May 6, 2024

Why Is A Dollar Not A Dollar?

By admin

It’s been a few weeks now and I’ve seen a LOT of people complaining about the federal changes to the capital gains inclusion rate.

The usual suspects like PWC, Grant Thornton, various law firms, the Financial Post and more have been quick to try to change the discussion away from any sense of tax equality in Canada to an all-out war against the varitable Communists that are apparently running our Parliament.

But before I get into things, CONGRATULATIONS: You’re successful.

Extremely successful.

If you are able to experience the tax consequence of the new Liberal capital gains inclusion rate, you’ve just declared an EXTRA $250,000 capital gains and not just income in any given year from this point forward.

I keep trying to get my head around the numbers and I can’t, so I deferred to an expert that isn’t ready to skewer the current government with right-wing financial ideology:

  • The changes, after all, will only restore the capital gains inclusion rate — that is, the proportion of your capital gains that are taxed — to the level it was at in the late 1990s
  • Even then, this new higher inclusion rate only kicks in at $250,000 per year, which means that everything up to that is still included at the old 50 per cent rate (in other words, you’d only pay taxes on $125,000 of it)
  • By comparison, the wages a teacher or lawyer or barista earns face an inclusion rate of 100 per cent.

In other words, your INVESTMENTS need to pay off in unbelievably successful numbers.

To have a capital gain of $250,000, you would have to make 25% rate of return on a million dollar investment. Many people may experience that in a lifetime if they work hard enough, but a lot of basic investment income is protected by rules surrounding first home ownership and RRSPs.

Therefore, you will be in a position where you will make more money than 99.9% of all Canadians.

I’ve got to know … why is your dollar more important or valuable than a dollar earned by an average electrician, lawyer, doctor, barista or highway worker?

For those who complain that this isn’t fair let me ask this:

  • Did you pay a fair wage to your employees?
  • Did you give employees benefits above and beyond what the social safety requires or did you just opt for the bare minimum that you’re legally required to pay?
  • Would you pay less if you could? How much less? Would you institute slavery if it wasn’t illegal just so that you could make more money?
  • Did you ever drive on a road that wasn’t a toll road?
  • Do you have a family doctor? If not, ask yourself why? More importantly, while you’re collecting millions in capital gains, what would you want to be paid to stick your finger up people’s backsides as part of your job description? GP physicians are getting more rare by the day and we need to pay them a LOT more than we’re paying CEOs.
  • Did you put out any of the forest fires that are still smoldering across Canada?
  • Did you bag sand for flooded areas?

Ultimately, ask yourself why your contribution to society is worth more than someone else’s.

So let me ask you this: why is a dollar that you make worth more than a dollar that I make or a nurse makes? Or a musician?

Of course, your ideas are helping to develop parts of the economy, but when a nurse  or a teacher earns money, they spend that money on other goods and services. In fact, they pay a disproportionate amount of their income on other services – usually IN CANADA – and this is why we also have what’s called a progressive tax system.

It’s true that not everyone is at the head of the pack like you might be and it’s true that not everyone takes risks.

I admire the entrepreneurial spirit and we have a lot of infrastructure in Canada that supports people starting and sustaining businesses that employ other people.

However, the reality is that very few people get an opportunity to also deduct expenses like gas, rent, leased properties, utilities, entertainment, food, legal fees, accounting fees, other professional goods and services, other taxes like the HST, car loans, donations to charities that haven’t needed extra cash since the Vatican came to exist, travel costs and much more. As a result, if you’re a successful small business owner climbing to the point where you’re declaring more than an EXTRA $250,000 in capital gains per year, you’ve been given an incredible advantage over working professionals because expenses help balance out your magnificent entrepreneurial drive.

But your dollar is NOT worth more than someone else’s.

Please stop pretending it is and that you’re worth more than everyone else.

A dollar is a dollar is a dollar and the sooner we stop complicating our system with favouratism towards certain economic actors, the sooner we’ll be able to push forward with real solutions to creating financial independence.

Oh yeah … threatening to pull out of Canada? Go ahead. Smarter people like Warren Buffet are chomping at the bit waiting to load money into Canada.