Election fervour and fever continues to escalate south of the border and Canada will soon follow. Our last federal election was September 20, 2021, and constitutional and statutory provisions require that the next federal election must be held no more than 5 years after a preceding election and by the third Monday in October in the 4th calendar year after the date of the previous election, which means on or before October 20, 2025.
Interestingly, current opinion polls, when compared with more than 50 years of public opinion data show that Canadians have never been as critical of the three major federal party leaders as they are today.
Equally important, polls show a majority believe that there has been a decline in recent years on such issues as the economy, healthcare, and taxation, as well as national unity, public safety, and Canada’s international reputation.
How do the two major parties’ policies differ on some of the key issues that affect private clients, including tax policy?
Carbon Tax
The Conservatives oppose a carbon tax and have spearheaded the “Axe the Tax” campaign to get rid of it which has galvanized a lot of support, particularly in oil and gas-rich Western Canada.
The Liberals support and defend the carbon tax.
Income Tax
The Conservatives: income tax cuts, cap government spending, bring down interest rates and inflation.
The Liberals: income tax increases because wealthy Canadians have to pay their “fair” share.
It is interesting to note that since 2015, federal spending has increased by 85%, the two biggest areas are 1) interest charges on the federal debt and 2) the size of government. The federal civil service has mushroomed by more than 40% since 2015, but the population has increased only 14%.
Federal government jobs are well-paying jobs, include benefits, and most importantly a pension—an entitlement that has been on the wane in Canada since the 1980s and 1990s.
With regard to capital gains tax, as you know, the government has proposed legislation raising the inclusion rate to 66.6% versus 50% for corporations and trusts, and for the portion of capital gains that exceed $250,000 in a year for individuals, realized on or after June 25, 2024.
The Liberals: necessary so that the wealthy don’t have an advantage, and as Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland said in the House of Commons in introducing the proposed legislation on June 10, 2024, the increase “ensures that the very wealthiest pay their fair share”.
The Conservatives: opposed to the capital gains tax increase and they voted against it on the basis that the increase negatively impacts doctors, farmers, and small business owners, many of whom are incorporated, that higher taxes hurt the broader economy and ultimately workers and consumers, and that it is a “job killer”.
They said that if elected, they would launch a “tax reform task force” within 60 days of forming a government to design a program to “lower taxes on work, hiring and making stuff”.
Immigration
Canada added about 450,000 new permanent residents in 2023. The government has been criticized for the huge surge in numbers – our population growth at 3.2% annually is faster than any Group of Seven nation, China, or India. In fact, this was the highest growth rate since 1957.
But there is nowhere near enough housing stock to accommodate this level of immigration. This has pushed rent into the stratosphere; there are even bidding wars for rental housing with some renters paying 60% of their monthly income (and more) on housing.
The government has now had to pull back on the number of new immigrants due to heavy criticism that their policy has only made Canada’s housing crisis and inflation worse.
The Liberals: in response to criticism have touted a renewed approach to immigration such as an intake cap on international student permit applications.
The Conservatives: would link Canada’s immigration levels to the number of new homes being built.
Foreign purchasers of residential real estate
There is a moratorium on foreign ownership of residential housing. The government introduced the measure to try to deal with the housing crisis and make housing more affordable for Canadians.
Originally for 2 years, the measure was set to expire on January 1, 2025. It has now been extended for 2 more years to January 1, 2027. Foreign purchasers will continue to be prohibited from purchasing residential property in Canada.
Housing affordability is a hot-button issue and speculation is that the extension, which came as a surprise, was to deflect criticism from the Conservatives that the Liberals were not doing enough to solve the housing crisis.
The Conservatives have blamed the Liberals for creating the housing crisis by too much immigration in the face of not enough housing stock.
The next Canadian federal election will raise fundamental issues on the future direction of the country and economic and tax policy will be key. Multiple crises—housing, immigration, inflation, income and wealth inequality, and productivity—have all created uncertainty and anxiety.
Canada will be at a crossroads and Canadians will need to critically evaluate and choose how to best balance two fundamental paths—the redistribution of wealth and the creation of wealth.
— Margaret O’Sullivan