UPDATE: Surplus stripping and the new, costly tax loophole for intergenerational transfers

Canadian tax forms

Part I: A recently approved private member’s bill is deeply flawed and opens the floodgates to aggressive surplus stripping schemes. It should be fixed. Read this articleUPDATE: Surplus stripping and the new, costly tax loophole for intergenerational transfers

Are the rich really getting poorer in Canada?

The rise of small-business incorporation is suppressing taxable incomes of rich Canadians. The growing gulf between top personal tax rates and the low rates paid by small CCPCs is driving the rise of incorporation. Read this articleAre the rich really getting poorer in Canada?

Evidence on Behavioural Effects of Higher Capital Gains Taxes in Canada

The debate over whether to increase the tax rate hinges in part on the extent to which a higher tax rate would distort investment decisions and reduce incentives for Canadians to invest. This commentary sheds light on this debate by analyzing the effects of a tax policy change in the mid-1990s that increased the effective capital gains tax rate. They find that the new higher rate on capital gains tax had no adverse effect on cumulative adverse effects on capital gains realizations. Read this articleEvidence on Behavioural Effects of Higher Capital Gains Taxes in Canada

An Employment Insurance system for the 21st century: Lesson 2, The future of work calls for better income insurance

This is the second commentary in a three-part series examining ideas for reforming Canada’s Employment Insurance (EI) program. This commentary discusses the need for the EI program to provide comprehensive insurance against various forms of income loss. The First commentary, on the need for EI to be better designed to insure against big shocks, can be found here. Read this articleAn Employment Insurance system for the 21st century: Lesson 2, The future of work calls for better income insurance

Highlights of interprovincial tax comparisons: Bilan de la fiscalité au Québec 2021 Edition

The first part of this 2021 edition of the Bilan de la fiscalité au Québec presents the tax announcements made by the Québec and federal governments, and by those of the other provinces, since the previous edition of the report. The next two sections compare Québec against the other Canadian provinces in terms of taxation. The fourth section presents an overview of tax expenditures in Québec and evidences the choices made regarding the different sources of tax revenues. Then, two sections examine taxation from different angles, namely, households (net tax burden) and individuals (profile of Québec taxpayers). Finally, the last section looks at various indicators of income inequality and how governments reduce inequality through taxation. Read this articleHighlights of interprovincial tax comparisons: Bilan de la fiscalité au Québec 2021 Edition

It’s time to increase taxes on capital gains

To address wealth inequality, and to improve functioning of our tax system, tax rates on capital gains income should be increased. The current tax preference for capital gains costs upwards of $15 billion annually. To equalize the tax treatment of gains and other income, the inclusion rate for capital gains on shares of small businesses should rise to 90% from the current 50%, and the inclusion rate for gains on shares of large corporations should rise to 70%. This would constitute a simpler, more efficient way of taxing high-wealth individuals compared to other recent proposals for a novel tax on wealth, and would likely raise more revenue as well. Read this articleIt’s time to increase taxes on capital gains

The Taxation of Capital Income in Canada Part III: Bringing it all Together

This is the final commentary in a three-part series examining possible reforms to Canada’s approach to taxing capital income. In this third commentary, I bring the material from the first two commentaries together and describe a tax reform package applied to the two sides of the capital market that would make Canada’s income tax system more attractive when viewed through the lens of the equity-efficiency trade-off. Key to the analysis is the decoupling of the supply and demand sides of the market in a small open economy like Canada. Read this articleThe Taxation of Capital Income in Canada Part III: Bringing it all Together