Cap Gain Inclusion rate changing?
I saw some recent speculation that the capital gain tax inclusion rate here in Canada could go to 75%, from 50%. Just wondering, how would that work, in light of unrealized gains many of us have.
Aug 2nd, 2020 7:31 am
Aug 2nd, 2020 10:23 pm
Aug 3rd, 2020 4:44 am
Aug 5th, 2020 5:49 pm
https://www.investmentexecutive.com/new ... 20-budget/One way the Liberals could raise billions in tax revenue immediately would be to increase the capital gains inclusion rate. The NDP, which promised in its election platform to raise the inclusion rate from 50% to 75%, would likely support such a move.
Raising the capital gains rate would fit well with the Liberals’ policy goal of taxing high- income Canadians more. And a higher rate would effectively close a tax loophole available to Canadian small businesses that allows for the conversion of dividends into capital gains in a practice called “surplus stripping.”
https://financialpost.com/real-estate/t ... eal-estateThe capital gains tax in Canada was implemented in 1972. The Royal Commission on Taxation, led by Kenneth Carter, had earlier recommended that since capital gains, gifts and bequests improved the welfare of the fortunate recipients, such gains must be taxed like income and wages. ‘A buck is a buck,’ the Commission famously argued.
As a result, changes were made to the Income Tax Act, and 50 per cent of all realized capital gains were included in taxable income. Over the years, the inclusion rate rose from 50 per cent to 66.66 per cent and then to 75 per cent, before being reduced back to 50 per cent, where it stands today.
Aug 9th, 2020 9:05 am
Aug 9th, 2020 2:23 pm
Aug 9th, 2020 2:42 pm
Yes you can do that if you are convinced 75% inclusion rate is coming. Previously the announcement date would also be the date of change so no one had a chance to sell in advance.
Aug 9th, 2020 9:17 pm
Aug 10th, 2020 8:41 am
Aug 10th, 2020 9:22 am
it's definitely coming. They already started tracking home purchases and sales on your taxes for this very reason. It started with cracking down on house flips and rentals being claimed as primary, but now that they have the information it's only a matter of time before they change the rules for primary residence all together.
Aug 10th, 2020 9:42 am
Aug 10th, 2020 9:49 am
Although I am no fan of taxes in any form, an estate tax is one of the “fairest” taxes as it is consistent with the goal of equality of opportunity - effectively forcing each generation to start on a more equal footing. The main issue with estate tax is there are many work arounds. The easiest amongst those is to simply gift one’s assets prior to death.BetCrooks wrote: ↑ Personally I am betting on an increase in probate "fees" e.g. an increase in taxation of estates when someone dies. Very high "death duties" were brought in in Britain through the Great Wars; didn't penalize the low earners much but were very high for those with sizeable inheritances.
They do muck around with cap gains from time to time though. When I was young, you could utilize a "lifetime" cap gains exemption of $100 000. Then "poof" it was gone, long before I ever had any use for it.
Who knows! But it is nice to now be in a position where it matters.....
Aug 10th, 2020 10:08 am
I am okay with income tax as long as it is not punitive because I agree that people should not be disincentivized to work but actually the opposite. People should be motivated to work and contribute to the country's GDP. People should also be motivated to start and run their own businesses and hire others so as to create even more opportunities for everyone to succeed.Although I am no fan of taxes in any form, an estate tax is one of the “fairest” taxes as it is consistent with the goal of equality of opportunity - effectively forcing each generation to start on a more equal footing. The main issue with estate tax is there are many work arounds. The easiest amongst those is to simply gift one’s assets prior to death.
The tax that is the hardest to understand from an economic incentive standpoint is income tax. Why the government thinks we should dis-incentivize working is beyond me.
Aug 10th, 2020 10:19 am
Aug 10th, 2020 2:44 pm
Money Smarts Blog wrote: ↑I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Aug 10th, 2020 8:05 pm
The irony of this post is that a CG inclusion rate of anything less than 100% already means Canadians pay less tax on income earned by sitting on their butt and not working than they do on income earned by working. There’s economic benefit to entrepreneurship to be sure, but we also have the Lifetime Capital Gains Exemption for that situation. The economic benefit to lower tax on ownership of publicly traded shares for someone who’s already maxed out their registered investments is comparatively lacking.choclover wrote: ↑ I am okay with income tax as long as it is not punitive because I agree that people should not be disincentivized to work but actually the opposite. People should be motivated to work and contribute to the country's GDP. People should also be motivated to start and run their own businesses and hire others so as to create even more opportunities for everyone to succeed.
The government always seems to want to tax based on their definition of "fairness" which seems to look at some people's hard work and/or risk taking and then call the results "lottery winnings" or "unfair" wealth. I personally don't think a tax policy that punishes people who work hard with punitive tax policies for the purposes of "transferring wealth" to those who don't work hard, don't work at all and/or don't work because they don't WANT to work is not going to result in a happy nor a productive society or a society with a decent standard of living.
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