While Justin Trudeau’s centre-right Liberal government was never as progressive as some suggested, the post-Trudeau Liberals are taking a sharp right turn, especially on the question of how to tax the rich.
Banker Mark Carney took time during his campaign launch to attack progressive politics, which he branded as far left: “We can’t achieve our full potential with the ideas of the far left. They too often see government as the solution to every problem, with the reflex to spend and subsidize.”
Carney also took shots at the capital gains tax increase last year: “Governments that spend too much and invest too little will eventually pay a heavy price..the countries that nurture, welcome and celebrate risk-takers will thrive.”
And Chrystia Freeland—the race’s other front-runner—has been suggesting the same, directly opposing her own government’s policies and image, veering away from the policies she directly implemented. Remember: Freeland has not just been an MP for over 10 years: she served in several top cabinet portfolios, and has long been seen as the heir-apparent to Justin Trudeau. So while Freeland is laughably painting her campaign as a challenge to the “Ottawa establishment,” it’s clear that Freeland is fully bending the knee to Bay Street and the capitalist class.
Reversing the increase in capital gains tax
Let’s recap just how Freeland broke from Trudeau’s modest capital gains reform. This has been part of her broader right-wing turn, where she has emphasized the need to cut spending while perplexingly also demanding tax cuts to empower Canadian capitalists. This is where her attacks on capital gains taxes come in. Freeland has argued that Canada must follow the lead of Donald Trump, embracing his pro-capitalist policies lest we lose out on investments here. This is a bog-standard right-wing argument, that unless we bend over for the rich, they won’t trickle their wealth down upon us.
But we should all remember why reforming the capital gains tax was so necessary from the perspective of justice and fairness, and how Freeland has spat on those principles. Before the capital gains reform, there was a massive gap between how income was taxed. Put simply, money earned though labour was taxed at the full value, whereas money earned from capital gains (which can include things such as selling a property or stocks at a profit) was only taxed at a 50% inclusion rate.
What this means is that if you earn $100,000 as a worker you’ll end up paying taxes on the entirety of your labour. But if you simply sell investments worth $100,000 in profit? The government treats that as only $50,000 of taxable income, and lets you have the other $50,000 tax free. The issue is clear: a factory worker busting their back pays the full load, whereas a landlord who flips one of their 10 properties for a profit gets a huge tax break.
The Trudeau reforms, supported by the NDP, while still preserving this inequality, moved in the right direction. It increased the capital gains inclusion rate from 50 to 66%, but only on gains over $250,000. This still means that a capitalist flipping stock while sitting on their behind pays less proportional tax than a worker, but it narrows the gap, while not raising taxes on modest gains more typical among the middle class. And these reforms preserved the family home exemption, which allows people to sell their main property for a profit without incurring capital gains at all.
Freeland introduced the increase in the capital gains inclusion rate when she was Finance Minister, explaining it would generate $19 billion that could be used to fund housing, dental care and pharmacare. But now in the leadership race she is opposed to the tax change.
Freeland is effectively saying: “dear plumbers, electricians, nurses, and cashiers: you need to keep paying the full share while property-flippers and stock speculators benefit from your labour.” That in this cost-of-living crisis people across Canada are enduring, the working class must continue to subsidize the idle rich. No wonder NDP MP Niki Ashton correctly hammered this move as a giveaway to the rich that aligned the Liberals with Poilievre’s Conservatives.
This raises a more troubling question: What else will the Liberals give up in order to align with Poilievre and win over his voters: will the Liberals privatize key public services? Will they abolish Medicare? Will they embrace anti-abortion policies? None of these are in the Freeland/Carney platform as of yet, but in their rightward move, we cannot guarantee they won’t adopt them.
Additionally, this sharp right turn poses a risk for the Liberals, because it makes the distinction between them and the NDP clearer. As former Freeland policy advisor Tyler Meredith noted, cutting the capital gains tax “opens a new flank to the NDP and poses challenges to how progressives deal with inequality in the future.”
People across Canada deserve a progressive alternative to the Poilievre Conservatives, but it’s become increasingly clear they won’t get it from the post-Trudeau liberals.
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