This Scribbler is amused by the furore over the increase in capital gains tax on gains over $250,000.
According to lobby groups opposed to the tax, the increase will ruin the economy.
They claim venture capital investors won’t invest in startups because they have to pay more tax.
They claim doctors will leave the country because they can’t build big enough retirement funds.
They claim farmers who use sale of the farm for a pension plan will have less in retirement.
They claim small businesses that sell a business to retire will have less for all the hard work over years.
That is essentially what those opposed to the increase — falling on 1.4 per cent of taxpayers – claim.
The media has done a good job as a mouthpiece for the tax opponents but hasn’t checked their claims.
This Scribbler remembers when there was no capital gains tax, and no write-offs for capital losses.
In 1971, the tax system was overhauled after recommendations by the Carter Royal Commission. That commission said a buck is a buck and all income should be taxed the same.
That four-year study of six volumes indicated fairness in taxation means the wealthy should pay more than others.
Equal taxation regardless of the kind of income didn’t happen.
The capital gains tax was levied at 66.66 per cent just like the new rate for high gains tax. Later it became 50 per cent.
In spite of all the claims about the new capital gains tax ruining the economy, Canada prospered.
Venture capitalists take immense risks investing in startups with a low per cent of success. The bottom line is if the startup looks promising enough they will keep investing.
Doctors who average $359,000 income in Saskatchewan (only $195,000 for family doctors) have the same retirement plan options as everyone else. Why do they need more opportunities to save money?
Farmers selling land will pay more taxes. Considering the government money that farmers receive during their career, is it not fair to pay some back in the end?
Farmers pay only 40 per cent of crop insurance premiums, have access to two government programs when income declines and can get interest-free cash advance loans. No one else has that security blanket.
Small business owners will suffer with higher taxes. The budget increased the capital gains exemption from $1 million to $1.25 million.
An increase in that exemption should ease the burden on small business and farmers.
As this is written the new capital gains legislation hasn’t been introduced.
Expect some walk-back for groups hit hardest by the tax.
Ironically, many of the same groups opposing the added tax also want government to cut the deficit something the tax will achieve.
Best case scenario would be a complete overhaul where everyone pays the same rate on all income.
Carter’s commission built an argument for a flat tax but no government will ever approve one. A flat tax wouldn’t allow government to tamper with the economy by offering tax breaks.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
