New 2024 federal budget | Page 2 | General financial discussion | Discussion forum

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.

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 are very good points with merit.. Your thoughts on this show fairness to everyone and Canada first. Maybe tackling just the foreign equities capital gains is a great compromise

Too much socialist thinking that prefers to throttle the golden goose from laying golden eggs to pay for services all Canadians enjoy. The best jurisdictions in the world do what they can to attract business and capital investment through capital incentives, low corporate tax rates (even 0%) and encouragement for investors to buy the shares of companies operating in their jurisdiction. It is corporate and small business that generates the wealth in any country.

Post #21 is an example of shortsightedness wondering why Canadians should get a break buying the shares of a non-Canadian company. It is because reciprocal rights through tax treaties then encourage foreigners to also buy the shares of Canadian companies to boost their access to cost effective capital (equity). Imagine where our big Canadian companies would be if big US and European portfolio managers and retail investors were not buying the shares of those companies. Our big 20 would be starved of equity capital, and debt for that matter, since debt/equity ratios matter in securing debt at reasonable cost.

The short answer is we cannot generate productivity and GDP growth without our corporate entities having access to competitive capital to re-invest in Canada. There have been many articles written in the past day on how this change in capital gains taxation will further depress productivity in this country which is already seeing far too many headwinds in red tape, carbon taxes and the like.

Canada has already fallen to the bottom of the G7 and soon to the bottom of major developed countries in our GDP/capita growth (which is actually in decline, not growth) if we do not remove a series of headwinds impeding capital investment. We need a government which will dramatically open the doors wide to encourage capital re-investment in this country if we do not want to continue our slide into unmanageable debt, a 50 cent loonie and loss of jobs.

AltaRed said
There have been many articles written in the past day on how this change in capital gains taxation will further depress productivity in this country  

Still can't get an explanation how could farmer's productivity will be depressed from this change in capital gains taxation.
Will farmer's fields have less crops yield? Will he have harder time getting loans from Canadian banks to grow his farming business? Will he have more obstacles in selling fruits of his labour because capital gains are taxed a tiny bit fairer?

The impacted people seem mostly those who produce nothing. Flipping real estate property, reselling shares between each other in the search of a greater fool, getting rich on bitcoins and crypto, making killing on stock options - these are money making activities for an individual, but not productive activity for a society in general.

Alexandre said

The impacted people seem mostly those who produce nothing.

That’s only true if you believe that doctors (among other highly qualified professionals) produce nothing. Its an interesting way of thinking

The cost of the stock option itself is, of course, taxed as salary. 100% inclusion rate.

Alexandre said
Still can't get an explanation how could farmer's productivity will be depressed from this change in capital gains taxation.
Will farmer's fields have less crops yield? Will he have harder time getting loans from Canadian banks to grow his farming business? Will he have more obstacles in selling fruits of his labour because capital gains are taxed a tiny bit fairer?

The impacted people seem mostly those who produce nothing. Flipping real estate property, reselling shares between each other in the search of a greater fool, getting rich on bitcoins and crypto, making killing on stock options - these are money making activities for an individual, but not productive activity for a society in general.  

Maybe start reading the articles published on why this will harm productivity across a wide spectrum of businesses and industries. Members here should not have to keep repeating to you what is widely available. Productivity is measured in output per hour worked, which is most easily captured in GDP generated on a per capita basis.

Even your sole proprietor farmer will be hurt by decreased national productivity. His/her products will sell for less due to decreased purchasing power of that farmer's customers and his land will decrease in value due to decreased wealth of the likely buyers. No one will escape decreased economic output on a per capita basis.

Simple example: If I end up with decreased after tax dollars due to selling stock (which is also likely to suffer price loss because of decreased value of cap gains and thus fewer investors buying), I will buy fewer consumer goods, including fewer products farmers generate. That reduces both my and the farmer's contribution to GDP.

Losses in GDP per capita ultimately affect every corner of the economy. It is the basis of Economic Impact analysis and the multiplier effect. Surely almost anyone who has been to university has taken macro-economics. The concept is complex but not at all difficult.

RetirEd said
Briguy: Just to make sure nobody misreads your post #1, I want to make clear that the capital gains tax is not rising to 67% of the capital gain! It's just that the taxable amount of the capital gain is raised from 50% to about 67%. (I think that may turn out to be 66.6666...%)

Capital gains were for decades UNTAXED, justified by the risk - always unfair that earned income gets the worst treatment!

The TFSA system was invented to attempt to partially correct the perceived injustice of earned income being taxed so highly.

Nerdralph:

Here in NS, when single-unit rental properties are sold, most purchasers live in them, instead of continuing to rent them out.

That doesn't seem to make sense. Whoever moves into those units moves out of somewhere else, no?

savemoresaveoften: Flat tax is the dream of very high-income taxpayer. It would represent a massive transfer of tax liability from low-income to high-income taxpayers. This is why it's the darling of Alberta's right-wing politics.

