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Justin Trudeau’s reaction to repeated criticism of the capital gains tax hike? He doubled down

Political parties, whether in government or opposition, introduce policy proposals on a fairly steady basis. Some ideas will be praised, while others will be criticized. That’s to be expected in the day-to-day world of politics.

One of the keys to success is for parties and leaders to take both of these reactions to heart and see if there are ways to improve or build upon the proposed policy measure. Anything that’s good can always be made better. If it’s rejected outright, then it’s up to party leaders and senior leadership to either figure out what needs to be improved, or if the best course of action is to scrap the policy and head back to the drawing board.

Prime Minister Justin Trudeau has never grasped the fine art of these two skills that every politician needs to learn. This isn’t to say his Liberal government hasn’t occasionally changed certain policy directions. The problem is their mediocre and ineffective leader seems to believe most of his ideas are great right off the bat, and the avalanche of bad ideas he’s proposed since taking office in 2015 don’t need to be tinkered with.

In fact, Trudeau’s natural reaction when a policy has been criticized is to double down rather than accept the deficiencies and fix them.

Here’s a recent example.

When the Liberals unveiled the April 16 federal budget, it included a tax hike in capital gains. In Section 8.1 of Budget 2024, they announced their intention “to increase the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds.” They attempted to brush away any and all concerns. “Only 0.13 per cent of Canadians with an average income of $1.4 million are expected to pay more personal income tax on their capital gains in any given year,” the same section noted. Several items that would have affected ordinary Canadians remained exempt, including the sale of principal residences.

Why had Finance Minister Chrystia Freeland targeted capital gains? Her predecessor, Bill Morneau, had rejected previous calls to look into this matter. “This was very clearly something that, while I was there, we resisted. We resisted it for a very specific reason – we were concerned about the growth of the country,” he said at a post-budget Q&A session with the accounting firm KPMG, and it’s “clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments.” Putting Morneau’s wealth and financial status aside, he made the right decision.

Freeland took a very different tact. “We are making Canada’s tax system more fair by ensuring that the very wealthiest pay their fair share,” she told the media. Instead of doing things that could potentially help the Canadian economy, such as reducing the size of government and introducing broad-based tax relief, the Finance Minister decided to use the age-old political tactic of soaking the rich under the guise of tax fairness.

She’s wrong, of course. Adjusting the tax levy from 50 percent to 66.7 percent on profits for capital gains over $250,000 for individuals, trusts and corporations doesn’t just hurt roughly 0.13 percent of the population. It hurts the other 99.87 percent, too.

Higher taxes and lower take-home pay increases the role of the state, reduces economic liberty and personal freedom. They also minimize the impact of free markets and private enterprise, and cripple economic growth and stability. In the case of capital gains, which refers to the sale of an asset (ie. house, building, stock shares) that has increased in value since the initial purchase, Ottawa reduced an individual’s annual investment earnings. Targeting capital gains was therefore a clear sign the Liberals have little to no respect for individuals and companies that are profitable and contribute to Canada’s overall economic engine.

The Trudeau government was immediately condemned by the business community. Major industry associations like the Canadian Chamber of Commerce spoke out against the capital gains tax hike. The Canadian Medical Association said the proposed changes “will have adverse effects on physician recruitment and retention across the country.” The Mining Association of Canada suggested the tax hike will “significantly reduce” the value of the Mineral Exploration Tax Credit for investors and companies.

Moreover, a Nanos Research survey for Bloomberg News conducted between April 28 to May 1 revealed that 45% of respondents felt the tax changes “will lead to decreased investments and innovation, which will weaken the economy.” This was the majority viewpoint, as 38 percent supported the proposal and the remaining 17 percent were unsure. It’s also worth noting 46 percent of Canadians ages 18 to 34 opposed the tax increase, while those aged 35 to 54 were at 48 percent.

Most Prime Ministers and their senior advisers, irrespective of political stripe, would look closely at these numbers and comments. They would realize that significant adjustments to the capital gains tax hike would be required, and would start the process immediately.

What did Trudeau do? You guessed it: he doubled down on this unpopular proposal. The PM actually released a short video on May 13 to justify his position. It was as ignorant and ill-informed as his government’s decision to target capital gains in the first place.

There are many reasons why the Liberals are getting clobbered in the polls. Trudeau’s inability to understand what Canadians want from their government, and to change proposed policies that a majority of Canadians dislike or believe will hurt the economy and their communities, are two of them.

Michael Taube, a longtime newspaper columnist and political commentator, was a speechwriter for former Canadian prime minister Stephen Harper.

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.