Taxing times call for taxing measures

With so much spending already announced, we were left wondering what the feds would actually end up unveiling at this year’s budget meeting. 

The answer? Tax changes to pay for all those plans, obviously.     

What happened: The federal government unveiled its 2024-25 budget yesterday. The biggest news to come out of it was an increase in the capital gains tax inclusion rate. Starting June 25, gains over $250,000 will be taxed at a two-thirds rate, up from one-half. 

  • The feds estimate the change will impact ~12% of Canadian corporations and the top ~0.13% of earners (around 40,000 people), while in turn generating ~$19 billion over five years. 

Why it matters: The feds have to find a way to pay for the $52.9 billion in new spending across housing, defence, AI, and housing (it deserves a second mention) while somehow keeping the deficit below the $40 billion threshold.

Yes, but: Some economists and business leaders warn raising taxes on capital gains could be a net negative in the long run by discouraging investment and entrepreneurial risk-taking, stymieing efforts to improve Canada’s bad-and-getting-worse productivity numbers. 

  • Perhaps anticipating this criticism, the budget also includes a "Canadian Entrepreneurs' Incentive" that reduces the inclusion rate to 33.3% on a lifetime maximum of $2 million of capital gains.

Was anything else new announced? Yep! Some noteworthy stuff includes a new carbon rebate for small biz, an official price tag for the first phase of national pharmacare ($1.5 billion), and a plan to repurpose underused federal-owned office buildings into housing.—QH