Remarks by the Deputy Prime Minister on delivering tax fairness for Canadians

Montréal, Quebec - June 13, 2024

First, I would like to acknowledge that we are gathered on the traditional territories of many First Nations, including the Mohawk Nation territory.

Thanks for joining me today. I am really glad to be here with my dear colleague, Minister Soraya Martinez Ferrada. And I am also happy to be here with the people from Rachel Julien, with Mélanie, with Denis.

It is so exciting to look behind us and to know that soon, there will be more than 900 new homes—including 210 rental apartments—for families to live in. Our government is really proud to support this project through our Apartment Construction Loan Program. And we are thankful to all of you for your hard work.

Today, I’m going to talk about tax fairness, and the investments that taxes allow us to make in Canada and Canadians.

This week, we introduced changes that will result in a small number of well-off Canadians paying a little more in tax when they sell a successful investment, like a portfolio of stocks, for example.

In turn, that revenue will pay for investments that will help all Canadians, especially younger generations.

It will help fund our plan to build more homes, faster—like the future homes we are standing in front of today. This plan will also help more younger Canadians achieve the dream of homeownership.

These investments will help make life cost less.

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 the Bank of Canada to lower interest rates last week—the first in the G7 to do so.

And I know, because I spoke with Mélanie and Denis, that lowering interest rates is important for housing construction. And it is one of the reasons why we are laser focused on fiscal responsibility.

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 powerful economic 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 good jobs Canadians need.

We know now is the time to invest in Canada and 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 changes, I want to start by emphasizing that they 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 employment 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 plumber.

That’s not fairness.

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 capital gains tax changes do not apply to the first $250,000 of capital gains every single year. The higher inclusion rate applies only to gains above this $250,000 threshold. Now, that means that most Quebecers will still be able to sell successful investments without paying a higher rate. For example, a couple who owns a duplex or a triplex will pay no additional tax on the first $500,000 in profit from a sale of their rental property.
•  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 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.

And Prime Minister Brian Mulroney raised the capital gains inclusion rate to 75 per cent—higher than the rate we’re establishing today.

Our proposed reform to the tax system was tabled and voted on in the House of Commons this week.

I encourage all Canadians, all Quebecers, to take note of the Members of Parliament who voted against these changes—and consider their motivation.

Take note of those who are defending a tax system that favours the wealthy—and who voted against investments in housing, in child care, and in health care.

Take note of those who are standing against the principle of greater fairness for all Canadians.

To those who want millionaires with significant investment gains to pay a lower marginal 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.

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.