Few people who work for a living earn anywhere close to $250,000 per year.
And yet, an individual who holds a house for 366 days and sells it, trades stocks and bonds, sells shares in a mutual fund, or collects certain distributions from a Real Estate Investment Trust, until recently only paid tax on 50% of their capital gains. (On April 16, 2024, the Trudeau government announced it will increase to two-thirds the inclusion rate on capital gains above $250,000 while continuing to tax only 50% of capital gains below $250,001.)
Interest paid on a savings account or GIC, and capital gains accumulated in and withdrawn from an RSP, are taxed as ordinary income, not capital gains, meaning 100% of this income is taxed. Contributions to an RSP are limited to 18% of earned income reported on the previous year’s tax return, up to a maximum of $31,560.
Why are 100% of the earnings of people who work for a living taxed and only 50% of capital gains through $250,000 (and now two-thirds of capital gains above $250,000) taxed?
The contributions of countless people who go to work every day are obvious. Workers do things that other people and society as a whole need done. What does a person who manages their investments contribute to society? Does gambling in the derivatives casino, whose purpose is to increase the prices of financial assets like houses and apartment buildings, improve the lives of other people? Why do workers subsidize these activities by assuming much of the tax burden investors would otherwise pay?
What is so special about the number $250,000, which happens to be the income of just 1% of Canadian taxpayers?
Health-care funding, hospital staffing, and health-care professional training seats have failed to keep pace with population growth, retirements, and the increasing complexity of an aging population’s medical needs. Social housing construction, which added 20,000 units of purpose-built affordable workforce rental housing per year during the 1960s and 1970s, dried up almost entirely by 1993. Public school districts struggle to provide music and art programs in the face of perennial funding shortfalls. Millions of Canadians have no family doctor. Millions of Canadian parents struggle to access, let alone afford, daycare for their children. And yet, 1% of Canadian taxpayers are handed a huge tax exemption year after year after year as compensation for driving up the prices of financial assets.
The least Ottawa can do is tax 100% of all capital gains, just as it does the capital gains distributed by workers’ RSPs and the interest workers earn on savings accounts and GICs.
Bill Appledorf
Victoria
