Trudeau Defends Capital Gains Tax Increase Amid Growing Criticsm

Prime Minister Justin Trudeau pushed back at increased criticism of his government’s move to raise capital gains tax in the 2024 federal budget.

Mr. Trudeau spoke in Saskatoon, Saskatchewan, on April 23, defending the increase in capital gains tax as fairness for younger generations when confronted with recent statements by former Liberal finance minister Bill Morneau.

Last week, Mr. Morneau stated that the raise on capital gains—which will see those making over $250,000 per year from capital gains pay tax on 66.7 percent of the gains, rather than the previous rate of 50 percent—is a threat to investment.

Mr. Trudeau told reporters that the change in capital gains tax was aimed at helping younger generations.

“We’re doing it by asking people who are the absolute wealthiest in this country to contribute a little bit more,” he said. “I understand for some people, this may cost more if they sell a cottage or a secondary residence. But young people can’t buy their primary residences yet.”

The Canadian Medical Association (CMA) has also raised concerns that doctors’ retirement savings might be affected by the capital gains tax changes as most doctors operate as small businesses and rely on professional corporations to save for retirement.

Related Stories

The CMA added that the changes could even affect the recruitment and retention of medical professionals within Canada.

Mr. Trudeau reacted to a reporter’s question on the CMA’s concerns, saying that he felt it was unfair a student or an electrician should pay taxes on 100 percent of their earnings while others pay taxes on only 50 percent.

“So yes, we are asking the most successful in this country to do a little bit more to make sure that everyone can see themselves in the success of this country,” he said.

When asked about concerns that Canadians who use investment properties to fund their retirements could face higher taxes with the increased rates, Mr. Trudeau noted that the tax increase will not affect primary residences.

“At a time when young people have started to give up on the dream of eventually ever being able to own a home, it was really important to rebalance the situation,” Mr. Trudeau said.

Mr. Trudeau’s comments come as he has tried to frame the capital gains tax increase as intergenerational economic fairness but has met with resistance from several groups and associations.

Over 1,000 CEOs and Canadian tech business leaders signed an open letter to the prime minister calling for a halt to the capital gains hike and warned that the move could harm economic growth.

“Anybody with experience in entrepreneurship and investment can see how this will stifle growth,” the letter stated.

The capital gains tax increase is set to be deferred for two months and will not come into force until June 25, a move that Budget Officer Yves Giroux called surprising.

“Cigarette taxes, the increase came into effect immediately so we don’t want people to rush to the convenience store to buy cheaper cigarettes,” Mr. Giroux stated to the House of Commons finance committee. “But capital gains, we don’t mind giving two months’ heads up to those who could rearrange their affairs so that they can escape the higher capital gains rates.”

“For the capital gains, it’s very likely to lead to a phenomenon where people will sell some assets before June 25 so their capital gain is all included at 50 percent rather than the higher two-thirds rate,” he said.