Chrystia Freeland will scrap capital gains tax hike if elected Liberal leader: source

Liberal leadership candidate Chrystia Freeland plans to scrap a capital gains hike if she wins, according to sources.

Liberal leadership contender Chrystia Freeland would scrap the federal government’s capital gains inclusion rate hike if she were elected to replace Prime Minister Justin Trudeau, a source close to her tells CTV News.

The story was first reported Wednesday by Bloomberg.

The policy shift would mark a major reversal for Freeland who introduced the measure as finance minister in last April’s federal budget.

At the time, Freeland defended the increase as a way for more well-off Canadians to contribute to the government’s spending agenda.

“People who are enriching our country with their work, and are doing really well, we’re asking those people to contribute a little bit more so that we can make the investments that Canadians need,” Freeland said in April.

According to the source, Freeland’s shifting stance is due to the re-election of U.S. President Donald Trump and the changing economic reality.

“Trump is intentionally creating uncertainty in order to scare investment away from Canada,” the source said, adding “This puts Canada at a significant risk of losing jobs and investment that will move to the United States instead. We must adapt, and quickly.”

Since launching her leadership bid, Freeland has centered her campaign with the message that she is the best person to stand up to Trump.

The tax hike, which came into effect back in June, has drawn criticism from some economists and innovators who say it could disincentivize investment.

The policy increased the capital gains inclusion rate – which is the portion of capital gains on which tax is paid – from 50 per cent to 67 per cent for individuals earning more than $250,000 in capital gains in a year, and on all capital gains realized by corporations and most types of trusts.

That means that people with more than $250,000 in profit made in a year on the sale of assets or investments – including stocks and secondary properties – will have to pay taxes on a larger portion of that money.

The move is expected to return up to $19.4 billion to federal coffers over five years and affect only 0.13 per cent of Canadians with an average annual income of $1.4 million.

The Liberals had separated the capital gains tax changes from other items in last year’s budget bill and tabled the proposals as a notice of ways and means motion in September. But amid a Conservative filibuster in the fall and Trudeau’s move to prorogue Parliament until March 24, the policy remains in limbo.

In a statement to CTV News earlier this month, an official from the Department of Finance said the Canada Revenue Agency (CRA) would continue to administer the capital gains changes.

“In the event that Parliament is prorogued, or dissolved, the CRA will generally continue to administer proposed legislation consistent with its established guidelines. Upon resumption of Parliament, if no bill is passed in the House of Commons, and the government signals its intent to not proceed with the proposed measures, the CRA would cease to administer them,” the statement said.

Conservative Leader Pierre Poilievre has also pledged to reverse the capital gains tax change if he becomes prime minister.

“This Liberal job- and investment-killing tax was a bad idea before President Trump’s tariff threat. It is outright insanity now,” Poilievre said in a statement last week.

Freeland’s move to scrap the tax change is the latest policy reversal linked to her time in the Trudeau government. The former finance minister has also said she will move away from the unpopular consumer carbon tax, which she has previously defended.

Liberal leadership contenders must declare their intent to run by Thursday, with the party selecting its next leader on March 9.

With files from CTV News’ Rachel Aiello