Canadian Politics Today

I'll put that up there with "The budget will balance itself"

 

So you think there are enough Canadians in numbers and volume with stocks in non-registered accounts *and* they are stupid enough to allow tax rates drive their decisions, who can move markets?

Really? You have any idea how small Canada is compared to world markets?

Now only consider Canadian non-registered accounts which is a fraction of Canadians total savings.

As I tell my wife: there will be no movement here.

People who invest in stocks which have no dividends do so in hopes of it going up so they get capital gains. If the taxes rise drastically on those capital gains people are going to stop buying these kinds of stock, which in turn will slow their upward growth. When combined with increased taxes this is something which builds on itself towards a continuing downward momentum. People will dump them in favor of dividend stocks.
 

People invest to earn a return.

If they earn it on their RRSP then they will eventually pay tax on it at the same marginal tax rate no matter the source (i.e. whatever tax bracket their income falls into).

If they earn it in a TFSA then they will pay no further tax on it since the principal they contrbuted to theirmTFSA is already after-tax dollars.

If they earn it in a non-registered account then they can pay tax at up to 48% for interest, wages, foreign income; about 31/41% on CDN dividends, and up to 24% for capital gains.

It is doubtful moving that top rate up from 24% to 36% on caital gains will have a meaningful effect on the markets.


My points:

1) Most people are invested in RRSP/TFSA's (well, besides their home which is tax exempt)
2) There is no need to give capital gains a tax subsidy because
3) if you want a tax break then either defer taxes in your RRSP and/or save taxes in your TFSA because
4) The vast majority of Canadians do not owe those who choose and/or can afford to save above and beyond tax shelters (RRSP/TFSAa) anything. 

Because government is trying to encourage people to put some of what disposable income they have left after their income has already been heavily taxed into savings rather than going down south for a nice warm holiday? Because international investors will flee in droves to other jurisdictions, like the US, where tax on investments will be so much lower?

This makes no sense.

TFSA's and RRSP's are underutilized by the majority of CDNs because most people can do little more than make their mortgage payments and buy groceries. 

How people choose to save is already incentivized with RRSP's and TFSA's and there is no need for further tax subsidies that, at best, benefit 1 or 2% of the population on a regular basis and maybe 20% on an occasional basis (because they sell a cottage and don't shelter it with the principal residence exemption, for example).

Raising the capital gain inclusion rate will benefit the majority of Canadians because it can ease their tax burden.

Also, you think that a US investor who is buying a CDN stock is going to pay tax the way we do in Canada?

Ever hear of tax treaties?

How much capital gain/loss Canada decides should be included in incomes to be taxed will have little to no effect on foreigners decision to invest here.

Maybe on the real estate side with taxable Canadian property but again one is only taxed on the gain when one sells so other factors such as rate of return on the rental and having a reliable legal system that respects property rights are more important.