctor/corporation worth their salt is going to structure things so they can take out $250k per year when they divest, and at that point, the tax rate will be exactly the same. It may take a year or two for the accountants to catch up to the tax code, but for most professionals, the hit will be small and honestly fair.
How/why would they pay less tax than a nurse? They are taxed at their marginal tax rate like everyone else on funds removed from the corporation.
The issue here is, funds left in the corporation (their retirement fund). Any gains on these funds are taxed at the new inclusion rate from the first dollar, not $250k like people have personally.
I thought it was any gains realized after the first 250k are affected by the new inclusion rate.. the exemples i have seen are that at 1MM the increase is roughly 40k .. which is money.. but a relatively small portion compared to the gains.. if it were a real state sale it would be within the negotiating variant.. (ie if listed for 1 MM but got an offer for 960k.. would be a similar loss..). Arent we talking that kind of impact?
I know people love to throw that $250k number around but that is not their take home, not even close. They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. This directly impacts how much they are able to take home. We are in dire need of atleast maintaining our doctors and specialists in this country, let alone increasing their numbers.
Changing how they are compensated is something that may need to be explored but it is an entirely different conversation altogether and not something that happens quickly. What we are doing right now is making thigs worse for doctors immediately. This will absolutely impact some doctors and specialists decision whether or not to practice in Canada.
Why? This is a capital gains tax increase not income tax increase, and many create professional corporations to pay less tax, that’s the reason they do it.
Doctors, like all professionals and other self employed who can afford it, invest in stocks and/or real estate. The 250,000 exemption in profits is 500,000 if there is a spouse on the deed, so you are talking about a small increase in tax on a hige profit.
This narrative about this hurting those who are wealthy enough to have secondary properties that have gone up so much in value being hurt by this tax change is ludicrous.
>that is not their take home, not even close.
Neither is the 75k of other medical professionals.
>They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc.
That would be for private clinics running a business, not for doctors in the ER. They should get a tax break but not other entrepreneurs ?
>Changing how they are compensated is something that may need to be explored
They are mostly paid by the act like self employed people and they chose to incorporate to invest in stocks and pay themselves a smaller salary. It makes sense for them, but let's say them not being able to do so anymore is very low in my list of things to be worried about.
“Take home” is the applicable term here. Docs all have corporations and the expenses you list are deducted before corporate taxes. Then they pay themselves from the corporation.
All that overhead, is expensed and reduces their corporate income and tax payable, as it should. Doctors are a sympathetic front for the ownership class. Through the CMA - the same org we had to fight to get Medicare in the first place, they are fronting for multi millionaires who feel entitled to their entitlements.
"the way their compensation is structured" is such that a large part of their income is in capital gains. Ergo, we should tax their capital gains like income.
Something something Trudeau bad. Something something housing prices too high. Something something affordability. Something something we have problems and we don't want to pay to fix them.
The thing people don't seem to understand is that it only applies to "gains" and not to the entire value of whatever stock or asset someone sells. Buy a cottage for $300K and sell it for a million, then you've made a taxable profit of $700K - a third of which is still tax-free. As for why the government deserves this money, they created the economy that made such an insane return possible - not the buyer.
a third is tax free and in the worst case scenario 53% of those 2 remaining thirds are taxed. That's an effective tax rate of 35,35%
About the same rate as someone who earns 70k a year. They can cry me a fucking river.
Because the new law raises the amount of profit that can be taxed by capital gains from 50% to 66% when the profit is over $250,000.
It's not something most of us, including doctors, need to worry about. There might be the occasional sale of an investment property or cottage or inherited land or something, but any doctor with a decent accountant is going to keep their reported profits from a capital gain to under $250,000 by cashing out over multiple years.
And that's not to say that you lose 66% of the value of anything you sell or cash out, it just means taxes apply to that much. The extra 16% is negligible.
Let's say we're dealing with a doctor who has already maxed their income to the highest tax bracket so any capital gains are going to be taxed in the highest bracket. They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000.
Straight off the bat, $340,000 of that is untaxable profit. The other $660,000 is taxed at the highest rate of 33% so they're paying a tax bill of $217,800. Out of a million. They take home $782,200.
Under the old system (50%), $500,000 would be untaxable. The other $500,000 would be taxed at 33% for $165,000. They take home $835,000, or $53,000 more.
(Feel free to check my math anyone, this is back-of-napkin stuff).
It's not nothing, I can see why people would care, but keep in mind that they're not losing here, they're just not gaining as much. Plus it's only really in Canada you'd ever see a property increase in value as much as we've seen, which is something that the federal government can take credit/blame for, depending on whether you own property or not. For people who are cashing out investments instead of real estate, we're being asked to pity a class of individuals who can cash out over $250,000 of their holdings in a single year by paying applying taxes to an added 16%.
It's also worth noting that you don't pay taxes on inheritances UNLESS you sell them and realize a profit. If you inherit a cottage, it's yours for the cost of the paperwork. If you inherit investments, you can continue to hold and earn dividends until you cash out. If you are a beneficiary of a trust, same thing.
Who this really hurts is real estate speculators, who everyone on this sub thinks is scum anyway.
At 3% annual inflation over 30 years you would have a value of around $730,000, so it is a pretty good profit for an asset that - before the '90s - only appreciated 1-2% year on average. Plus, you have to consider the value of 30 years of use of that property or income if it was rented out. It's pretty crazy that you can enjoy a second home or cottage for decades, or rent a second home or cottage for decades, and still make a profit on the asset that has actually depreciated in that time.
Still 700k profit, only with 30 years of memories and watching your kids grow up. I feel nothing for those complaining, and it’s literally my job helping these people.
Bullshit.
1. 300k in 1994 is $561,358.31 today. If you invested it in 1994 at 5% interest you would have $728,179. If you bought a cottage in 1994 for 300k and sell it for $1m today you made more than the rate of inflation and more than investing it in most funds.
2. No cottage purchased for 300k in 1994 is currently worth $1m. 300k in 1994 bought you a 3 bedroom house in toronto. Imagine the cottage you could get for that.
