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We asked an economist if the capital gains tax changes will really generate nearly $20B


The Liberals' proposed changes to the capital gains tax passed in the House of Commons on Tuesday, clearing the way for the federal government to hike the amount of tax Canadians pay on the sale of assets or investments.

The changes, which come into effect June 25, will raise the inclusion rate on capital gains to 67 per cent for Canadians earning more than $250,000 through stocks or secondary properties, up from the current 50 per cent.

Since it was first brought up in April, several business groups have criticized the proposals, including a joint letter from the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, Canadian Manufacturers and Exporters, and several other organizations.

"This measure will limit opportunities for all generations and make Canada a less competitive, and less innovative nation," the letter said.

To counter the pushback, Prime Minister Justin Trudeau released a video on social media May 13, explaining the changes will only affect "less than one per cent of people."

"At a time when the richest are only getting richer, I think it's fair to ask those people to pay a little more," Trudeau said in the video. He also claimed that the changes "will result in almost $20 billion in new revenue" — $19.7 billion over five years, to be exact — that will go to investments in affordable housing.

But how accurate are the government's claims? Would these proposed changes really provide that much new revenue for the feds? Will Canada's ultra-wealthy be the ones who pay their "fair share" through the new tax increase?

Would the government really be able to generate $20B in tax revenue?

Joseph Steinberg is an associate professor with the University of Toronto's economics department. With a PhD in economics, Steinberg's research uses quantitative models to study public finance and policy.

Speaking with, he says these types of policies are unlikely to raise much in the way of tax revenue, and that it will be far less than the near $20 billion the government claims it could generate.

"I don't think that this specific policy is likely to be successful," he said. "Suppose this policy is going to affect less than one per cent of Canadian households, or the very, very rich. The problem with this is they're precisely the same population of households that engage in offshore tax evasion and other forms of tax avoidance."

Through years of research, Steinberg says bills and legislation similar to this only affect "moderately" rich Canadians – those we may consider to be upper-middle class, who own two cars, maybe own or share a cottage – not the ultra-wealthy that it's being promoted as targeting.

Leader of the Liberal Party of Canada Justin Trudeau speaks during a Liberal Party of Canada fundraiser in Ottawa, on Monday, June 10, 2024. (Spencer Colby/The Canadian Press)

"Imagine somebody who's got an investment property or a cottage. Maybe they won't sell it this year or next year, but they're going to sell it at some point in the future," he said. "If that sale goes beyond $250,000, that household is going to be affected. Very few Canadians annually earn more than a quarter-of-a-million dollars in capital gains, but the percentage of people who will at one point, that exceeds one per cent."

Going one step further, Steinberg says the ultra-wealthy usually like this kind of policy, because "they have ways to avoid them."

"If the goal (of the proposal) is to reduce inequality," he continued, "these kinds of policies aren't going to help."

What could the government be doing instead?

Steinberg says this type of proposal doesn't really attack one of the root causes of wealth inequality, which he says is tax avoidance.

"Given what my research into policies on raising taxes on the wealthy has found … since we don't enforce any rules against tax avoidance and tax evasion, these kinds of policies are really unlikely to raise much, if any, in the way of tax revenues."

The Canada Revenue Agency (CRA) estimates Canada loses nearly $3 billion a year in offshore investing, which is close to how much the government projects to bring in each year with the changes. Steinberg reiterates that's where the government could make the rich pay their fair share.

"I would recommend, instead of this policy, ramp up enforcement of tax evasion by the ultra rich. Give the CRA even more resources to audit really rich households, more resources to fight money laundering," he said.

"The return on that investment would be pretty high for the government."

Pushback and praise for the proposals

Others have criticized the proposals, including some in the tech sector. When Deputy Prime Minister and Finance Minister Chrystia Freeland introduced the motion to Parliament Monday, Shopify president Harley Finkelstein shared a critical post on X, calling the move "a tax on innovation and risk-taking."

"Investing in new products or ideas is inherently risky. Entrepreneurs need incentives, not penalties, to drive (Canadians) forward," he wrote. "This policy will disincentivize risk-taking and tax Canadian ambition at a time when we need more entrepreneurs, not fewer."

But while the Liberals hammer the point that the proposal targets the richest people in the country, Steinberg says it's impossible to ignore the amount of pushback it's received from those in various tax brackets.

"I think it's fair to say that Trudeau and his government are pretty unpopular, and people are less likely to be inclined to view any kind of policy that his government proposes favourably," he said.

Steinberg also says the rising costs of living and inflation are at the forefront of Canadians' minds, and that this proposal may not be something they perceive as helpful in their day-to-day lives.

Not everyone thinks the policy would stifle innovation. Jon Shell is the chair of Social Capital Partners, a non-profit that focuses on rising wealth concentration. Through a post on his LinkedIn page, he argues that the capital gains tax in the '90s was 75 per cent. 

"(The '90s) also happens to be the decade everyone says was best for productivity, growth, investment, whatever," he wrote. "All the productivity people LOVE the 1990s. Lowering the rate (to 50 per cent in October 2000) had no impact on productivity or investment, but was certainly great for the super rich, and certainly great for me when I sold my companies in 2020." 

Several groups representing educators have also spoken in favour of the proposal, saying it could make a difference for future generations of Canadians.

"The Canadian Teachers' Federation (CTF) is pleased to support changes that contribute to the federal government's ability to make investments that enhance the common good, such as a national school food program, child care, poverty alleviation and more," Cassandra Hallet, the executive director of the CTF said on X.

Karen Littlewood, president of the Ontario Secondary School Teachers' Federation, echoed the sentiment.

"Asking for tax fairness is not a bad thing," she wrote on X. "Asking the wealthiest 0.13 per cent of Canadians to pay a little more so ALL Canadians can have pharmacare and dental and school nutrition programs is a good thing."




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