gosh you listen to these two how are you supposed to know how an increase to the capital gains tax will affect you is it as the Finance Minister suggests a tax on the ultra Rich only 0. 13% of Canadians with an average annual income of $1. 4 million will be affected by this change in any given year or is it as the opposition leader tells it just crushing the little guy MrSpeaker if you are a small business owner you have even $1 of investment gain you pay this higher tax that the prime minister is promising then pierer puts out a video saying everything is broken and the country is broke businesses jobs doctors and food production will leave Canada and Justin Trudeau is like don't believe those guys they're all trying to spin it in nine different ways so let's just try to calm down and figure this out we'll start real easy with what is the capital gains tax but then we'll sort through how it's going up who that affects and ultimately which politician if any is telling the [Music] truth so this section won't be very long because it's actually really simple capital gains are just profits that you make from selling certain things stocks bonds investment properties those are are kind of the main ones but it could also be shares in a business crypto precious metals on the stock market but let's say I buy $100 worth of Apple shares the company does well and I'm able to sell for 2000 which if you do the math that's a profit or a capital gain of plus [Music] $100 you with me so far right now in Canada 50% of capital gains are taxed like regular income so let's say I make normally 50 Grand a year I add 50% of this which is $50 to my income and that's taxed at my regular income tax rate so if I live in Ontario that means I get taxed around 20% for making this much money so the government takes 20% that's $10 of what was ultimately a $100 profit that's how things already are what the government is going to do effective June 25th of this year is increase how much of my profits get taxed so returning to this example instead of getting taxed on just half of my capital gains the government wants to increase this so-called inclusion rate to 2/3 so about 66% of my profits become taxable and this is where I think a lot of misinformation has gone around where people say that oh the government now wants to tax 66% of my profits and that sounds like you're losing 66% of your money but it's not that it's making 66% of your money taxable where 50% of it was already taxable so now $66 of my original $100 profit is taxable at my current rate of about 20% that means $13 goes to the government before it was 10 now it's 13 but wait we're not done because the government perhaps realizing taxes are unpopular has also created A4 million individual exemption starting June 25th if someone makes up to $250,000 in capital gains they're still going to pay taxes on only half of that so in any given year as long as my capital gains are less than $250,000 I don't have to pay the new 66% inclusion rate I only pay capital gains tax on the same 50% that I always have meaning even under the new rules in this scenario because the profit is less than a quar million dollar I would still pay the old amount okay we don't think it's fair that a teacher or electrician pays taxes on 100% of their income while a multi-millionaire pays taxes only on 50% of the passive income they make on capital gains so the government is telling the truth truth right that exemption is so big $250,000 that surely only the ultra wealthy the top 0.
1% Cashing Out hundreds of thousands of dollars in Investments each year only they would pay more and then the government takes all that money and and spends it on all kinds of nice things that we all like right well that's not really true I can't see how such a small percentage of the population will be affected by the new rates to me it has to be larger really you should look at it how many people in their lifetime will be affected by this capital gains exemp uh increase and it's going to be a much higher number and what I estimate it's going to be something like 1. 25 million people okay let's explore [Music] that what the government isn't exactly coming right out and announcing is that yes while in any given year very few Canadians are claiming more than 200 $50,000 in capital gains that's not to say that many Canadians will not claim that much at some point in their lives so you buy a cottage let's say in 1980 Vancouver the Toronto area for let's say you know $880,000 and then today you you end up selling the cottage for uh you know $500,000 and so you have a capital gain of $420,000 but that you only do that once that's Jack Mintz by the way he studied 10 10 years worth of stats Canan data from people who filed capital gains in Canada what he found is that the majority of people only file once and in fact that's what the data shows is that uh 2third of people only uh have uh capital gains only once and uh or very infrequently uh during their lifetime so year over year sure you have you know maybe tens of thousands of people filing these huge gains which might make you think it's the top 1% of society when in fact a lot of it might just be a constantly revolving door of Regular People cashing out their once in a-lifetime gains even a simple transfer of assets can count as a capital gain even if no money changes hands and I said why should I pay capital