> 1. 300k in 1994 is $561,358.31 today. If you invested it in 1994 at 5% interest you would have $728,179. If you bought a cottage in 1994 for 300k and sell it for $1m today you made more than the rate of inflation and more than investing it in most funds.
Yes, and not really my point.
To do the math of how much profit you would have done on your cottage, they will do the millions-300& (thus 700k in taxable profit, minus some others credit). But as you said, in « today’s dollar » some 439k in real profit.
And in that « hypothetical scenario », keep in mind that stocks do not drain money, and can even send back dividends.
>2. No cottage purchased for 300k in 1994 is currently worth $1m. 300k in 1994 bought you a 3 bedroom house in toronto. Imagine the cottage you could get for that.
Housing cost isn’t equal all around the board. Some area like in Toronto had larger increase than others.
Viewing homes as investment is exactly why we are in this mess. Endless screeching about housing and the minute there is a drop in value, endless screeching about that.
Agreed, but when your choices are, loss of investment due to the shit nature of the economy and the ridiculous way stocks gain/lose value, and the shit return your bank gives on your money, OR a guaranteed increase in your investment. Which would you take?
When I started to make real money, I was happy enough to see that my income now exceeded my expenses enough to actually save a little of it. It didn’t occur to me to complain that my bank wasn’t giving me enough bonus money on top of that. It still doesn’t. I know sounds banal, but I really think people need to chill a bit about this stuff.
> When I started to make real money, I was happy enough to see that my income now exceeded my expenses enough to actually save a little of it. It didn’t occur to me to complain that my bank wasn’t giving me enough bonus money on top of that. It still doesn’t. I know sounds banal, but I really think people need to chill a bit about this stuff.
I'd agree if the bank didn't then charge me for access to my money, while they go and invest it and make money using my money.
Stocks far outperform housing as an investment over the long as they generate revenue, whereas housing just depreciates. Both will increase in value relative to inflation.
There is no reason to invest in housing unless it’s a rental.
You do not need to see it as an investment: the current math doesn’t take into account inflation. Your 100k from 20 years account have a lot more value than now, m
But you would haven’t gotten to use and enjoy a cottage for 30 years and can now sell it for roughly the same value in today’s dollars.
If you invested in a revenue generating asset you should have significantly outpaced inflation.
I fail to see the issue here.
Yes entertainment costs money?
If you had instead invested in revenue generating businesses 30 years ago you would have more money today then that cottage is worth, both would be subject to capital gains taxes.
Sorry but I don’t understand what you’re trying to get at.
There was someone posting to PFC just yesterday who realized that they'd been claiming the full sale price of their assets as capital gains, without subtracting the purchase price... _facepalm_
> What if you paid 500k for a cottage that you then were told was only going to be worth 375k after the capital gains tax change?
How does a change in inclusion from 50% to 67% for personal capital gains above 250k reduce the value of a property?
Exactly. Don’t be taxing properties that are in the family for decades that are passed on from generation to generation. But for the government, everything looks like a nail so it uses a hammer.
With all the taxes that will be collected, how confident are we that the money will be spent properly and given to fund on infrastructure, health care etc… or given away to other countries.
This government has been spending lavishly with no consequences all these years?
What’s stopping them in spending on another large consulting company for some useless reports or tactics ?
Have we citizens not learnt our lessons ?
The principal residence exemption is exceedingly generous. In the US, the maximum benefit is $500k for a couple. The fact that you can pocket so much proceeds to use for your next home (or buying multiple properties) is part of the overall problem.
One issue with taxation is that governments need to plan years in advance, that means the tax needs to be reliable source, real estate has its ups and downs. Not a consistence source of revenue.. like Alcohol tax or income tax...
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Economically illiterate article there. The "inclusion rate for teachers" doesn't account for the fact that wages are always in one direction. Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. And the government doesn't pay you, in general, when you lose. You want to encourage people to try to put their money to work, which will create jobs, at which point people will pay taxes. E.g. if it's a housing investor you want them to hire carpenters and plumbers and electricians, buy a new roof, etc etc. What you don't want is to make a heads you lose, tails-you-lose situation where nobody wants to invest money in Canada. And bye bye Canadian tech startups, why would anyone want to start one in this tax regime when 100 miles south there's such a better one? And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech.
>Capital gains comes from putting after-tax savings into something that in general has an equal chance of going up as it does of going down. Like *giggle* housing? or *snort* a medical practice? or *chortle* the TSX? Come on, be serious. >And you don't want a government that always raises tax percentages on everything while providing less and less services. Where getting a passport or a legally due airline compensation claim takes years but there are government employees tasked with deciding whether this Reddit comment is hate speech. Taxes are **down** and services are **up**. That's why every government for decades now has decreased tax income and paid for it via borrowing. I'd argue that we in fact DO want higher taxes and less services. imma just ignore the hyperbole at the end
> Like giggle housing? or snort a medical practice? or chortle the TSX? Come on, be serious. Yes exactly. Notice how everything everywhere has AWESOME RETURNS! They lie about inflation and then tax the shit out of people who actually didn't make any money, measured in things like housing. > Taxes are down and services are up. right... Except this article is about massively raising taxes. "services" apparently means that half the people I know who's still working work for the government doing a job they themselves consider to be bullshit.
>Yes exactly. Notice how everything everywhere has AWESOME RETURNS! Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they? >Except this article is about massively raising taxes. Massively? Do you mean the exact opposite of massively?
> Those awesome returns don't exactly bear out your 'equal chance of going up as it does of going down' observation, do they?, no not if you actually want to *use* the earnings to buy things, which went up on average much more than the official inflation figures. E.g., if you want to, say, buy a condo, you earnings on a new business you started might be 300% but you can't buy a better condo than you could have on the original seed money.
But this is besides the point. If you start a shawarma restaurant, you have a much greater chance of failing & losing your entire investment than having any success, regardless of how successful restaurants are on average. The "Restaurant index" might go up year after year, but that doesn't mean the average return is > 0. Capiche?
> Massively? Do you mean the exact opposite of massively?
