Dear John,

The capital gains tax increase has been making headlines again, so I thought it would be a good time to revisit this topic, who will be affected, and how the increase will hurt investment, productivity, entrepreneurship, and innovation in Canada.

When you sell an asset, like a stock, bond, or business for more than you paid for it, the difference is called a capital gain, which governments then collect taxes on.

First off, there is a misconception out there – often spread by our own elected officials! – that capital gains taxes only affect wealthy people.

This is simply not true. Expert analyses have shown that millions of tax filers have net capital gains each year, and many earn middle – or even low – incomes. Raising capital gains taxes will inevitably affect Canadians in all income groups.

Currently, depending on which province you live in, the top capital gains tax rate ranges between 23.8% and 27.4%, which puts Canada in the middle of the pack when compared to other high-income countries.

But the planned federal increase will mean that, depending on your province, the top rate will range between 31.7% and 36.5%. This means Canada will have among the highest and least competitive top capital gains tax rate in the developed world.

In fact, a recent Fraser Institute study found that after this increase, Canada will no longer have any advantage on the top capital gains tax rate compared to over three-quarters of industrialized countries!

This means it will be less attractive to invest in Canada, resulting in weaker investment, stagnant wages, and lower economic growth – at a time when we desperately need the exact opposite.

It is clear the government should abandon the proposed increase, and instead focus on improving the competitiveness of Canada’s tax system.

John, I’m happy to report that this study was shared across the Sun network, and our researchers discussed it on radio and podcast interviews right across the country. It was also seen by tens of thousands of people on social media!

This year we plan to release many more studies just like this one, explaining how government policies affect the lives of ordinary Canadians.

As Ottawa – and the country – enters a period of political change, I think you’ll agree that our work is more important than ever.

If you’re able to, please consider supporting us with a donation. We of course don’t rely on government funding, we rely entirely on supporters like you!

Sincerely,

Niels Veldhuis
President
The Fraser Institute