Today's discussion:

Sorry, Canada, but we can’t tax our way to prosperity

We must recognize that economic growth and financial stability are what underwrite the costs of the social supports that we expect in a modern developed economy.

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RJK Wells

What to make of this latest tax salvo from the Trudeau Government, other than it being their version of the failed Spanish encomienda system? The only outcome of this feudal approach will be a slow and steady economic decline, all under the control of an ever burgeoning bureaucratic ‘encomenderos’ class in Ottawa, taking more of the fruits of the labour of Canadians, leaving us with less.

6th May 2024 at 8:45 am
Kim Morton

When one looks at the Sunshine list, there is an incredible number of government employees that have taxed us into their prosperity.

6th May 2024 at 9:23 am
Paul Attics

Is anybody asserting that we need to “tax our way to prosperity”? Not likely.

We do need a tax system that encourages economic growth, while being fair, and generating enough revenue to fund our society without going into too much debt (too much debt is when the debt service cost alone is one of the biggest slices in a government expenditure pie chart). What constitutes fairness and a healthy societal structure are obviously debatable and different political parties and citizens will have different positions. However, economic growth is the quantitative measure of success, or failure, of whatever way we go.

Unfortunately, those with the wealth also have the political power to incrementally make the tax system more and more favorable over time. Naturally, they will also have the disproportionate power to push back on tax adjustments that they don’t like.

6th May 2024 at 8:39 am
Greg

Should there be reward for successful innovation and entrepreneurship, sure.

Is there innovation in owning real estate, or especially a cottage? Or in a professional hiding income in a small business to allow tax free accumulation and lower tax rates? Or in buying and selling stocks?

Not so much.

6th May 2024 at 3:41 pm
Peter Byrne

I learned all this when I was quite young playing the video game SimCity. When I raised the tax rate too much the companies failed, jobs dried up, and prosperity evaporated.

6th May 2024 at 1:48 pm
A.Chezzi

No we can`t but everyone and every company can and should pay a fair share. The argument that companies provide jobs and taxation will kill jobs is a canard. It is just a way to avoid paying the taxes they should be paying. Companies have so many loopholes and lawyers to get them out of paying what they should. Companies profits are made on the backs of labour and labour should be sharing in what the companies are making. Capitalism is good at making money but poor at distributing the wealth. There has to be a time when enough is enough.

6th May 2024 at 12:40 pm
Gord Edwards

Could you define “fair” and the amount of taxes companies “should be paying”?

Jagmeet Singh likes to talk about “excessive profits” but I’ve never heard him define what acceptable profit is nor how he came to that number. As well the existence of government mandated “excess profit” implies the existence of “minimum profits”. If a company is subject to having such “excess profits” taken away in good times, would not the government be reasonably expected to top up profits in bad times?

6th May 2024 at 3:00 pm
Valerie

Given that the lower capital gains tax existed during a long period of declining productivity, it seems that in practice it failed to work. Strange to see the mix of opinions (across news sources) decrying both the decline in productive investment and the hit to cottage owners. Raising the inclusion rate is a blunt instrument, but so was lowering it in the first place.

6th May 2024 at 6:48 am
Gord Edwards

I don’t think you can blame the existing capital gains approach for lack of growth. There are many factors that have resulted in declining productivity such as government regulation, overall tax burden on Canadians, attractiveness of the US employment market, etc. A smart capital gains taxation regime seems to be a necessary but not (alone) sufficient condition to generate growth.

The change in capital gains taxation is normally being talked about as if it is one thing. I see at least two and potentially three types of scenario:

– 1- all tax payers for whom capital gains over $250K increase. Which effects the cottage owner etc.
– 2 – all corporations for which all capital gains increase.
– 3 – perhaps small business, doctors etc that have been the focus of a lot of commentary in the news. I think this is a specific case of type 2 as they are captured as corporations. But the impacts are distinct from type 2.

The idea of someone’s cottage value skyrocketing resulting in more taxes doesn’t engender great sympathy from me. I’m all for as low as practical taxation but people can debate the appropriate level of taxation. But buying real estate doesn’t really stimulate the economy. I’m much more concerned about type 2 and type 3 (links to economic growth).

Unfortunately in some cases those arguing for or against the changes use the different types/scenarios to avoid criticism of their position. If there is a type 3 concern, respond with a type 1 example – using the benefits of oranges to deflect criticism of apples.

6th May 2024 at 11:09 am
Karen Breakey

“No country ever taxed its way to prosperity. That is a lesson firmly rooted in reality.”

Or firmly rooted in fantasy. Economic security for all and excellent infrastructure including education creates real prosperity. Here are the actual facts, firmly rooted in reality. US numbers.

“For tax years 1944 through 1951, the highest marginal tax rate for individuals was 91%, increasing to 92% for 1952 and 1953, and reverting to 91% 1954 through 1963”
From: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_States#:~:text=For%20tax%20years%201944%20through,tax%20years%201965%20through%201981.

Gross national product (GNP), which measured all goods and services produced, skyrocketed to $300 billion by 1950, compared to just $200 billion in 1940. By 1960, it had topped $500 billion, firmly establishing the United States as the richest and most powerful nation in the world.” From: https://www.history.com/news/post-world-war-ii-boom-economy#

Looks a lot like taxing your way to prosperity.

6th May 2024 at 12:23 pm
Dennis

Of course a lot of capital gains tax was paid by people making less than $100,000 when you remove capital gains. Retired people like me are the ones paying much of the capital gains taxes, because we are living on our investments. I don’t have any employment income. To argue that someone making $400,000 a year should not have capital gains taxes increased because that person does not have another substancial source of income is absurd.

6th May 2024 at 9:48 am
MARGARET DENSMORE

We desparately need a more acountable government.

6th May 2024 at 8:47 pm
L Tuff

Why does Freeland keep pretending she knows anything about finance, economics or even simple common sense. This woman is so far out of her zone she is totally incompetent. This government has to GO NOW!

6th May 2024 at 7:22 pm
Lauraine

What in our standard of living is getter lower? Compared to what??? what we think we are entitled to? And if that means we do not have as much to blow on wants? So what, get used to reality and be grateful for public healthcare and education.

6th May 2024 at 5:05 pm
Valerie

Who decides how much healthcare we’re entitled to? Many covered surgeries, like effectively buying mobility back in old age, can hardly be considered an absolute need. Don’t be surprised when young people most exposed to other kinds of standard of living decline don’t draw the line between needs and wants generously.

6th May 2024 at 8:03 pm