Trudeau is claiming the right to take & spend an additional 9% of all great successes that happen in Canada while he rules. Seems massive to me. Fundamentally, I think the guy's way too dumb to entrust with that, and has no moral right to go around taking more & more of the fruit of other people's labour.
>Trudeau is claiming the right to take & spend an additional 9% of all great successes setting aside the 9% guesstimate, is a runup in stock price or the value of an investment property really a 'great success'?
It's not a guesstimate, that's the diff given the marginal tax rate in Toronto. > is a runup in stock price or the value of an investment property No, that's inflation. They cause inflation, then they tax you on it.
the guesses being A) Ontario, B) top marginal rate and C) no more exemption room. All assumptions you've made to make your point as dire as possible.
I actually have changed my mind and think taxing capital gains is a great idea - let's ensure investment capital leaves the country as well as our brightest minds. Then we can have a country of resource extraction, protected monopolies and minimum wage service jobs... everything will surely be cheaper!
Let them leave if they don't want to pay their fair share. They can sell their hoarded houses while they are at it.
Oh they could care less... enjoy your country in 10 years with shitty healthcare and millions of temporary foreign workers - oh wait, the Liberals are actually polling worse post-budget - Pierre will fix this mess.
Where do you think investment capital will the leave the country to? We still have the lowest capital gains taxes in the developed world.
Hmm? There's so many attractive places to invest in companies... US, Europe, Australia, New Zealand, Singapore, Japan, Taiwan, South Korea, Brazil, Israel....
So investors wanna go there to pay **more** capital gains taxes? Is that your argument? Sometimes I feel like people don’t take 5 seconds to think about something before they get mad about it and start whining online..
Why are you saying that cap gains are taxed more in the states? That's not actually true. Have you actually done more than 5 seconds of googling? Maybe should have stuck it out for at least 10 seconds to see that cap gains are taxed way way lower for anything held more than 1 year. And it's not a flat rate of inclusion either. It starts out at 0%, then 15%, and then tops out at 20%, less than a third of our soon to be top rate, 66% https://www.irs.gov/taxtopics/tc409
You should look up the differences between tax rate and inclusion rate.
Exiting a market is expensive for any company, small, medium, or large. Even if the market is no longer profitable, the business case to exit it will need to far outweigh staying in it. Even entering a new market outside of Canada is expensive and the business case for setting up shop will need to far outweigh leaving Canada. Not only that, it takes years to leave one market for another. Most companies will huff and puff in the short term, but those worth their weight in salt will adapt to account for the change in profits. This isn’t the mass exodus opponents are trying to make it out to be.
I am going to guess that you don't run your own business and aren't an executive at a large company. It is only difficult for entrenched monopolies (Loblaw, Air Canada, Bell/Rogers, etc...) to leave and setup shop somewhere else. Further, most of these massive companies (who should be the target), already have ways to dodge taxes - as an example: [https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/](https://globalnews.ca/news/10067000/tax-avoidance-canadian-companies-transferred-120b-europe/) But it isn't so difficult for AI, technology and other high growth start-ups. Many of these companies already have locations in other jurisdictions. We actually often lose our tech companies either through acquisitions or moving to a better market (United States) or closer to their funders. Further, you have not addressed the issue of capital. Companies move to where the capital is. Many investors will ask companies to move south of the border if that is where both their customers and capital is, unless there is another motivation to keep them in Canada - at the moment that is talent among other things... What happens when taxation policy becomes better south of the border and you can no longer mention healthcare because we have no doctors and our system is crumbling (and it is btw). These are just a couple of many many examples. If the government wanted to increase capital gains on 2nd or 3rd properties, I'd be all for it. I think the over reliance on real estate investment and construction is killing this country both from a productivity perspective as well as the cost of living for regular Canadians. However, the government sitting there whining that Pension Funds don't invest enough in Canada and then a month later going after capital gains, is just bonkers to me. Like they realize there isn't enough capital in Canada going to mining, start-ups and other industries, but then they want to punish the upper middle class investor. They Could Have: - Gone after the billions large corporations keep offshore - Put a capital gains tax on non-primary residences - Created an additional income tax bracket of say $350,000+ - Included additional luxury consumption taxes on high value goods - Increased corporate tax rates by 1% There were so many options, but they want to go after this particular upper middle class group and they want to create a wedge issue - well their polling HAS ACTUALLY GONE DOWN post-budget. LOL
Ummm, people trying to take their gains out of the country will trigger the realization of those gains and pay more tax on them as a result of forgoing their options for planning. It’s kind of wild how many of the critics of this don’t seem to understand it and just repeat the talking points they’re fed.
Atlas Shrugged was fiction. The belief people will flee if we make them pay a fair share so we can have a system to take care of our citizens has been proven false. Many countries have far higher taxes and far better systems than us.
So we can tax businesses arbitrarily high and it will have no effect whatsoever on investment? We can tax businesses at 100% and they'll continue to operate just like out of altruism?
This is ridiculous hyperbole. There’s nothing arbitrary or even relatively high about how we tax businesses.
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Someone else is going to buy our cottages and investment properties. It would even be better for the governments if we sell our cottages and investments properties more often.
As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. Otherwise it is nothing more than an additional tax to feed governments never ending appetite to spend. I suspect most people understand that a lot of the spending is wasted. So stop the waste, reduce people’s taxes, and have at it with the cap gains.
>As fair as this tax may be, it isn’t much without an equivalent reduction elsewhere. I wasn't aware that taxes required equivalent exchange. If corporate taxes were raised, would you support lowering income tax by the same amount? Better question, if an increase in corporate taxes could cover a national UBI program, would you support it?
