Emmanuelle B. Faubert, economist at the MEI
OTTAWA – Contrary to the claims espoused in a recent joint publication from IRIS and the Centre for Future Work, middle-class Canadians are the main group impacted by the increase in the capital gains inclusion rate, according to a researcher from the Montreal Economic Institute.
“It is misleading to say the middle class won’t be impacted by the capital gains tax hike just because they may not claim capital gains every year,” explains Emmanuelle B. Faubert, economist at the MEI. “After all, most people selling a duplex or triplex only do so once in their life, not every single year.”
Data from Statistics Canada shows that of the 25,100 taxpayers who claimed capital gains over $250,000 in 2011, two-thirds never claimed similar gains over the next 11 tax years. Only 170 of them have consistently declared such capital gains.
According to calculations from economist Jack Mintz, the increase in the capital gains inclusion rate risks impacting 1.26 million Canadians over the course of their lives.
The MEI’s economist also points out that IRIS and Centre for Future Work’s findings on the prominence of certain industries in reported capital gains stems from their invaluable investment in sectors across the economy.
“If the financial sector declares such a large share of capital gains nationwide, it is because its investments in other sectors of our economy are growing,” explains Mrs. Faubert. “And it is with the funding from real estate investors that the construction industry can get to work building new condos, apartments or single-family homes.
“As Canadians rightly recognize, this tax hike will affect the middle-class and will reduce the start-up capital available to start new entrepreneurial ventures.”
In a publication from this past May, the MEI explained that this tax increase would have a negative impact on entrepreneurship in Canada, reducing the capital available to start new projects.
A recent MEI-Ipsos poll showed that six out of 10 Canadians fear this tax increase will have a negative impact on the Canadian economy. Seven out of 10 respondents said the tax increase would also affect the middle class.
The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
