Tomorrow, we will introduce changes that will result in a small number of well-off Canadians paying a little more in tax when they sell a successful investment.
June 9, 2024 – Toronto, Ontario
Good afternoon.
I would like to start by acknowledging that we are gathered on the traditional territories of many nations, including the Mississaugas of the Credit, the Anishinaabeg, the Chippewa, the Haudenosaunee, and the Wendat Peoples.
Thanks everyone for joining me today. I am really glad to be here with my colleague, Minister Gary Anandasangaree. I am so glad to be here with the incredible people at the YMCA. I am so grateful for your work.
Today, I’m going to talk about taxes, and the investments they allow us to make in Canada and Canadians. I’d like to begin by asking us all to imagine we were creating Canada’s tax system from scratch, and we had to choose between two options:
We could choose to give the greatest tax advantages to those who are already the most well-off.
Or, we could ask every Canadian to pay their fair share to keep Canada strong.
Now, I am confident that most of us here—here in Toronto and across Canada—would choose fairness.
Because I know that in Canada, we believe in taking care of each other. In Canada, we believe in fairness. That’s the Canadian way.
And that’s why, tomorrow, our government is taking action to improve tax fairness for all Canadians.
Tomorrow, we will introduce changes that will result in a small number of well-off Canadians paying a little more in tax when they sell a successful investment.
In turn, that revenue will pay for investments that will help all Canadians, especially our younger generations.
It will help fund our plan to build more homes, faster, so more younger Canadians can achieve the dream of homeownership.
It will help make life cost less for Canadians.
Already, $10-a-day child care is saving young parents thousands of dollars a year. And child care fees, reduced by 50 per cent, are saving young parents thousands of dollars a year. These tax changes will allow us to expand our national system of early learning and child care and get down to $10-a-day from coast to coast to coast—so that more Canadian families can benefit.
That revenue will also allow us to support important new programs to make life cost less, like the National Pharmacare Plan, which will make contraceptives and diabetes medications free. It will enable the creation of a National School Food Program. And it will support the Canadian Dental Care Plan. More than 2 million Canadians across the country have already been approved to see a dentist or hygienist.
Finally, these changes will help us drive economic growth in a way that is shared by all—the kind of growth that will deliver prosperity by creating good jobs, increasing investments, and boosting productivity.
To do this we must secure our AI advantage; invest in students, researchers and Canadian brainpower; get major projects built faster; and make Canada a global leader in the industries of tomorrow, to create more jobs that will drive us towards a net-zero future.
Now, Canada could finance these critical investments by taking on more debt. But that would place an unfair burden on our younger generations.
Fiscal responsibility matters—and our fiscally responsible approach is in part what enabled Canada to lower interest rates this past week—the first G7 country to do so.
Interest rates are coming down because inflation is falling. Inflation fell to 2.7 per cent in April, down from 2.9 per cent in March. That’s four months in a row that inflation has been within the Bank of Canada’s target range. That’s good news.
In fact, inflation has fallen to its lowest level in three years, and wage growth has now outpaced inflation for 15 months in a row.
Today, almost 1.3 million more Canadians are working compared to before the pandemic.
The OECD expects the Canadian economy to see the second fastest rate of growth among the G7 this year and the fastest growth in 2025, tied only with the U.S.
After our budget was tabled in April, Moody’s and S&P, two of the leading credit ratings agencies, reaffirmed Canada’s triple-A credit rating with a stable outlook. In fact, Canada and Germany are the only G7 countries with a triple-A rating from two of the three leading credit ratings agencies. Moody’s also predicts that, over the medium term, Canada will see stronger economic growth than some other triple-A economies.
These are very powerful proof points. They show that Canada’s economy is strong and resilient. They show that our economic plan is fiscally responsible. And that really matters because it means that we can afford to make the investments and create the jobs Canada needs.
We know now is the time to invest in Canadians. And we know that the fair way to pay for those investments is to ask those at the top to contribute a little bit more.
Now, as I walk you through the details of the coming tax reform, I want to start by emphasizing that the changes we are making are focused exclusively on investment profits known as “capital gains.”
When someone sells an investment that has appreciated in value—like a portfolio of stocks or a rental property—they accrue a capital gain.
In Canada, these gains are taxed below the rate that we all pay on regular income.