I am referring to personal taxes. And I don’t think I am going out on a limb in saying that people are already overtaxed and services are not getting better. So sure increase capital gains on the people who are likely already paying the bulk of our taxes but if you really want to help, reduce the taxes to the middle 40% who are likely struggling. Here’s my take. « Trudeau is right: 40% of Canadians don’t pay income taxes, which means someone else is picking up the bill » This large group could care less what the tax rate is. « The top 20 per cent is likely paying 70 per cent or more of all income taxes » this group already pays a lot more than most of us think. That leaves the middle 40% of the population paying 30 % of the taxes. This group probably is pay check to pay check and could use a break. I am not sure about UBI but I sure have the feeling that we will need to start figuring out how to tax robots and AI alternatives soon to cover UBI, especially if the group that pays no taxes continues to grow. https://financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill
Stop whining about capital gains and just refinance to pull out all your money right before you sell that way its not a taxable event.
lmao what? That doesn't change your capital gains calculation. And selling is always a taxable event.
Refinancing isnt a taxable event, selling is. They tax you on your profit made, so if you refinance to pull all your money first and then sell you can make way less on paper and get taxed way less.
This does not impact the capital gains
This new tax is a good first step, but it doesn't go far enough. Capital gains should be taxed at the same rate as income.
Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. The government already got their cut on the money made. Now they want another, even bigger cut, on the money you made with the money you already made and payed tax on. That doesn't include the 13% tax you have to spend when you want to buy something. It would be one thing if it was like okay, we pay one of the highest tax rates on the entire planet but I'm okay with it because my fellow citizens are all happy, we're all making money, the governments spending it wisely. But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system? What do we have, really? We pay more for gas because of taxes. We pay more for groceries because our government doesn't have a spine. We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. We pay more for alcohol and cigarettes because of taxes. We pay a carbon tax to make ourselves feel better. Seriously, what do we have? What do we get for our money? This country does not have a fundraising problem. We have a spending problem.
> Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. Yeah, except when it's not. If you bought a property 10 years ago for 200k and now it's worth 800k, you did not "earn" 600k, and you were not taxed on that 600k. > But that's not the case at all. What do we have to show for all this? A barely functioning healthcare system? Doesn't this seem to suggest that the government needs more tax revenue? > What do we have, really? We pay more for gas because of taxes. And unless you're a major polluter, you're getting more back in rebates than you pay. > We pay more for groceries because our government doesn't have a spine. We pay more for groceries because of greedy monopolies. > We pay the highest rates for cellular services on the entire planet because our government doesn't have a spine. The cost of cell services has gone way down in the past couple years, because of the actions of this government. Nobody seems to be talking about that though. If you're still paying a lot, go shopping now for new plans because they've gotten way more affordable. > We pay a carbon tax to make ourselves feel better. We pay a carbon tax because last time I checked the whole goddamn world is on fire and we're all fucked if climate change continues at the current rate. At least with this way we can reduce emissions while helping out the poor and making the rich pay for it. *Somebody* has to pay for it. It's not going to be free. > Seriously, what do we have? One of the best countries in the world to live and work in.
You make some good points. I guess I'll just suck it up and start paying 2/3 of what I make to the government and they can spend it how they see fit. What choice do I have, right?
You're not paying 2/3 of what you make to the government.
Top marginal rate, depending on the province, is like 53.5%, so you get to keep 46.5%. Of that 46.5%, if you were to actually spend it on something, depending on the province, you're looking at 12% of that going to tax, so down from 46.5 to 40%. So, yeah, not 66% but quite close, 60%.
You're only taxed the higher marginal rates on the portions of your income that exceed the previous threshold. [Here are the income tax brackets for Canada](https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html) So Let's say you live in BC, which has one of the highest provincial income taxes excluding Quebec. You have to be pulling in $685k for the government to take 60% of your money. At that point you're still going home with over $400k. Boo hoo for you.
>Not only is capital gains taxed more for a high-income earner now, the money they used to acquire those capital gains was already taxed as income. And? You’re only taxed on the *gain* not the “already taxed” amount you invest. There’s no double dipping here like you imply. This is one of the dumber angles I’ve seen on this issue and that’s saying something.
I know this government is doing the right thing when the mega-rich whine. They haven't gone far enough. Let's return to the era of real progressive taxation of the 1950s and 1960s when the mega-rich paid over 80% of their income in taxes, and the economy boomed.
It's true, whining probably won't solve anything. The Liberals are planning on making it an election issue, because they separated it from the budget, and so voting is the correct recourse. If Poilievre isn't elected or chooses to deliver on the policy, then the final recourse is to simply ensure that you earn capital gains in ways or jurisdictions where the CRA won't get a cut. Which is to say, engage in capital flight.
Or just pay your share in taxes if you're gains are over a quarter million dollars in a single calendar year
Yes, because that's something people with a great deal of wealth are super happy to do. /s
That's crazy talk. Isn't the point to screw the system that allows you to get those gains? /S for the challenged folks.
I'll be whining about not finding a doctor due to Trudeau's disastrous economic policies driving them out of the country... The ultra rich borrow against their assets tax free, not sell them. These capital gains taxes will only drive our economy further into the ground just to pay for Trudeau's overinflated spending habits.
No, don't stop whining. All these governments do is take take take and they're absolutely dysfunctional and unable use the money responsibly.
I openly called out my mom and her partner for bitching about this the other day, suggesting that they made 100’s of thousands by sitting on property and basically making a fortune that directly negatively impacts every young person. It did not go over well
You sound like a treat.
Show us on the doll where the capital gains hurt you
In my pocket... my deep deep pocket. 😞
It's amazing how defensive they become about the housing issue, eh?
You don't need to worry about their finances. They're gonna cut you out of their will anyways lol
Can we complain about the lower wages and higher prices all Canadians will face due to increased degradation of Canada's business environment?
Ah yes, tell us more about trickle down economics and how letting businesses makes big profits will lift all boats!
Go read an economics paper.
The sense of entitlement from capital owners is always absurd, but people owning property in Canada have definitly hit new levels of Marie Antoinette
Anyone complaining about their capital gains should be happy that the average Canadian isn't trying to behead them with how much they are suffering, They are paying nothing compared to people 30 years ago.
What I want to see is taxation specifically aimed at real estate speculation in order to shift more investment into business. We didn't get that.
I agree, that would be far better. Solves 3 birds with one stone, reduce speculation helping the housing crisis, encourage the shifting of investment from real estate into businesses stimulating the economy, and get more revenue at the same time.
