A rather modest tax reform has much of the business community and its attendant economists in a bit of a dither. Corporations and trusts will now pay taxes on two-thirds of their capital gains rather than just on half. This also applies to individuals for capital gains over $250,000. Gains on principal residences are excluded.

Conservatives, too, have joined in on the censure, yet it all began with a Conservative government. In 1962, Prime Minister John Diefenbaker appointed a Royal Commission on Taxation headed by Toronto accountant Kenneth Carter.

The commission was set up in response to business concerns that taxation was too high in Canada and Carter began his work agreeing with that concern. He changed his mind. He discovered that although tax rates were indeed high, tax breaks sheltered the incomes of the rich. He came to his famous conclusion “A buck is a buck is a buck,” believing that the country should base its taxes on all of the income people received regardless of how they got it.

The commission’s report consequently recommended that capital gains—increase in value of stocks, bonds, jewelry, and real estate—heretofore exempt, should now be taxed like any other income.

When the six-volume report was released in 1967, it aroused fierce opposition from the individuals and corporations who enjoyed the tax break. The now-Liberal government was cowed by the opposition and the proposed reforms shelved.

Finally in 1972, 10 years after the Carter Commission was appointed, a new Liberal government instituted a capital gains tax, however only 50 percent of the gains would be included. The other half still got a free ride.

The included portion went up and down, increased to two-thirds in 1988 and to three-quarters in 1990, and then fell back to one-half in 2000.

Supporters of a free ride for capital gains insist it’s necessary to encourage innovation and investment, thus providing economic activity including jobs. It is, in other words, a good thing for the economy—a more righteous argument than the rich just wanting to keep more of their money. And it’s the rich we’re talking about. According to Finance Minister Freeland, only 0.13 per cent of Canadians (who have an average income of $1.4 million) will be affected. 

As far as deleterious effects on the economy are concerned, a report by Canadians for Tax Fairness claims that raising the capital gains inclusion rate has no correlation with economic productivity. Furthermore many studies show that economic inequality has a destructive effect on labour productivity—countries with more equal distribution of incomes tend to have higher labour productivity.

In any case, a buck is still a buck is still a buck. It was in Kenneth Carter’s time and remains so today. It is simply unfair that someone collecting income from a gain in their stock portfolio should pay tax on only half when the average Canadian pays tax on 100 percent of their income.

Opposition leader Pierre Poilievre has, on cue, opposed the increase which is a bit awkward. He likes to present himself as a champion of the “common” people and an enemy of the “elites” which should make him a supporter of the change. Perhaps to undermine the obvious charge of hypocrisy, he has promised, if elected, to establish a “tax reform task force.”

If indeed he is ever in a position to establish such a task force, he couldn’t do better than emulate his Conservative predecessor John Diefenbaker and appoint as head of his task force a 21st century version of Kenneth Carter.