Liberals would be better off to focus on the good parts of their spend list than pick a fight on a tax increase that few understand and even fewer will be paying.
By Sheila Copps
First published in The Hill Times on June 24, 2024.OTTAWA—The Liberals want to pick a fight on capital gains. And Pierre Poilievre is poised for battle.
He has characterized the tax changes announced in the budget as “economic vandalism,” and has taken the unusual step of appearing on mainstream media television to fight the changes.
For her part, Finance Minister Chrystia Freeland has been leading the charge for the Liberals.
The deputy prime minister repeated her message that richer Canadians would not want to see “the public sphere so degraded,” and that the “wrath of the vast majority of their less-privileged compatriots burns hot.”
Not sure about the reference to compatriots? If Liberals want to occupy the political centre, they need to use ordinary language.
Freeland, and compatriot Small Business Minister Rechie Valdez have characterized the capital gains hike as tax fairness.
Prime Minister Justin Trudeau has also publicly defended the changes are a matter of fairness.
He says it is simply not fair that a teacher pays tax on 100 per cent of their income, while a business owner pays taxes only 50 per cent of “passive’ income capital gains hikes.
The last budget proposed a hike to two-thirds of capital gains. In the 1990s, the capital gains tax—pegged at 75 per cent—was even higher.
If Poilievre wants to hike the temperature on taxes, he thinks there are some political points to be scored.
His party was the only one to vote against the proposed capital gains changes, but he has already promised to do a complete revision of the tax system without any specific details.
Depending on where you sit on the political spectrum, the question of fairness is a moving target.
The Fraser Institute—a bastion of conservatism—claimed in a 2023 report that the top 20 per cent of income-earning families in the country pay more than 60 per cent of the taxes.
On the other hand, the Broadbent Institute says those figures are skewed because top earners also account for two-thirds of the nation’s total net wealth, while the bottom 40 per cent of net earners comprise just three per cent.
So just where do Canadians land on what constitutes tax fairness?
This is where the question of who will win the tax fairness fight turns.
Most Canadians who don’t expect a personal tax bite on capital gains have already moved on to other issues in their lives.
Those who do expect to pay a capital gain are hopping mad, and they don’t plan to forget it any time soon.
The Canadian Medical Association says the tax changes will negatively impact on family doctor availability, already at a crisis level in many parts of the country.
They are lobbying, along with their provincial organizations, for an exemption for medical corporations or—at the very least—measures to allow individuals in the corporation to share the exemption threshold in an indexed tax amendment.
According to an Abacus survey commissioned by the CMA, 76 per cent of Canadians with an opinion on the issue felt changes should be reversed for doctors.
The CMA’s president has said that a special exemption should apply to doctors because “We are unique. …We need to be treated that way.”
But if doctors are exempted, then what about farmers, and small business operators in other sectors?
They, too, would like an exemption or a change in the proposed law. And that’s what Poilievre is banking on.
Most Canadians are fully in favour of taxing the rich, as long as it doesn’t include them.
But they have already forgotten about capital gains, and are moving on to other issues.
Affordability, inflation, food prices, and housing are high on their agenda. And they really don’t care about a capital gains change.
So Poilievre is planning to roll up a rather confusing tax change into his attack on the tax-and-spend Liberals.
In the end, the only people currently following the issue closely are those in the top bracket who could be affected by the changes.
As far as they are concerned, it is not fair for them to pay more taxes, and they are not going to be moved by concerns of their compatriots.
Liberals would be much better off to focus on the positive elements of their spend list than pick a fight on a tax increase that few understand, and even fewer will be paying.
The message on dental care, pharmacare, and daycare is positive news for millions of Canadians.
That’s the battle that Liberals should be fighting.
Sheila Copps is a former Jean Chrétien-era cabinet minister and a former deputy prime minister. Follow her on Twitter at @Sheila_Copps.