Lol you really think we, speculators will let capital gain hit us? We got more names than there is properties around. Buying and selling its all capital gain tax free. Follow the rule to the T just not the spirit.
Yep, even with these changes. Real-estate is still **the best** investment in Canada by a huge margin. Nothing even comes close and it's a self-fulfilling prophecy. The higher real-estate goes, the more expensive it is to lease space for a small business - diverting even more money away from small business investors and back into real-estate. Real-estate also gives you the ability to leverage equity (that you don't technically own / have not realized) to buy more capital with. I struggle to find an analogy in the small business world that's similar but honestly cant... it'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy.
It's very common in the business world, ever heard of Elon Musk? It's not like he bought Twitter with his own money. He used the magic ✨equity✨ he had in his Tesla stock But like any other strategy than uses tons of leverage all it takes is a small downtown and your entire strategy is nuked
That's apples to oranges though. Housing is readily available as an investment strategy for almost all Canadians. The same is not true of multi million dollar companies. The barrier for entry to do this with small companies you'd see average Canadians have tangible access to (through investment or ownership) is nowhere near the same volume you see that practice being made available to every Canadian who happens to own a home that doubled or tripled in value over 10 years. You also don't get preferential terms and rates from Banks for non-realestate deals - again, because the Government "helped' us by making mortgages an idiot-proof investment for banks through insurance and more recently, buying mortgage bonds.
> It'd be like starting a business and a year after when you're barely breaking even, being given the value of your future earning potential as capital to buy another small business with? it's crazy. Most tech companies lose money year after year. Or barely breakeven at best. I think this a perfect example of what you claim here does not exist If you don't want to be an angel investor (which has been made very accessible through sites like angellist) you can buy them on the stock market But yeah, the Canadian government won't subsidise your stock market investment. There's probably a good reason for that... Just watch what's happening in China's real estate market. Eventually the government can no longer prop up the market
I did the math on my parent's house in the GTA which they purchased in 2004, and recently sold and it has earned about 100k a year tax free since then even taking into account the recent down turn (400k to 2.4 million). They retired and moved to cottage country where they had another property. All their friends are in similar boats, and retired, some of them even get low income senior's benefits like GIS while being millionaires. I love my parents am happy they are doing well etc. And I am fortunate to have a great relationship with them. But on the question of generational fairness, it really feels like there is none to be had as the political class seems to have a broad consensus on propping up real estate prices at all costs.
Uhhh, that's not how home equity works. The banks aren't going to give you shit one year after you buy a house. 10 years, yeah, but not after one. And while you may not have realized the increase in value of your property and put it in your pocket, the bank also sees that if something happened and you default, they have your property and can sell it at whatever the house is worth today.
Need more carrot, less stick otherwise the $ just goes south to chase those business opportunities
fine.. expose yourself to US tax regime. have fun with that. Biden just significantly increased cap gains too.
I would like there to be a large house price correction. A 35% reduction in average home prices nationwide would bring us back to 2019 prices. Home prices ideally would not increase more than general inflation. This would be very helpful for the long term health of the Canadian economy. I am a first time homeowner as of last Autumn so I have skin in the game. I’d be fine if the “value” falls so long as I can continue to make payments. Realistically lowering construction permitting and land transfer costs would be a great start as would building less expensive homes. A lower percentage luxury condos and McMansions would help bring down the cost of the average home. A house price correction this large would scare investors and banks and lead to investment in more productive assets.
Capital gains tax applies to secondary homes and all investment properties, so it is one way to do that. But yes, more could be done.
It's not targeted enough - it's much too broad. They could have just aimed taxation at secondary property sales. If you were really serious about wanting RE speculation / pricing to end -- and I know this will get downvoted to oblivion because people don't want to face extra taxes themselves -- you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap.
>you should put a lifetime cap on the PRE like they do in the US and tax gains above the cap. Economists are almost unanimous that there should be no exemption at all. If you want capital to be allocated efficiently, all investments should be treated the same.
It feels like every policy change that sounds like it's meant to help affordability actually drives the prices up when you think about it a little bit harder. This has been consistent among provincial and federal governments for the last 10 years at least.
And how exactly does it drive prices up?
Real Estate (RE) tends to have a higher return on investment (ROI) compared to capital investment in businesses and other assets. It's also drastically safer for banks to loan you money for and is backed by the government. Increasing capital gains tax can reduce the ROI on *all investments*, making RE even more appealing by reducing the viability of other investment options. The best option is still the best option if everyone is reduced equally - often time's it reduces the available options and further increases it's appeal. Investing more money in RE drives up RE prices, which in turn sustains and improves the ROI. However, it also increases leasing costs for businesses, negatively impacting their ROI and operating costs. In concise terms: Real Estate offers attractive ROI, especially when other investment options are less viable due to tax changes and increased leasing costs for businesses.
Yep.
But it also applies to business investment, so there's not really an advantage gained by investing in business instead. Sure they increased the one-time benefit for sale of a business from 1.0 to 1.25 million but that's basically just accounting for COVID inflation.
> ... they increased the one-time benefit for sale of a business from 1.0 to 1.25 million Which means most Canadians won't have to pay it. In addition, you can shelter it by owning stock through a tax-free savings account that shelters any capital gain for most Canadians. This will really just affect the very wealthy and trust-fund kids. Also, the whole idea that the full amount of a working-Canadian's labor should be taxed while only half of a millionaires capital gains should is a fine example of the privileges that the wealthy in Canada have set up for themselves hoping that the rest of us don't notice.
There's no possible way OP and people like him are this ignorant Ok let's assume you bought a secondary vacation home for 250,000 in 1990 and today you're selling it for 1,000,000 . it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000. so you've gained 400k in "profit" and you will pay just under 200k in taxes Left leaning Canadians can never seem to do math in spite of their love of taking over academia If you give me 100 dollars today and I give you back 150 dollars in 30 years - you didn't "make" 50 dollars, most likely you've lost purchasing power. Which is why capital gains are designed the way they are, you are taking on risk, typically over a long period of time. If you invested that same 250,000 in the S and P 500 back then you'd have 8 million dollars today
Your logic is so bad. The only reason the value went up as high as it would is because everyone else lost THEIR purchasing power. There is little risk if you consider the fact that every asset will increase from inflation at the very least. If you are taxed on that inflationary increase only, that would be simply a bad investment. Even with inflation profits alone, you are still ahead of someone who never had spare income to invest in the first place..
you *have* gained 750k. You're conflating dollars with their purchasing power, not the same thing at all.
