Prime Minister Justin Trudeau and his deputy PM Chrystia Freeland are facing serious heat from Canada’s top earners for jacking up the capital gains tax to 66.3%.Following the federal budget projections released by Freeland, who is also finance minister, in parliament this week former finance minister Bill Morneau also warned her latest budget is a dangerous threat to investment and economic growth. He said, given the Trudeau Liberals’ gross tax hike, entrepreneurs and corporations will be wary of investing in Canada and more likely to consider moving their business elsewhere. Indeed, the news was not well-received by Canada’s wealthiest business people. An open letter published this week shows CEOs are dead against the shocking capital gains tax. On Thursday evening, 150 CEOs had signed the letter addressed to Trudeau and Freeland specifically. By Friday morning, the signatories amounted to 1,036. CEOs told Trudeau and Freeland it is businesses such as theirs that keep the Canadian economy going and reminded them of the value of their investments. “Each and every day, we invest in Canada. We invest our time, our ingenuity and our money. We are betting on Canadians and we are betting that with hard work and tenacity, we can make the country better,” wrote CEOs. “You cannot tax your way to prosperity. But in the 2024 federal budget, we see a government trying to hike taxes on investment. Anybody with experience in entrepreneurship and investment can see how this will stifle growth.”“We are at a moment when capital is harder to access than at any time in the past generation. Higher interest rates and economic uncertainty mean that many high-growth companies with innovative products struggle to secure growth capital on favourable terms.”CEOs pointed to the Bank of Canada’s recent proclamation that the nation is in a productivity “emergency” and said despite that fact, innovative companies have gone through successful growth because they can offer initiatives such as stock options — which are subject to capital gains tax. “Canada’s economy needs productivity growth, innovation and above all, we need investment. As signatories of this letter, we’re investing in Canada.”The letter calls for the Trudeau Liberals to “scrap this disastrous tax hike on investment and listen to the innovators who are trying to create a more prosperous future for every generation.”Morneau on Wednesday said when he was finance minister, he resisted increasing the capital gains tax because he didn’t want to deter investors and entrepreneurs. Canada can now expect a substantial investment drought, said Morneau. “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.”Morneau slammed Trudeau’s administration for its net negative move of pushing the rate from one-half to two-thirds on capital gains over $250,000 for individuals and on all gains for corporations and trusts. “It’s clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments,” said Morneau, adding business owners and heads of corporations and others most likely to feel the burden of the new the tax increase would think twice about putting money to work in Canada because they wouldn’t make as much of a return on their investments. "We've created a disincentive and that's very difficult. I think we always have to recognize any measure that creates a disincentive for investment not only impacts us within the country but also impacts foreign investors that are looking at our country," he said."I don't think there's any way to sugarcoat it. It's a challenge. It's probably very troubling for many investors."Freeland, whose budget is entitled Fairness For Every Generation, said it was her prerogative to make sure Canadians of all ages are treated “fairly.” She did not mention the adverse impacts on younger generations who would inherit family cottages and investments. "We are making Canada's tax system more fair by ensuring that the very wealthiest pay their fair share," Freeland said Tuesday after tabling her budget in the House of Commons. Freeland thinks the capital gains tax increase will raise $19 billion over five years and presented it as a means to pay for Trudeau’s housing plan. "I know there will be many voices raised in protest. No one likes paying more tax, even — or perhaps particularly — those who can afford it the most," she said.Morneau disagrees with his successor. The former finance minister noted Canada’s GDP per capita is declining and the country is less wealthy than before Freeland took over in 2020. He slammed the Trudeau Liberals for being more interested in spending taxpayer dollars on expensive new social programs.Instead, the federal government should be more concerned with reversing troubling national wealth trends."Canada is not growing at the pace we need it to grow and if you can't grow the size of the pie, it's not easy to figure out how to share the proceeds," he said."You think about that first before you add new programs and the government's done exactly the opposite,” added Morneau, comparing the US’ “dynamic investment culture” to Canada’s lack thereof. Morneau also pointed out Trudeau’s bloated bureaucracy, which has about 357,247 public servants, and has easily outpaced population growth, and the deficit is now double what is was when he left his position in 2020. "There wasn't enough done to reduce spending," he said, while offering muted praise for the government's decision to focus so much of its spending on the housing conundrum. "The priority was appropriate."
