Remarks by the Deputy Prime Minister on tabling a Notice of Ways and Means Motion to deliver tax fairness for every generation

June 10, 2024 – Ottawa, Ontario

Good afternoon everyone. I am really, really glad to be here with so many of my wonderful colleagues to talk about an important decision our government has taken—an important measure we are putting in place.

Our government is taking action to improve tax fairness for all Canadians.

A few minutes ago, I tabled a Notice of Ways and Means Motion in Parliament that will allow us to implement the changes the budget proposed to capital gains taxation. This Ways and Means Motion, and the legislation that will follow it, reflect the capital gains changes laid out in the 2024 budget and its Tax Annex.

As a result of these changes, a small number of well-off Canadians will pay a little more tax when they sell a successful investment.

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, so more younger Canadians can achieve the dream of homeownership.

And it will help make life cost less in Canada.

Now, Canada could finance these critical investments by taking on more debt. But that would place an unfair burden on younger generations.

Fiscal responsibility matters—and our fiscally responsible approach is in part what enabled Canada to lower interest rates just a few days ago—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 is 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.

In fact, 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.

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 Canada needs and to create the good jobs Canadians need.

We know now is the time to invest in Canada and in Canadians. And we know that the fair way, the responsible 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.

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 plumber.

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 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. That means most Canadians will still be able to sell successful investments without paying a higher rate. For example, a couple who own a rental property 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 of 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 is 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 memorably declared that fairness should be the most important objective of the tax system. He 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.

Our proposed reform to the tax system will be 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 greater tax fairness for everyone.

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.

Today, our government is taking another important step to create a country where that promise is fulfilled—and where fairness prevails for every generation.

I want thank all of my colleagues who are here with me today, and I am ready to take your questions.