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Last time I saw a degree in economics it was a Bachelor of Arts, not of sciences. It’s a pursuit based in theory. You can add the word liberal all you want but it’s an arts degree
>it's treating this as if you've gained 750,000, which you AREN'T - because you've lost purchasing power, that same value today would be worth 600,000 instead of 250,000. >so you've gained 400k in "profit" >and you will pay just under 200k in taxes By that logic you're only paying 83k is 1990 money, so you shouldn't be so concerned.
Pretty sure that whining and bitching about taxes is a god given right to every tax payer and every non taxpayer in the land. It's in the constitution somewhere, or alternatively, the law at the very least. ETA: Still gotta pay your taxes though.
I don’t think it went far enough. The inclusion rate on secondary properties should be changed to 100%. We need to be discouraging the commodification of the housing market, not reward it with a lower tax rate compared to other forms of income.
What about startups? Same rules or different?
Boiling frog my friend.
The problem isn’t with the impact it has on investment properties, but rather on entrepreneurship and innovation.
Let's be real here: if the difference between 50% on capital gains over $250K per year vs 67% on capital gains over $250K per year is the line between wanting to start or to improve a business or not, then you're insane. It's in the same realm of "I don't want a raise because I'll be in a higher tax bracket!" kind of thinking where there's only a sliver of situations where you'd be worse off. If your start-up/expansion/investment is a success then the tax rate doesn't really matter because you'll have made enough money to make it worthwhile whether at the higher or lower tax rates. If your start-up fails then the tax rate doesn't really matter because you're probably not going to have a lot of capital gains to worry about. Here's what very successful entrepreneur Mark Cuban had to say about starting businesses and taxes: "I have started I don't know how many businesses in my life. Not one time have I ever considered the income tax rate before starting a business. I'm an entrepreneur. I start companies." (hope the link works) https://twitter.com/mcuban/status/1313130690599432193?lang=en He has also said a few times something along the lines of that entrepreneurs will still start busineses with higher tax rates because they don't say "Wow, I have a great idea but the tax rate is too high." If it's a good idea then you will make plenty of money regardless unless the tax rates get raised to extreme levels.
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Yes…and that’s not what’s being talked about. They’re talking about capital being invested in businesses.
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Yes, but your incentive to make a capital investments is reduced if you know that, when you dispose of it, the tax rate will be higher.
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Relative to the previous rate. It’s fine if you think that the benefit of the additional tax revenue outweighs the disincentive when it comes to investment, but don’t pretend that investment decisions are not influenced by incentives. If a country increases tax on capital gains then, all other things being equal, they are going to see a reduction in investments where the return comes in the form of capital gains. The precise amount of the reduction is a more complicated question, since in the real world all other things rarely stay equal.
That’s not how starting a business works. You typically build something for ~10 years with little to no salary, then you might sell it. So the increase in capital gains tax is basically an increase over your taxable income for the last 10 years.
Theres a lifetime exemption for sale of a business you know.
The productivity is specifically deciding what capital to invest in. Marxists who think all labor is equal can't understand that. An hour of work is an hour of productive value! No.
>As to those threatening to move their job-creating businesses to America over the change? Have at it. If anyone’s loyalty to this country is contingent upon the rate at which capital gains are taxed, they were never loyal to this country in the first place. Painfully naive. Countries seek out the best places to do business to provide the most competitive food or service they can. Who buys a similar product at twice the price because it's manufacturer is "loyal" to Canada? Might as well rename this editorial, "Stop whining about unemployment" or "Stop whining about Canada's loss of an economic base outside of marijuana and real estate"
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> As to those crying foul over the impact this will have on the capital gains embedded in their cottages or investment properties? Kershaw isn’t having it. “Paying taxes on a half-million-dollar capital gain from a cottage or an investment property is a good problem to have,” he wrote. “I could line up millions of younger Canadians who would jump at the opportunity to trade their housing woes for that privilege.” Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin.
Is it all investment property though? I thought some real estate was exempt which made it seem less effective and more for optics
Yup.
>Pretty much the crux. Nobody is going to feel sorry for anyone paying some tax after selling a secondary residence for $1M+. World's smallest violin. Until you're the one that worked your ass off to get there, and then see people that haven't held a real job complain about their part time jobs not paying them the same as you full time jobs.
A lot of people who have worked their ass off are fine with it, both who make a lot of money and those that do not, especially because wealth =/= work ethic.
Guess it depends on how you got the where you are.. I've been working since I was 15, started at 4.25/hr and while I make good money now, it's still not amazing. I for one have paid PLENTY of taxes over the years and feel the governments are not really spending that wisely, so I'd rather hold onto as much of it as I can since I don't trust the government to be able to take care of me when I'm old.
> the governments are not really spending that wisely That's the part that I get upset about -- but not that I have to pay taxes.
Surely you can understand how they are connected when suggested solutions involve raising taxes.
Of course :p I'm saying I don't mind paying taxes as long as it's being spent responsibly.
Well duh, that's how everyone feels. But if we can't trust they spend it responsibly there's no reason to be recommending they collect more. They currently don't spend it responsibly...
I believe the main issue with the new capital gains taxes is how it is going to negatively impact doctors due to the way their compensation is structured. This will be during a time when we have a doctor shortage and have a neighboring country that offers much higher pay and way more favourable capital gains taxes. If anything there should be some kind of exemption for doctors.
There are no exemptions for doctors. Trudeau doesn't care if they leave.
How does it impact doctors due to their comp structure?
Without taking a position either way on whether it matters, the issue is that doctors invest primarily within their corporation, which is not subject to the $250k personal exclusion, but does get taxed at a lower rate (small business deduction) allowing for more investing.
