No taxation without representation — that should be the bare minimum in Canada. But the Trudeau government’s capital gains tax increase violates this fundamental democratic principle, while severely dragging down the Canadian economy.
Fortunately, Conservative Leader Pierre Poilievre recently promised to reverse the tax hike should he form government.
“With this tax hike, Canada’s capital gains tax will be one of the highest in the advanced world,” Poilievre said in a video posted to social media. “So businesses, jobs and money will pour out of our country at an even faster rate.”
That isn’t just rhetoric, it’s backed by hard evidence. A report from the C.D. Howe Institute predicts the proposed increase will cost Canada more than 400,000 jobs, shrink GDP by $90 billion and cut $127 billion from Canada’s capital stock.
But the damage doesn’t stop there. It would also hit average Canadians much harder than the government lets on.
“The report projects significant economic harm caused by the proposed increase,” according to the C.D. Howe Institute.
And while the government claims it will only affect the rich, the report found that “half of the affected individuals would be earning … less than $117,000 annually, with 10 per cent earning as little as $18,000, excluding capital gains income.”
This isn’t a tax hike on billionaires. It’s a financial sucker punch to Canadians who worked hard to invest in second properties, small businesses or their retirement.
Findings from the Fraser Institute echo these warnings. Its report debunks the government’s spin that this tax hike only targets the wealthiest Canadians.
“Many Canadians earning modest incomes, such as families with second properties or professionals with equity in their business, will face higher taxes as a result of the recent change,” notes the Fraser Institute.
Despite clear economic risks, the Canada Revenue Agency is planning to enforce the tax hike even though our elected parliamentarians haven’t passed the required legislation.
Last year, the Trudeau government proposed the capital gains tax hike with a procedural step called a “ways and means motion.”
Here’s the catch: a ways and means motion is not a law. It’s a tool that allows the government to propose tax changes. It doesn’t grant the legal authority to enforce them.
This tax hike requires parliamentary approval by amending the Income Tax Act. That means introducing legislation, debating it and passing it through a vote by elected representatives.
But Trudeau’s Liberals never got around to doing that. Instead, the prime minister prorogued Parliament, which should have shelved the proposal.
However, the CRA is acting like the tax hike is a done deal, pushing forward with enforcement as if it has the legal green light. This is an outrageous overreach by unelected bureaucrats and sets a dangerous precedent.
Even more troubling, this enforcement blatantly violates the Constitution.
Section 53 of the Constitution Act, 1867, states that all taxation must originate with elected representatives in the House of Commons. “No taxation without representation” isn’t just a catchy slogan — it’s a foundational principle of Canada’s democracy.
Parliament isn’t scheduled to resume until March 24, with the Conservatives, NDP and Bloc Québécois all indicating they will bring down the Liberal government at that time. Polls suggest the Conservatives, who oppose the tax hike, are likely to form the next government.
Yet the CRA is charging ahead, enforcing a tax hike that hasn’t passed and likely never will. This reckless and unconstitutional move undermines trust in Canada’s democratic processes.
And if the CRA can enforce a tax hike based on a proposal that Parliament hasn’t approved, what’s stopping it from doing so again in the future? Taxation in Canada should be clear, transparent and rooted in law, not speculative bureaucratic overreach.
Poilievre is right to stand up against this tax hike, but this isn’t just his fight. All Canadians must push back against this undemocratic manoeuvring. The government must halt the enforcement of the undemocratic capital gains tax hike immediately.
National Post
Devin Drover is the general counsel and Franco Terrazzano is the federal director of the Canadian Taxpayers Federation.