Like many social-policy advocates, we at Maytree have long advocated, often loudly, for a deeper commitment by government to address the most critical issues facing Canadians. Rising levels of poverty, homelessness, and food insecurity require urgent responses from all levels of government.
But when it comes to funding these responses, the same organizations often lose our voices — and we shouldn’t.
There are reasons to evade discussions around taxation and revenue. Tax policy is complicated. It isn’t our expertise. And tax increases, divorced from what it is being funded, are deeply personal and seen as a drag on our economy. Yet the reality remains that the challenges we face require new investment.
That’s why the proposed increase to the capital-gains inclusion rate is a welcome policy. It would generate nearly $20 billion over five years federally and billions more provincially, allowing for significant investment in crucial areas like housing, which has suffered from decades of neglect. It would also pay for new initiatives, such as the $200-a-month Canada Disability Benefit. Though much too small, the benefit will help hundreds of thousands living in deep poverty. Then there are pharmacare, school lunches, and more.
But there’s a public debate raging about the advisability of taxing capital gains, and the forces allied against the move are privileged and strong. With the government focused on a message of fairness, the more complex relationship between smart, progressive tax policy and strong social policy is largely absent from the conversation.
Without rehashing the capital-gains debate in full, increasing the inclusion rate is good tax policy. It provides a more equitable system by requiring higher-income Canadians to pay more. Our tax system is not nearly as progressive as many think, and social pressures, changing demographics, and international commitments demand real introspection in terms of whom we ask to fund future obligations.
The change also makes our tax system more efficient by taxing income from capital gains at rates closer to those applied on other types of income, like employment earnings or dividends. The divergence has come after decades of shifting income-tax rates created a tax advantage for higher-income Canadians, who can structure their wealth to minimize tax.
Given the strong policy rationale, some opponents of the change fall back on nebulous arguments about taxes and spending simply being too high. These are not arguments about taxing capital gains; they’re about the kind of society in which we want to live.
Agenda segment, February 9, 2024: Is it time for a wealth tax in Canada?
Others are concerned that tax increases could affect entrepreneurship and productivity. This issue should be thoughtfully assessed in the context of broader tax reform but also be measured against the economic value of what’s being funded.
Those opposed to the change have been loud and well organized and taken a prominent hold on the discourse around this issue. What gets lost is an honest debate about today’s unacceptable levels of poverty. We need to draw a line between the opponents’ position and our responsibility to make fulfilling social and economic rights a collective priority.
Don’t be afraid to admit it: If you believe advancing social and economic rights requires government investment, then you’re a tax-policy advocate. If you don’t feel you have the expertise to weigh in, pay attention to the work of tax-policy experts and amplify their voices.
Our redistributive tax system is the foundation of social policy in Canada, and we must be prepared to speak up for smart, progressive revenue tools just as we do for stronger social supports.
Meaningful tax increases are rare in today’s politics, and the increased capital-gains inclusion rate will make billions in new investments in housing and income security possible. This needs to be a social-policy debate. It’s time for social-policy voices to join the fray.
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