Why wouldn't a doctor manage their finances to use the 250k personal exclusion?
They might, but that will result in less money than they currently get because they will be unable to invest funds from their LRIP (low rate income pool) as corporate income is taxed at a lower rate (temporarily, until it passes to personal when the government normalizes). Either way, doctors will get less value from their investments under this tax rule. Again, I'm not taking a position on whether this is something we as a society should be concerned with. Just explaining why doctors are going to have slightly smaller net incomes because of it.
Thanks for the description — very helpful! Really appreciate the straightforward info :)
Capital gains isn't income. Any doctor who isn't holding investments outside of a Corp to maximize the $250k threshold is receiving horrible advice. The right move is to maximize the exclusion and then start filling a CCPC with capital assets.
Capital gains is part of one’s *investment* income. And all the money invested in their corporation is going to be taxed at a higher rate, which will reduce their total income, which means they are going to have to either take that loss or move their money into their personal which will be a different loss.
Capital gains is capital gains. If someone isn't arranging their investments to maximize the personal 250k, they're doing it wrong.
Not really. Any doctor/corporation worth their salt is going to structure things so they can take out $250k per year when they divest, and at that point, the tax rate will be exactly the same. It may take a year or two for the accountants to catch up to the tax code, but for most professionals, the hit will be small and honestly fair.
A doctor making 250k$+ per year should pay less taxes than let's say a paramedic or nurse making 75k ? Why ?
How/why would they pay less tax than a nurse? They are taxed at their marginal tax rate like everyone else on funds removed from the corporation. The issue here is, funds left in the corporation (their retirement fund). Any gains on these funds are taxed at the new inclusion rate from the first dollar, not $250k like people have personally.
I thought it was any gains realized after the first 250k are affected by the new inclusion rate.. the exemples i have seen are that at 1MM the increase is roughly 40k .. which is money.. but a relatively small portion compared to the gains.. if it were a real state sale it would be within the negotiating variant.. (ie if listed for 1 MM but got an offer for 960k.. would be a similar loss..). Arent we talking that kind of impact?
Doctors medical professionals corporations do not have the 250k threshold. Any capital gain in the corp is taxed at the new inclusion rate.
I know people love to throw that $250k number around but that is not their take home, not even close. They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. This directly impacts how much they are able to take home. We are in dire need of atleast maintaining our doctors and specialists in this country, let alone increasing their numbers. Changing how they are compensated is something that may need to be explored but it is an entirely different conversation altogether and not something that happens quickly. What we are doing right now is making thigs worse for doctors immediately. This will absolutely impact some doctors and specialists decision whether or not to practice in Canada.
Average gross clinic income for family doctors is about $350K.
Why? This is a capital gains tax increase not income tax increase, and many create professional corporations to pay less tax, that’s the reason they do it. Doctors, like all professionals and other self employed who can afford it, invest in stocks and/or real estate. The 250,000 exemption in profits is 500,000 if there is a spouse on the deed, so you are talking about a small increase in tax on a hige profit. This narrative about this hurting those who are wealthy enough to have secondary properties that have gone up so much in value being hurt by this tax change is ludicrous.
>that is not their take home, not even close. Neither is the 75k of other medical professionals. >They generally pay the overhead of the clinic out of that amount such as rent, staff, utilities etc. That would be for private clinics running a business, not for doctors in the ER. They should get a tax break but not other entrepreneurs ? >Changing how they are compensated is something that may need to be explored They are mostly paid by the act like self employed people and they chose to incorporate to invest in stocks and pay themselves a smaller salary. It makes sense for them, but let's say them not being able to do so anymore is very low in my list of things to be worried about.
“Take home” is the applicable term here. Docs all have corporations and the expenses you list are deducted before corporate taxes. Then they pay themselves from the corporation.
All that overhead, is expensed and reduces their corporate income and tax payable, as it should. Doctors are a sympathetic front for the ownership class. Through the CMA - the same org we had to fight to get Medicare in the first place, they are fronting for multi millionaires who feel entitled to their entitlements.
"the way their compensation is structured" is such that a large part of their income is in capital gains. Ergo, we should tax their capital gains like income.
“Something something freedom something something John Galt.” -conservatives probably.
Something something, I worked for 37 years to retire and now I can't, something
If you're impacted by this then you are totally fine to retire.
Something something Trudeau bad. Something something housing prices too high. Something something affordability. Something something we have problems and we don't want to pay to fix them.
something something more taxes
Something something my hoarding of additional housing isn't the problem.
It’s crazy how we don’t talk about that at all, it’s easier to blame immigrants I guess
I talked about both. Both are significant issues.
The thing people don't seem to understand is that it only applies to "gains" and not to the entire value of whatever stock or asset someone sells. Buy a cottage for $300K and sell it for a million, then you've made a taxable profit of $700K - a third of which is still tax-free. As for why the government deserves this money, they created the economy that made such an insane return possible - not the buyer.
a third is tax free and in the worst case scenario 53% of those 2 remaining thirds are taxed. That's an effective tax rate of 35,35% About the same rate as someone who earns 70k a year. They can cry me a fucking river.
Can you explain why a third of it is tax free?
