New 2024 federal budget | General financial discussion | Discussion forum

Higher inclusion rate starts for gains on or after June 25 this year.

savemoresaveoften said
Really only affects senior executives who gets stocks option etc, or those who makes a killing on their rental properties, I am ok with both and think it is actually a welcome initiative.
As for some of the spending initiative, not so much. A government (any government) just isn’t competent enough to spend in any responsible / sensible fashion. It does make a difference when one is not spending one’s OWN money. It’s hard wired into human behavior.  

Screws incorporated professionals. Doctors, lawyers, accountants, engineers, etc. Also, people who die unprepared.

Affects people who don’t enjoy even longer waiting times or might be looking for a family physician.

Sends a message that Canada does not want anyone to put too much effort and too many years into education.

Potential to further demotivate people from getting into small business.

Not quite sure what effect this will have on renters, but could reduce the number of rentals and hence jack up the rents.

Be prepared for the same rate for all schedule 3 items, etc, etc, and et cetera. It's coming unless stopped.

Alexandre said

mordko said
Screws incorporated professionals. Doctors, lawyers, accountants, engineers, etc.

Are you talking about capital gains tax or about some other part of the budget?

Capital gains tax structure is unfair to almost everyone. Why am I, salaried employee of a company, taxed at 100% of my income, while CEO whose primary income is stock options taxed at 67% of their income with first $250K excluded?

A fair tax system should tax capital gains as any other income. The fact that not even NDP dare to fix capital gains taxation unfairness says a lot about who every mainstream Canadian party caters to.
They would rather run budget deficit than eliminate tax loopholes favoring wealthy and influential.

Perhaps, with capital gains taxed as ordinary income, more people will prefer honest salaried employment to making living by speculating on stock market.  

Yes, about capital gains. Capital gains taxes apply to post salaried income. There is a good reason the inclusion rate is lower: to offset the impact of inflation.

Hypothetically, if I invested $100 30 years ago and doubled my investment, in real terms I gained nothing but my capital increased by $100. When the taxman takes a cut, he is inflicting a loss on investor.

Unfairness exists but its in relation to interest income when CRA inflicts a loss in real terms by ignoring inflation.

I understand none of this makes sense to someone who thinks that investing = gambling. You are not alone. Thats why we have low productivity as a country.

mordko said
Hypothetically, if I invested $100 30 years ago and doubled my investment, in real terms I gained nothing but my capital increased by $100. When the taxman takes a cut, he is inflicting a loss on investor.

Well its a bad investment because it fails to earn u a return that beats inflation AND tax, no different from those who wants 100% security and only buys GIC, and then complain inflation and interst income tax too high...

I am always a proponent of flat tax system, but Canada is a socialist free country, and most will not agree when it comes to election time.

mordko said
Yes, about capital gains. Capital gains taxes apply to post salaried income.

Interest income is post salaried income, too. Not taxed at generous Capital Gains schema.

There is a good reason the inclusion rate is lower: to offset the impact of inflation.

This is the only type of income where such excuse applies, why?

Your $40,000 salary from 30 years ago is taxed at the same rate now, even if you make more now. Today you will be taxed on all your salary income including first $40,000 of it.
Considering increases in such salary taxes as CPP and what else, that your employer and you will pay on first $40,000 you earn, you may even be taxed higher on $40,000 salary today than 30 years ago.

my capital increased by $100. When the taxman takes a cut, he is inflicting a loss on investor.
Thats why we have low productivity as a country.  

Using an example:
You (farmer in Canada) bought one share of an American public company from Peter (mechanical engineer employed by Canadian automotive industry) in January 2023 for $10 and sold it to Paul (Canadian software developer employed by Blackberry) in December 2023 for $110, making $100 profit.

Suppose, when you file tax return in 2024 CRA taxes you at regular income rates for this profit.
Suppose, at your income tax rate you would have had to pay $35 in taxes for $100 capital gains. You are left with $65 after tax profit on your original investment of $10. Still not bad, if you ask me.

Please explain how that will impact productivity in Canada. Which Canadian industry productivity will be impacted: farming, IT or automotive industry?

You are not explaining how would your or someone productivity will suffer if your capital gain is taxed at regular income rate, in an example I provided.

I would say, it could be the opposite, if using my example. Paying CRA $35 on $100 from stock speculations might force you, the farmer, work harder in fields to compensate for that.

While it is not illegal to earn income from stock speculations, that will not put food on people's tables.

Gaining tax free income from buying and selling stocks and bitcoins disincentivizes people from doing something productive. These activities take their time from doing something productive.

Get rid of capital gain generous tax avoidance schema and productivity will increase, because suddenly people will find that employment in industries that are actually producing something gets same tax treatment as speculations on stocks and bitcoins.

Alexandre said
You are not explaining how would your or someone productivity will suffer if your capital gain is taxed at regular income rate, in an example I provided.

I would say, it could be the opposite, if using my example. Paying CRA $35 on $100 from stock speculations might force you, the farmer, work harder in fields to compensate for that.

While it is not illegal to earn income from stock speculations, that will not put food on people's tables.

Gaining tax free income from buying and selling stocks and bitcoins disincentivizes people from doing something productive. These activities take their time from doing something productive.

Get rid of capital gain generous tax avoidance schema and productivity will increase, because suddenly people will find that employment in industries that are actually producing something gets same tax treatment as speculations on stocks and bitcoins.  

well some may specualte in stocks, some use stocks as an instrument to invest and diversify, and well deserve the capital gain break. A capitalist free economy needs capital, not interest only earners !

The point of why a tax break on Capitol gains exists is being missed in these posts.

The PRIMARY reason for a CG tax break is to support businesses by incentivizing people to buy company common stock which is a low to no cost method for the company to raise money to conduct their business.

When people buy common stocks they are taking a BIG RISK, as they might lose their entire investment. That is why the CG tax break exists relative to Interest income which has NO RISK via CDIC.

What needs to change is company executives who are allowed to abuse the CG system and take their income as stock which is taxed as CG so the most they pay is a 25% marginal tax rate even if they make 50 million or more per year. This is decidedly unfair to all salaried employees who pay a 53% marginal tax rate on just a few hundred thousand dollars of income.

The Liberals said they would stop this Company executive practice in their runup to the 2015 election, but were talked out of it....by Company executives ! Now after 10 years, this is the Liberal response....hit everyone with a CG tax increase on CG income over $250k. Yet, the 50 Million dollar company executives will still only pay 33.3% in marginal tax....a full 20% lower than 200k salaried employees. Less unfair but still GREATLY unfair.

Alexandre said
Even if I accept "productivity" argument, it still does not explain why Canadian taxpayers must pay from Canadian budget for American companies' productivity.

There is no productivity gain for Canada if Canadian buys share of an American company and sells it with profit to another Canadian.
If there is, for Canada, where is it? Use my example to demonstrate.

I can accept that when Canadian taxpayer buys shares of Canadian company with headquarters in Canada and most workforce in Canada, then maybe such taxpayer deserves a bit of a tax break from the Canadian government.

I do not see good reason why Canadian government should pay with tax breaks to people speculating with shares of foreign companies.
These tax breaks come from Canadian budget deficit, which is inflation impacting mostly poor and middle class Canadians. Also, from higher taxes on Canadians who earn living by actually being employed and producing something.  

If Canada starts punishing people who invest in this “American company” then the US government will reciprocate. We depend on investments from outside Canada. Which right now are flowing out because our country is unfriendly to investors. And thats why our productivity is low and falling compared to the US.

Money will always find a nice, warm and welcoming place. And that place will get a boost.