Capital gains tax | Legault could imitate Trudeau and gain a lot

(Quebec) The Legault government plans to copy Ottawa and increase the tax on capital gains. Such an operation would allow it to raise hundreds of millions of additional dollars annually, at a time when its financial resources are in the red.

You should know that Quebec has always applied tax treatment similar to Ottawa's regarding capital gains for decades. Every time the federal government made a change, Quebec followed suit.

Capital gain is income derived from the sale of properties that have increased in value such as shares, chalets, second homes and apartments – excluding the main residence. Currently, we pay tax, both federally and provincially, on half of capital gains. This is preferential treatment compared to that applied to labor income.

Under the federal budget presented Tuesday, effective June 25, the inclusion rate — the portion of capital gain that is taxable — will increase from half (50%) to two-thirds for everything over $250,000. This change is expected to affect about 40,000 people and 307,000 businesses, according to federal estimates.

With the inclusion limited to 50% of capital gains in the tax due, Quebec has deprived itself of $2.4 billion in personal taxes and $1.7 billion in corporate tax in 2023. If the inclusion rate increases to 66%, this means I think The government will receive more than 1 billion additional. But since Ottawa intends to apply the new rate to any capital gains over $250,000, it is difficult to come up with an accurate estimate for Quebec, but it may be less than $1 billion. The operation will still generate hundreds of millions of dollars.

On March 12, Eric Girard presented a budget showing a record absolute deficit of $11 billion. To get out of the hole by 2029-2030, that is, two years later than planned, the minister stressed that he does not intend to increase the tax burden. He replied: “We have just reduced taxes, we will not increase them.”

During the 2012 election, Quebec's Future Coalition promised to increase taxes on capital gains, by increasing the inclusion rate from 50% to 75%. Its leader, François Legault, said: “In order to be able to finance our actions, we ask for the effort of everyone, including those who are a little more fortunate.” This commitment later disappeared from the CAQ's list of promises.

In a message I posted Journalism Recently, Professors Antoine Genest-Grégoire (Head of Taxation and Public Finance Research at the University of Sherbrooke) and Olivier Jacques (Researcher at Serrano University) wrote that “82% of capital gains come from the richest 10%, and 57% from the richest.” . Top 1%.

In 2015, Quebec's tax audit commission, created by the Couillard government and chaired by tax expert Luc Godbout, recommended “a review of the way capital gains are taxed” in order to increase the tax burden. We can read in his report that “this amendment aims to treat capital gains more fairly, compared to other sources of income.” The Commission added that Quebec must coordinate with Ottawa to implement such a measure.