The Hidden Costs of Canada's Capital Gains Tax Hike

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Source Article: Matthew Lau: Liberal tax hike will burden us all

Misleading Numbers and the Real Burden on Canadians

A decade ago, a University of Toronto economics professor emphasized the importance of understanding tax incidence. This concept is crucial today as the Liberal government increased the capital gains inclusion rate from 50% to 66% on June 25th, claiming it will only affect 0.13% of Canadians annually. This figure is misleading and incomplete and ignores the broader economic impact.

Misleading Figures: The 0.13% Myth

The government's claim that the tax hike impacts only 0.13% of Canadians annually is deceptive. The taxpayers within this 0.13% change yearly, and many Canadians might face this tax once in their lifetime. Economist Jack Mintz estimates that 1.26 million Canadians, or 4.3% of tax filers, will be affected by the capital gains tax hike over their lifetimes, not just 0.13% as suggested.

Incomplete Picture: Corporations and Investments

The 0.13% figure also omits corporations. Approximately 307,000 corporations, including around 6,000 publicly traded ones, will be subject to the tax. Many Canadians will indirectly pay higher capital gains taxes through investments and pension plans. Mintz estimates that 4.74 million individual investors will be affected, representing 15.8% of all filers, far exceeding the government's claim.

Ignoring Tax Incidence: The Broader Economic Impact

Tax incidence theory shows that the economic burden of taxes often falls on people beyond those directly taxed. For instance, corporate income taxes are paid by shareholders but ultimately affect workers through lower wages. Similarly, the capital gains tax hike will discourage business investment, reducing labour productivity and employment opportunities. Business investment has already declined significantly since 2015, and this tax hike could exacerbate the trend.

A Partnership for Holistic Wealth Management

To address these elevated tax challenges, I have partnered with one of Canada's leading independent private wealth management firms that serve high-net-worth clients nationwide. This firm offers professional investment management and comprehensive wealth planning advice from a fiducially focused, client-first perspective, providing affluent Canadians access to sophisticated strategies and solutions usually reserved for the ultra-affluent.

Driven by a "capital preservation first" philosophy, the firm generates consistent, tax-efficient returns uncorrelated to public markets. Through my relationship with this firm and other key industry professionals and firms, my clients gain exclusive access to alternative investments such as private equity, private real estate, precious metals, commodities, government-sanctioned flow-through tax structures, and tax-efficient corporate insurance solutions offered through mutual life companies – all designed to fortify and de-risk a client's personal, family, business and estate assets against financial risk, economic threats, inflation and higher taxes.

The Custodial Model: An Additional Layer of Protection

In light of the revelations made in David Rogers Webb's book" The Great Taking ," to further safeguard wealth, the firm employs a custodial model, where client assets are held securely by an independent third-party custodian rather than commingled with the firm's assets. This crucial segregation of assets provides an additional layer of protection, reducing the risk of seizure or misappropriation in a financial crisis or institutional insolvency. The custodial model offers investors a safeguarded solution to help secure their wealth separately from the management firm.

Watch The Great Taking Documentary

Secure Your Wealth: Consider Moving Your Assets to the U.S.

Given the economic uncertainty and high taxes in Canada, many affluent Canadians are exploring relocating their wealth to the U.S. The U.S. offers a more favourable tax environment and stronger asset protection laws. Peter J. Merrick, a cross-border specialist, has dedicated his career to helping Canadians navigate international wealth management, facilitating seamless asset transfers to safeguard financial futures.

To learn more, CLICK HERE.

Complimentary Portfolio Evaluation

In these uncertain times, professional guidance and a diversified, risk-mitigated portfolio are invaluable. As a valued reader, you are offered a complimentary portfolio evaluation to discuss how to fortify and de-risk your portfolio against financial institution risk, economic threats, inflation, and higher taxes. To schedule your complimentary portfolio evaluation, email me at [email protected] or use my Calendly Link.

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Additional Resources:

• The Great Taking PDF
• The Great Taking - Documentary
• The Great Taking Download
• The Great Taking (Audio Book) by David Webb

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