Alexandre:

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

Exactly. All the gains in the real-estate market cornering, and the mortgage money earned by lenders, contributes nothing to the economy except whatever extra investment the winners choose to make. If that's in Canada at all!  

RetirEd said
Briguy: Just to make sure nobody misreads your post #1, I want to make clear that the capital gains tax is not rising to 67% of the capital gain! It's just that the taxable amount of the capital gain is raised from 50% to about 67%. (I think that may turn out to be 66.6666...%)

Capital gains were for decades UNTAXED, justified by the risk - always unfair that earned income gets the worst treatment!

The TFSA system was invented to attempt to partially correct the perceived injustice of earned income being taxed so highly.

Nerdralph:

Here in NS, when single-unit rental properties are sold, most purchasers live in them, instead of continuing to rent them out.

That doesn't seem to make sense. Whoever moves into those units moves out of somewhere else, no?

savemoresaveoften: Flat tax is the dream of very high-income taxpayer. It would represent a massive transfer of tax liability from low-income to high-income taxpayers. This is why it's the darling of Alberta's right-wing politics.

Alexandre:

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

Exactly. All the gains in the real-estate market cornering, and the mortgage money earned by lenders, contributes nothing to the economy except whatever extra investment the winners choose to make. If that's in Canada at all!  

Flat tax works for a true capitalist society, and it has the right ingredient of encouragement to take risk and work harder for one’s own good.
Canada is a socialist free country, where too many people knows too well the abundance of welfare support means it’s pretty to ‘starve to death’ here. And with a progressive tax system with more than 50% marginal tax, it’s a real disincentive for the average Joe to care to move up at all.

MattS said
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.

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 are very good points with merit.. Your thoughts on this show fairness to everyone and Canada first. Maybe tackling just the foreign equities capital gains is a great compromise  

MattS said
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.

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 are very good points with merit.. Your thoughts on this show fairness to everyone and Canada first. Maybe tackling just the foreign equities capital gains is a great compromise  

Extremely narrow minded and totally miss the big picture. Invest in a foreign company does not mean Canada gets shuts out at all. We are now a global economy, with Canada components and production that may not in Canada, does not mean Canada don’t benefit from it.

When you buy some Canadian Tire tool, it does not employ Canadian workers to produce do not use Canada raw material cuz it’s made in China , yet u believe it deserves a tax break for Canadian buying a Canadian company stock. On the other hand, buy Apple stock does not deserve a break, even tho Apple has many retail locations in Canada and provides Employment for Canadians, shipping will also employ Canadian couriers/workers at UPS, FedEx, etc etc. on top parts used in the Apple products can be designed / manufactured in Canada.

AltaRed said
Productivity is measured in output per hour worked...

Agreed. So how does taxing those who flip real estate at regular income rates does reduce output per hour of a farmer, assembly lane employee, software developer, etc., etc.?

Even your sole proprietor farmer will be hurt by decreased national productivity.

Maybe one day tax break will be required to afford a carton of eggs, but we are not there yet.

You are trying to change the topic. Productivity, as you defined and I agree with that definition, will not change because of change in capital gains taxation.

Simple example: If I end up with decreased after tax dollars due to selling stock, I will buy fewer consumer goods, including fewer products farmers generate.

Are you seriously telling me you'll start saving on food now that you will have to pay higher capital gain taxes?

Anyone (person or business) who has less net income after taxes will ultimately spend less on something else whatever it may be. Higher cap gains taxation takes cash flow out of the economy and that leaves less to spend on goods and services that make up our national GDP. The economic impact of one less dollar available to spend by the now higher taxed taxpayer manifests itself into $7 less GDP based on an economic multiplier of about 7.

Collectively, that means less cash flow available to buy: 1) as much food, or at least higher margin food such as meat, as before the change, 2) less money to buy goods produced on an assembly line which reduces company profits and thus employee jobs and salaries, 3) less electronics and software purchased by both consumers and businesses which reduces demand for software developers, etc, etc. That is how the economic multiplier of 7 works.

As to your RE flipper, those who are making less after tax money from flipping real estate have less net cash flow to spend on goods and services. See my prior paragraph for same result.

Summation: Less net cash flow available results in lower spending which results in a loss of GDP generation and thus less GDP per capita. It is really that simple at the macro level.

Added: What we have not even got into is efficiency of capital/cash deployment. Economies which are most productive generate the highest cash flow per hour worked. The most profitable organizations generate the most GDP per capita. Penalizing success simply reduces productivity.

Here is a chart showing productivity change from 2015 to 2022. https://data.oecd.org/lprdty/gdp-per-hour-worked.htm Canada has continued to slide under the Liberal government. It is 12th worst out of 38 OECD countries. Can we affort to let it slide even more?

In terms of GDP output per hour, Canada is about 25th, less than half of Ireland which made a huge push post GFC to reduce taxation on business and industry to attract capital investment. https://ilostat.ilo.org/topics/labour-productivity/