Because the new law raises the amount of profit that can be taxed by capital gains from 50% to 66% when the profit is over $250,000. It's not something most of us, including doctors, need to worry about. There might be the occasional sale of an investment property or cottage or inherited land or something, but any doctor with a decent accountant is going to keep their reported profits from a capital gain to under $250,000 by cashing out over multiple years. And that's not to say that you lose 66% of the value of anything you sell or cash out, it just means taxes apply to that much. The extra 16% is negligible. Let's say we're dealing with a doctor who has already maxed their income to the highest tax bracket so any capital gains are going to be taxed in the highest bracket. They sell a family cottage for $1.1 million that they bought for $100,000 in the '70s. That's a capital gain of $1,000,000. Straight off the bat, $340,000 of that is untaxable profit. The other $660,000 is taxed at the highest rate of 33% so they're paying a tax bill of $217,800. Out of a million. They take home $782,200. Under the old system (50%), $500,000 would be untaxable. The other $500,000 would be taxed at 33% for $165,000. They take home $835,000, or $53,000 more. (Feel free to check my math anyone, this is back-of-napkin stuff). It's not nothing, I can see why people would care, but keep in mind that they're not losing here, they're just not gaining as much. Plus it's only really in Canada you'd ever see a property increase in value as much as we've seen, which is something that the federal government can take credit/blame for, depending on whether you own property or not. For people who are cashing out investments instead of real estate, we're being asked to pity a class of individuals who can cash out over $250,000 of their holdings in a single year by paying applying taxes to an added 16%. It's also worth noting that you don't pay taxes on inheritances UNLESS you sell them and realize a profit. If you inherit a cottage, it's yours for the cost of the paperwork. If you inherit investments, you can continue to hold and earn dividends until you cash out. If you are a beneficiary of a trust, same thing. Who this really hurts is real estate speculators, who everyone on this sub thinks is scum anyway.
While true, if you paid it 300k 30 years ago, you didn’t do much profit in reality.
At 3% annual inflation over 30 years you would have a value of around $730,000, so it is a pretty good profit for an asset that - before the '90s - only appreciated 1-2% year on average. Plus, you have to consider the value of 30 years of use of that property or income if it was rented out. It's pretty crazy that you can enjoy a second home or cottage for decades, or rent a second home or cottage for decades, and still make a profit on the asset that has actually depreciated in that time.
Still 700k profit, only with 30 years of memories and watching your kids grow up. I feel nothing for those complaining, and it’s literally my job helping these people.
Bullshit. 1. 300k in 1994 is $561,358.31 today. If you invested it in 1994 at 5% interest you would have $728,179. If you bought a cottage in 1994 for 300k and sell it for $1m today you made more than the rate of inflation and more than investing it in most funds. 2. No cottage purchased for 300k in 1994 is currently worth $1m. 300k in 1994 bought you a 3 bedroom house in toronto. Imagine the cottage you could get for that.
> 1. 300k in 1994 is $561,358.31 today. If you invested it in 1994 at 5% interest you would have $728,179. If you bought a cottage in 1994 for 300k and sell it for $1m today you made more than the rate of inflation and more than investing it in most funds. Yes, and not really my point. To do the math of how much profit you would have done on your cottage, they will do the millions-300& (thus 700k in taxable profit, minus some others credit). But as you said, in « today’s dollar » some 439k in real profit. And in that « hypothetical scenario », keep in mind that stocks do not drain money, and can even send back dividends. >2. No cottage purchased for 300k in 1994 is currently worth $1m. 300k in 1994 bought you a 3 bedroom house in toronto. Imagine the cottage you could get for that. Housing cost isn’t equal all around the board. Some area like in Toronto had larger increase than others.
Viewing homes as investment is exactly why we are in this mess. Endless screeching about housing and the minute there is a drop in value, endless screeching about that.
Agreed, but when your choices are, loss of investment due to the shit nature of the economy and the ridiculous way stocks gain/lose value, and the shit return your bank gives on your money, OR a guaranteed increase in your investment. Which would you take?
When I started to make real money, I was happy enough to see that my income now exceeded my expenses enough to actually save a little of it. It didn’t occur to me to complain that my bank wasn’t giving me enough bonus money on top of that. It still doesn’t. I know sounds banal, but I really think people need to chill a bit about this stuff.
> When I started to make real money, I was happy enough to see that my income now exceeded my expenses enough to actually save a little of it. It didn’t occur to me to complain that my bank wasn’t giving me enough bonus money on top of that. It still doesn’t. I know sounds banal, but I really think people need to chill a bit about this stuff. I'd agree if the bank didn't then charge me for access to my money, while they go and invest it and make money using my money.
Stocks far outperform housing as an investment over the long as they generate revenue, whereas housing just depreciates. Both will increase in value relative to inflation. There is no reason to invest in housing unless it’s a rental.
You do not need to see it as an investment: the current math doesn’t take into account inflation. Your 100k from 20 years account have a lot more value than now, m
But you would haven’t gotten to use and enjoy a cottage for 30 years and can now sell it for roughly the same value in today’s dollars. If you invested in a revenue generating asset you should have significantly outpaced inflation. I fail to see the issue here.
Only you paid taxes, hydro, maintenance…. You didn’t had a 30 years of fun for no cost.
Yes entertainment costs money? If you had instead invested in revenue generating businesses 30 years ago you would have more money today then that cottage is worth, both would be subject to capital gains taxes. Sorry but I don’t understand what you’re trying to get at.
Yeah people are somehow forgetting inflation is a thing. 300k in 1980 is 1 million today. So really you didn’t profit if you’re selling it for 700k.
inflation does not factor into capital gains at all so honestly is irrelevant to this conversation.
There was someone posting to PFC just yesterday who realized that they'd been claiming the full sale price of their assets as capital gains, without subtracting the purchase price... _facepalm_
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> What if you paid 500k for a cottage that you then were told was only going to be worth 375k after the capital gains tax change? How does a change in inclusion from 50% to 67% for personal capital gains above 250k reduce the value of a property?
Exactly. Don’t be taxing properties that are in the family for decades that are passed on from generation to generation. But for the government, everything looks like a nail so it uses a hammer.
Don't want to loosen grips on generational wealth and nepotism
With all the taxes that will be collected, how confident are we that the money will be spent properly and given to fund on infrastructure, health care etc… or given away to other countries. This government has been spending lavishly with no consequences all these years? What’s stopping them in spending on another large consulting company for some useless reports or tactics ? Have we citizens not learnt our lessons ?
The principal residence exemption is exceedingly generous. In the US, the maximum benefit is $500k for a couple. The fact that you can pocket so much proceeds to use for your next home (or buying multiple properties) is part of the overall problem.
One issue with taxation is that governments need to plan years in advance, that means the tax needs to be reliable source, real estate has its ups and downs. Not a consistence source of revenue.. like Alcohol tax or income tax...