Anti-tax mania

This is Joseph.

Canada recently proposed an increased capital gains tax:

Under the proposal, the inclusion rate for annual capital gains realized above $250,000 for individuals would be taxed at a rate of two-thirds, up from the current 50 per cent. Any gains under that bar would continue to be taxed at the 50 per cent rate.

It is projected to affect 0.13% of Canadians. Keep in mind that this means you pay the marginal tax rate on an extra 16% of the capital gains tax. So for a person in Ontario, with a top marginal tax rate, that'd be an extra $85K on a $1.25 million capital gain. 

This has a lot of exclusions:

The tax system also provides a lifetime capital gains exemption in the instance of an individual selling their small business or a qualifying farm or fishing property. That exemption will remain and budget 2024 proposes expanding it to $1.25 million of eligible capital gains, up from just over $1 million currently.

The budget also proposes a new carve out for entrepreneurs, protecting the sell-off of some shares in specific instances. This incentive would apply to up to $2 million in capital gains per individual over a lifetime, and would see proceeds taxed at an inclusion rate of 33.3 per cent.

Selling a primary residence will remain excluded from capital gains taxes under the proposal.

So it doesn't apply to an owner-occupied house or the  first lifetime million dollars of a small business (like a medical practice). So basically a way to make capital gains a much less tax protected vehicle for very wealthy Canadians. The case that most people give is cottages that were bought 30 years ago when they were inexpensive and now they will sell for over $250,000. 

To be honest, is this a big deal? I don't know -- buying a rapidly appreciating asset with great timing seems like a really good example of a public good to tax. Further, the real issue is the huge cost of real estate in Canada. California has 181K people without housing. Canada has 235K people without housing. Maybe the issue is the high cost of real estate and making it a slightly worse investment seems to only help?  

But it is impressive how loud the complaints have been. Now I agree Canada is a high tax country with a lot of bad tax policy, but it is curious how a tax razor focused on the wealthy gets so much blowback. And, yes, if you are generating more than $250K in capital gains, after the lifetime exemption of $1 million, it is unlikely that you are in any other category.