My dad used to say if you want to know what is going to happen to Canada in the future, look at Britain now. That was in the late 70’s – interesting how right he was. I have put my own twist on the premise by looking south of the border for tax policy.
Last week, President Biden announced a multi-trillion dollar tax increase for the wealthy Americans and big corporations. This is all supposedly going to be used to combat climate change, reduce income inequality, and expand the social safety net. For the rich, this means up to a 2.6 percent increase on their taxable income, the sale of their investments and the transfer of assets upon their death.
If someone earns more than $1 million per year, they would be taxed on their capital gains. This means, proceeds of selling stocks, cryptocurrencies, boats, or even art would be taxed as regular income. They used to pay 20 percent, now that’s jumping up to 39.6 percent.
Some states face tax rates above 50 percent – the highest tax rate in nearly 100 years. Corporations are going to see a seven percent tax rate increase, up from 21 percent to 28 percent. In Canada, we pay 26.5 percent. Companies that pollute the environment would also see fewer tax breaks.
Countries around the world are watching how the tax proposals are being received, since that will determine whether they will sign on to Ms. Yellen’s global minimum tax.
For Canadians the message is clear. Taxes are going up. Time to tax plan. If you have unrealized gains in property you should crystalize them before the capital gains rate soars. Need help with that? Call me.
Fraser Simpson, the Tax Mechanic