gain you know I I'm I I'm not selling it to them I I'm gifting it to them Farmers have lots of cash but it's tight up in land uh and that the entire purpose behind farming is to pass it on to the next Generation so anything that makes that more complex more difficult and more expensive isn't good a lot of Canadians I think may have inherited those Cottages so maybe they they weren't inherently wealthy to begin with these are the sorts of situations that Pi POV is staking his claim on that Trudeau is taxing everybody to death and it's incredible during a healthcare shortage he wants to tax away our doct doctors during a food price uh crisis he wants to tax our Farmers he wants to tax our small business job creators so that was a lot what is PF talking about here well small businesses the idea there is that if an owner wants to sell their small business like maybe they're retiring they're winding things down their nest egg just got a fair bit smaller a million dollars in after tax profit under the old rules would shrink by about $100,000 under the new rules if you care to see the math on that we start with a capital gain a profit of $1. 36 million and you'll see in a moment why I chose that number under the old regime half of that was taxable most likely at the highest tax bracket of 53% assuming once again that you're in Ontario take that percentage away from this from half of your profit and you're paying $300 60 about $360,000 in taxes this minus this is what you're left with a cool million even but under the new regime someone selling their you know small business for the same amount of profit pays tax on half of the first $250,000 that's the individual exemption that works out to about $66,000 in tax at our current tax rate and on the remaining $1.
11 million 66% is taxable that's about $732,000 that we have to pay taxes on at our 53% tax rate that means you're paying almost $390,000 in tax on this amount you add these two numbers here you end up with a grand total of tax $456,000 which is almost $100,000 more than we used to pay for the exact same sale let's talk about doctors anything that's making things harder for family physicians is really concerning to me because we know that over 6 million Canadians already don't have access to a primary care provider many doctors don't collect salaries in quite the same way you and I might many of them incorporate meaning in a legal and a financial sense they become a company why incorporate well it's a way of getting around High personal income taxes so in Ontario for example instead of paying progressively more and more income tax the more money I make all the way up to the 53% tax bracket an incorporated doctor could pay the small business tax rate which is way lower in Ontario it adds up to about 12% total on the first half million doar in taxable income now a doctor can't stay a corporation Forever at some point they need to draw down that money for personal use but for all those years the tax money that they saved they were probably reinvesting through the company buying stocks and bonds which then grow in a compounded way all the way to retirement that's how many doctors plan for retirement but under the new rules once they sell those company assets they'll get hit with this new higher capital gains tax for example my Corporation it's just me there's no shareholders there's nobody else making money and so me as an individual saving for retirement saving for sick leave or maternity leave I'm going to be facing an increase in my taxes as I try to save for those things because doctors don't have access to pension or sick days or maternity leave or parental leave officially the position of the Canadian Medical Association is this change to the capital gains tax will hurt Healthcare in Canada especially because Incorporated profession professionals which includes many doctors they don't benefit from the exemption on the first qu million dollar in capital gains that we individuals get so when they retire and start selling assets from the corporation they're paying the new 66% inclusion rate from Dollar number one depending on which province they live in that's effectively like having your tax rate go up 8 to 10% this POV argues makes being a doctor in Canada much less attractive he reasons this tax change punishes all the wrong people haven't the Liberals learned that taxing away doctors taxing away homebuilders taxing away the entrepreneurs who who make paychecks is economic wack oness H so is POV the one who's telling the truth will it destroy jobs you know that's a more difficult nuanced question so this is one more incentive to have people not start up business not come here and to leave but you're not going to have I don't think you're going to have a wholesale departure of entrepreneurs it's going to definitely hit uh some of the very wealthiest people no question about that but there's going to be a lot of middle class people that are going to be affected what makes this such a messy question is that Canada's tax code is complicated the math in reality isn't always as clean as how I presented it to you for example there's what's called a lifetime capital gains exemption for certain asset sales so the first million dollars a person makes from selling a business or a farm for example that's not taxable at all 0% tax and the liberal government is increasing that exemption to $1.