Today, in fact, only half of the capital gain is taxed at all.
So, if someone makes a $2 million profit on a stock sale, they pay tax on only $1 million of that gain.
That’s a big advantage.
And there are consequences to this preferential treatment of capital gains:
Many of the wealthiest Canadians make most of their money through investments—not income.
But because of how investment gains are taxed, well-off Canadians can wind up paying a lower marginal tax rate than a nurse or a carpenter.
That’s not fairness; that’s favouritism.
And so, beginning on June 25, well-off Canadians will pay tax on two-thirds of their capital gains, instead of just one-half.
I want to highlight four important points about this change:
- First, all Canadians will continue to pay no capital gains tax at all when they sell their principal residence. Any money you make on the sale of your home is yours to keep.
- Second, the tax changes do not apply to the first $250,000 of capital gains every single year. The higher rate applies only to gains above this $250,000 threshold. Now, that means that most Canadians will still be able to sell successful investments without paying a higher rate. For example, a couple who owns a rental apartment will pay no additional tax on the first $500,000 in profit from a sale.
- Third, we’re increasing the lifetime capital gains exemption for those who sell their small business or farm. Gains up to $1.25 million will now be entirely tax- free.
- And fourth, to encourage innovation and job creation, we are introducing a new incentive for entrepreneurs that will reduce the amount of tax they pay on capital gains and increase the lifetime exemption on the sale of all or part of their business.
In the end—and this is key—we estimate that only 0.13 per cent of Canadians—with an average annual income of $1.4 million—will be affected by this change in any given year. But millions more, especially younger Canadians, will benefit from it.
Taxing capital gains is not an inherently partisan idea. It’s an idea that everyone who cares about fairness should support.
In fact, the idea of taxing capital gains in Canada was first broached by the government of Prime Minister John Diefenbaker and his Royal Commission on Taxation, chaired by Kenneth Carter.
In the Royal Commission’s report, Carter said that fairness should be the foremost objective of the tax system, and he memorably insisted, “a buck is a buck is a buck”.
And Prime Minister Brian Mulroney raised the capital gains inclusion rate to 75 per cent—higher than the rate we’re establishing today.
Yet, I have heard from some Canadians who are concerned. No one likes paying more tax, even those who can afford it the most. And to those Canadians I want to say: We applaud your hard work and your success. You are making great contributions to our country. And we want more Canadians to enjoy success as you do, and to contribute, as you are.
But I would also like to ask Canada’s one per cent—in fact, Canada’s 0.13 per cent—to consider this: What kind of a Canada do you want to live in?
Do you want to live in a country where kids go to school hungry?
Do you want to live in a country where a teenage girl gets pregnant just because she doesn’t have the money to buy birth control?
Do you want to live in a country where the only young Canadians who can buy their own homes are those with parents who can help with the downpayment?
Do you want to live in a country where we make the investments we need—in health care, in housing, in old age pensions—but we lack the political will to pay for them, and choose instead to pass a ballooning debt onto our children?
Do you want to live in a country where those at the very top live lives of luxury, but must do so in gated communities behind ever higher fences, using private health care and airplanes, because the public sphere is so degraded, and the wrath of the vast majority of their less privileged compatriots burns so hot?
Every Canadian across our great country needs to ask themselves these same questions.
Because the stakes could not be higher.
Democracy is not inevitable. It has succeeded and succeeds because it has delivered a good life for the middle class. When democracy fails to deliver on that most fundamental social contract, we should not be surprised if the middle class loses faith in democracy itself.
Tax policy is not only, or chiefly, the province of accountants or economists. It belongs to all of us—because it is how we decide what kind of country we want to live in and what kind of country we want to build.
Our proposed reform to the tax system will be tabled and voted on in the House of Commons this week.
I encourage all Canadians to pay attention.
Pay attention to any Members of Parliament voting against these changes—and consider their motivation.
Pay attention to those who are defending a tax system that favours the wealthy.
To those who are standing against the principle of greater tax fairness for all Canadians.
To those who want millionaires with significant investment gains to pay a lower tax rate than a teacher or a nurse, than a carpenter or a plumber.
A fair shot at building a good, middle class life has always been the promise of Canada.
Tomorrow, our government is taking another important step to create a country where that promise is fulfilled—and where fairness prevails for every generation.
Thank you very much.
