The axe attack

When groceries, houses, kibble and insurance costs more, people lash out at taxes. That makes sense. Especially in Canada, where we’re now seeing a property tax eruption.

Trump got it. No tax on tips. None on overtime wages. Ditto for government pensions for the wrinklies. So millions of people are looking forward to that break – expected to cost Washington a few hundred billion over the course of his presidency.

Drop taxes, get elected. It’s a time-honoured thing. Jean Chretien swept to office vowing to trash the GST (he didn’t). Now Pierre Poilievre is calling for a ‘carbon tax election’ during which he will wear his ‘Axe the Tax’ T-shirt. He says he expects to run against ‘Carbon Tax Carney’ and in the meantime he has just vowed to reverse Ottawa’s recent move to increase the capital gains tax inclusion rate.

As you know, half of a capital gain has been taxed as income in the year it’s received. Half has been tax-free. Been that way now since the autumn of 2000. This means making bank in the form of a cap gain was one of the best deals going for investors.

For example, if you sold a cottage or some Nvidia shares and scored a profit of $100,000, fifty grand would go into your pocket and the other half be added to annual income. Even if you were a mega-rich oligarch who ran, say, a free, no-advertising blog of financial advice and alluring dog pictures and were in the top tax bracket (54%), the overall tax on your hundred grand would be 27%. You get to keep 73% of it.

By the way, the inclusion rate used to be three-quarters under the Mulroney Conservatives, before being ratcheted down by the Libs. The last Chrystia budget (remember her?) proposed increasing that back to two-thirds, but only on the portion of an annual gain of more than $250,000.

In other words, an estimated 96% of the population would never face that inclusion rate. And many of those who might could stagger gains over successive years, thereby not crossing the quarter-million-dollar threshold. Most impacted by the two-thirds change would be people selling off secondary residences, investment rentals or long-held family properties. Much higher thresholds continue to be in place for farmers and small business folk.

Well, the enabling budget legislation never got passed since oppo parties obstructed Parliament for a few months. Now the House is prorogued until late Mach. The CRA says tough, we’ll collect it anyway. And Poilievre says phooey. When I’m PM, I’ll axe that tax change, too.

The CD Howe Institute argues that a higher cap gains tax will cost jobs (up to 400,000 of them), mostly in technology, and would fade the economy. Meanwhile the Canadian Taxpayers Federation is applauding the Con leader’s position. “Poilievre is right to oppose the capital gains tax hike that will punish Canadian doctors, entrepreneurs and people saving for their retirement,” it says. “The capital gains tax hike will blow a huge hole in Canada’s economy that we can’t afford.”

How about the carbon tax?

It’s intended to be revenue neutral. In fact it’s interesting, and surprising, to see my wife receive regular payments. About 90% of the money collected through the tax is paid to individuals like her in the form of rebates. The rest is used to help businesses and institutions drop their carbon output by switching from fossil fuels.

Anyway, seven premiers have railed against it. Alberta sees it as a special penalty on the oil and gas sector. Mark Carney says he will end it, or change it. And the feds collect no net revenue, insisting it’s just there to encourage people to switch to heat pumps or serial snuggling.

In short, most people do not understand capital gains or how they are taxed. They do not grasp the carbon tax – its intent, how it’s run or the link between that levy and the money which shows up in their bank account each quarter.

But they sure understand ‘Axe the Tax’ because that’s visceral. Being victimized is fashionable and ubiquitous these days. Trump tapped into that, saying America’s economy was ’broken’ at a time when it was the best-performing one on the planet with inflation squished, the jobless rate at a 50-year low, financial assets romping and wages increasing.

Taking a page from that winning electoral strategy, Poilievre states “Canadians are now living through hell” because of the “wackonomics” practiced by the current government. He would end the carbon tax along with the rebate cheques and has not spelled out how climate change might be addressed. His Alberta base is stridently behind him, polls show. Premier Danielle Smith’s refusal to join other premiers and the feds in opposing Trump tariffs – in defence of oil and gas exports – supports his position.

So, there ya go.

The current guys say increasing the tax on capital gains over a quarter million a year is responsible and fair. They claim increasing the price of fossil fuels to encourage people to switch away from them only makes sense for the future. In a few days the most powerful man on the planet, leading the richest country, will reduce taxes on corporations run by billionairess like Musk, Zukerberg and Bezos. He will axe the tax on individuals while erasing the green agenda, rolling back American support of climate accords and drill, baby, drill. He also won.

So here we are. A fork in the road.

About the picture: “Hi Garth – after seeing Samson the other day I thought he looked like my neighbors pooch,” writes Doug. “Bowie is 15 weeks old, smart as a whip and we get to pup sit him a couple time a week.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/01/16/the-axe-attack/