- cross-posted to:
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- cross-posted to:
- [email protected]
In its 2024 federal budget, the Trudeau government proposed steps that would help equalize the tax rates between the richest Canadians who primarily make their money from passive income, and working people who earn a paycheque. These proposed changes to how capital gains are taxed would only require the richest 0.13 per cent of Canadians to pay more, alongside help to address exploding housing costs.
Despite the narrow scope of this change, it (predictably) generated outrage among some of my wealthy peers alongside those who seem ready to go to battle to ensure that the very rich continue paying less tax than working people as a per cent of taxes on income.
It’s not an option available to most people, and yet while working people are taxed on their full paycheque, only 50 per cent of capital gains are currently taxed. I may pay a higher dollar amount compared with some working people, but I pay a much lower rate, even compared to high earning doctors, lawyers and engineers.
Why should I pay a lower rate just because I was lucky enough to have money to invest, and why should someone who actually works for a living have to pay a higher one?
As you move up the wealth and income scale, you come across fewer and fewer people who are making most, or sometimes any, of their money from a paycheque. Instead, the rich invest in the stock market, property and other ways to keep their wealth growing. As such, they have enjoyed lower tax rates for decades.
Meta recently announced the layoff of 11,000 people. This resulted in a 20 per cent increase in their stock price, and a dividend issued to shareholders. I own stock in Meta. If I sell that stock and realize capital gains, I will have directly benefited from an already profitable company that has just negatively impacted the lives of thousands of people.
At the very least, I should be paying the same per cent of tax on those gains as former employees would have paid on their salaries.
Yeah, to the tune of 100%. Passive income isn’t a thing. It’s just someone else’s labour value that’s been denied to them.
On the other hand, providing capital increases the value of the labour applied. Giving a tradesperson and additional capital might mean they can afford better tools that allow them to work more quickly, accomplish more per hour of labour and therefore be able to charge more for that hour while the customer simultaneously pays less for the task being done. The tradesperson is then able to pay back that capital plus some gains for the person providing the capital. Everybody wins, the investor gets more money than they started with, the tradesperson earns more after paying back the investment than if they hadn’t taken it in the first place, and the customer gets a lower rate for the tasks that need to be performed.
The problem is when we let that scale up to the point of there being people with essentially endless funds to spend on things like mega-yachts and ridiculous mansions, while others aren’t even getting their basic needs met. The answer to me isn’t removing the benefits of capital income at all, but adding some progressive taxation to keep the net income more modest, and maybe some stronger/target employment regulation so the capital holders aren’t getting rich off labour that’s supported by government social programs.
Yeah, we already have an investment problem in Canada. Workers do extra unnecessary labour because there is less investment in them relative to the US. I see it at my work. We do extra work to shoestring together the tools that American companies buy for their employees. We try to compete on cost of input they compete on cost of output.