There are a lot of Canadian couples out there who don’t have a government pension, nor do they have a corporate pension from a big business. There are a lot of people who do have those pensions, and that’s great for them. But that’s not the kind of work a lot of people are in, so those just aren’t options for them.
Instead, some people take up more creative solutions to retirement, including putting their savings into a rental property or two. This approach is regularly addressed in the personal finances pages. Owning rental properties is a pretty normal, middle-class retirement strategy.
But now, according to Prime Minister Justin Trudeau, it’s unfair—the rest of Canadians should disapprove of rental property owners, and more of their money will need to be taken away from them to punish them for what they did.
This is one of the alarming takeaways from the government’s stubborn refusal to admit defeat on plans to increase the capital gains tax in Canada.
Since the tax increase was announced last month, the negative reactions have been immense. The loudest opposition has been from the trendy tech sector—which no doubt included more than a few Liberal voters and donors, or at least did.
This is a group of entrepreneurs who, along with their core employees, typically take a low salary for years as they scale up a business and then receive gains once they sell it or list it on the stock market.
Then again, many of them get nothing, as a lot of these tech companies go bust. That’s the trade-off. The ones that do go big create benefits not just for themselves and their employees but for the broader community and economy.
This is apparently unfair, according to Trudeau and Finance Minister Chrystia Freeland. They are sticking with their plan to increase the amount of capital gains that are taxable from 50 percent to two-thirds.
This simple change may be enough to make entrepreneurs pack up and move south of the border. It could end up causing much more money to leave Canada than would have been brought in from increased tax revenues.
Trudeau was warned, but it seems it doesn’t concern him. On May 13, he released a video defending the increase. It’s a condescending video that begins with slowly defining for the viewer what an “asset” is. He then compares and contrasts the financial scenarios of a nurse and a high-earning investment banker to offer a simple hero-versus-villain picture.
Trudeau doesn’t acknowledge that middle-class Canadians will be dinged as he includes in the mix second homes like rental properties and cottages.
Trudeau argues this tax increase will bring in $20 billion and then lists off a series of programs that the money can go toward, as if the implementation of this tax increase is the sole impediment to Canada’s being able to have things like a school lunch program.
It used to be the Canadian dream to buy a house in town and also have a cottage. It’s upsetting for upcoming generations that the housing crisis has now placed that out of reach for many people.
Should Canadians who now can’t afford a first or second home be angry at those who bought their properties during more affordable times? Of course not. But Trudeau seems to think so.
What he’s doing now is stoking a cynical culture war. He wants people to see the money and assets that other people have, get angry about it, and demand that this money be redistributed to them. (Even though it will really just go to paying back the debt the government has accumulated.)
Canadians are better than that. We still aspire to success and to financially better ourselves. Those who have succeeded are, by and large, not considered villains. It’s doubtful Trudeau’s strategy will work.
As the government has taken a hit due to its refusal to give up the unpopular carbon tax, there’s surely nothing it would like more than to change the channel, from opposition to a tax to support for a different tax.
Don’t hold your breath.
