Justin Trudeau has to do something dramatic to let Canadians know that he really is listening and the capital gains reversal could be it. 

By Sheila Copps
First published in The Hill Times on July 1, 2024.

OTTAWA—Justin Trudeau should pull a Doug Ford.

Apologize and say his government got it wrong when it announced a hike in the capital gains inclusion rate from 50 per cent to 66.7 per cent for annual gains over $250,000.

Premier Ford reversed his controversial position on selling off greenbelt land by simply apologizing and changing his mind. The political fallout from that reversal was nil.

A flip on the capital gains hike could signal that Trudeau is willing to admit when he is wrong.

The budget announcement was one reason Liberals lost a key byelection in Toronto-St. Paul’s last week. According to a demographic analysis of the riding by Environics, the average household income there is $190,945.30.

That is more than double the average before taxes income of $92,764 for the rest of the country.

An apology would reinforce comments made by the prime minister the day after the shocking loss of a riding that had been held by the Liberals for three decades.

Commenting on the outcome, the prime minister said “I hear people’s concerns. And frustrations.”

Simply repeating that he is working to ameliorate the situation will not be enough.

Inside the caucus, members are quietly grumbling about their leader’s unpopularity, predicting a general election could be disastrous if the party’s numbers are not shored up.

Trudeau has to do something dramatic to let Canadians know that he really is listening and the capital gains reversal could be it.

The issue would not matter in most ridings as ordinary Canadians cannot hope to have an annual capital gain in excess of $250,000.

But for those who do, it was the straw that broke the camel’s back in last week’s vote.

That, and the prime minister’s personal unpopularity, were certainly factors in the surprising defeat. They both coupled with the government’s position on the Israel-Hamas war to create a perfect storm.

The war in the Middle East even had the mayor of a Montreal suburb calling on Toronto voters to repudiate Trudeau. Mayor Jeremy Levi of Hampstead used X (Twitter) to literally “implore” voters in Toronto to vote for Don Stewart and Pierre Poilievre.

The mayor accused Trudeau of lying to all Jewish Canadians about his promise to do something to combat antisemitism. “This is no longer about Jews, but a leader who consistently failed.”

Deputy Conservative leader Melissa Lantsman penned a similar message to constituents in the riding, asking them to send Trudeau “a message about his betrayal of our Jewish community” because of his silence on rise of “Jew hatred” since the beginning of the war.

According to the most recent census, approximately 15 per cent of the riding population is Jewish, but Lantsman refused to say whether the letter was sent selectively to Jewish households.

Couple that with the reality that the Liberal candidate, Leslie Church, well-known in political circles as chief of staff to Chrystia Freeland, was largely unknown in the constituency.

According to some Liberal sources, there were other, popular local candidates who were willing to step up when Carolyn Bennett vacated the seat, she had held for a quarter century.

But they were bypassed for Church, largely at the insistence of deputy prime minister Freeland.

Freeland holds an adjacent riding to that of Toronto-St. Paul’s. In University-Rosedale, the demographics are very similar, and with the shocking loss last week, Freeland must also be wondering about the vulnerability of her own seat.

She campaigned hard for Church, suggesting at a press conference on the day of the vote that the election was about “two visions of Canada, two sets of values.” Freeland said the alternative vision to the Liberal one was “cold, cruel and small” that would lead to cuts.

Freeland’s pitch did not appear to resonate with the local voters.

After the polls closed, Conservative organizer Jenni Byrne made an unusual appearance on CBC to say her candidate had lost the election, when a few hours later it turned out the opposite was true.

At 4:30 a.m., the final ballot put Conservative candidate Don Stewart ahead by almost 600 votes. Church had led the polls through most of the evening, but the numbers in the advance voting prompted the flip.

Liberal insiders knew it would be a tough fight, but they thought the tide was turning in their favour in the last few days.

Caucus successors to Trudeau are already quietly organizing, although most pledge public support for the beleaguered leader.

Something dramatic needs to happen to turn this ship around.

Sheila Copps is a former Jean Chrétien-era cabinet minister and a former deputy prime minister. Follow her on Twitter at @Sheila_Copps.

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.