Business
Trudeau hiking taxes again in 2024
From the Canadian Taxpayers Federation
Author: Franco Terrazzano
Brace for impact, taxpayers.
Prime Minister Justin Trudeau will be reaching deeper into your pockets in the new year with payroll tax hikes, a carbon tax hike and alcohol tax hikes.
Canadians will be paying higher payroll taxes because of the mandatory rising Canada Pension Plan and Employment Insurance contributions.
If you make $73,200 or more, you’ll be paying an extra $347 in payroll taxes in 2024, for a total tax bill of $5,104.
Your employer will also be forced to fork over $5,524 in the new year.
The federal government is imposing a new tax, which it calls “CPP2.” The original CPP taxes your income at six per cent up to $68,500. The new CPP2 expands that threshold and taxes additional income at four per cent up to $73,200.
Trudeau likes to claim he’s “working to make life more affordable.” But he’s also hiking a tax that directly makes life more expensive: the carbon tax.
The carbon tax increases the price of gasoline, diesel and home heating fuels, which is a big deal in our vast, cold country. The carbon tax also makes groceries more expensive, as it increases costs for the farmers who grow our food and the truckers who deliver it.
The carbon tax will cost the average family up to $911 in 2024 even after the rebates, according to the Parliamentary Budget Officer.
The feds are also scheming up a digital services tax. This new tax targets social media platforms, companies operating digital marketplaces, and businesses earning revenue from online advertising, such as Amazon, Google, Facebook, Uber and Airbnb.
Consumers should expect to pay higher prices because of the tax. When faced with the three per cent DST in France, Amazon increased its commission charge to French vendors by the same amount.
You could be forgiven if all these tax hikes drive you to drink.
But when you pick up that case of Blue, a bottle of pinot or a mickey of rum, Trudeau will be taking an extra 4.7 per cent from you through his alcohol tax hikes.
Next year’s federal alcohol tax hike is expected to cost taxpayers almost $100 million.
Taxes in Canada already account for about half of the price of beer, 65 per cent of the price of wine and more than three quarters of the price of spirits.
While Trudeau hikes taxes, many other countries are providing relief.
The Canadian Taxpayers Federation identified 51 national governments that provided tax relief during the pandemic or to ease the burdens of inflation. Those governments include more than half of the G7 and G20 countries and two-thirds of the countries in the Organization for Economic Co-operation and Development.
Provincial governments – of all political stripes – are also providing relief.
Manitoba’s NDP government is suspending its fuel tax in the new year. Gas tax relief from Ontario’s Progressive Conservatives will save a family with a minivan and pick-up truck about $185 through June 2024. And the Liberals in Newfoundland and Labrador cut their gas tax by eight cents per litre.
The Alberta government promised to cut personal income taxes and passed legislation requiring a vote before a government can increase income or business taxes. Manitoba’s income tax cuts could save an individual taxpayer more than $2,000. Quebec lowered its income tax rate on the first two brackets. New Brunswick implemented significant income tax relief in 2023. And Prince Edward Island’s income tax cut will save middle-class taxpayers up to $200.
The fastest, simplest and easiest way for Trudeau to make all areas of life more affordable is to ditch his high-tax policies and allow Canadians to keep more of our money.
From the Fraser Institute
By Jake Fuss and Alex Whalen
According to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians”
This week, Prime Minister Trudeau released a video about his government’s decision to increase capital gains taxes. Unfortunately, he made several misleading claims while failing to acknowledge the harmful effects this tax increase will have on a broad swath of Canadians.
Right now, individuals and businesses who sell capital assets pay taxes on 50 per cent of the gain (based on their full marginal rate). Beginning on June 25, however, the Trudeau government will increase that share to 66.7 per cent for capital gains above $250,000. People with gains above that amount will again pay their full marginal rate, but now on two-thirds of the gain.
In the video, which you can view online, the prime minister claims that this tax increase will affect only the “very richest” people in Canada and will generate significant new revenue—$20 billion, according to him—to pay for social programs. But economic research and data on capital gains taxes reveal a different picture.
For starters, it simply isn’t true that capital gains taxes only affect the wealthy. Many Canadians who incur capital gains taxes, such as small business owners, may only do so once in their lifetimes.
For example, a plumber who makes $90,000 annually may choose to sell his business for $500,000 at retirement. In that year, the plumber’s income is exaggerated because it includes the capital gain rather than only his normal income. In fact, according to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians” with an “average income of $1.4 million a year.”
But this is a misleading statement. Why? Because it creates a distorted view of who will pay these capital gains taxes. Many Canadians with modest annual incomes own businesses, second homes or stocks and could end up paying these higher taxes following a onetime sale where the appreciation of their asset equals at least $250,000.
Moreover, economic research finds that capital taxes remain among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. By increasing them the government will deter investment in Canada and chase away capital at a time when we badly need it. Business investment, which is crucial to boost living standards and incomes for Canadians, is collapsing in Canada. This tax hike will make a bad economic situation worse.
Finally, as noted, in the video the prime minister claims that this tax increase will generate “almost $20 billion in new revenue.” But investors do not incur capital gains taxes until they sell an asset and realize a gain. A higher capital gains tax rate gives them an incentive to hold onto their investments, perhaps until the rate is reduced after a change in government. According to economists, this “lock-in” effect can stifle economic activity. The Trudeau government likely bases its “$20 billion” number on an assumption that investors will sell their assets sooner rather than later—perhaps before June 25, to take advantage of the old inclusion rate before it disappears (although because the government has not revealed exactly how the new rate will apply that seems less likely). Of course, if revenue from the tax hike does turn out to be less than anticipated, the government will incur larger budget deficits than planned and plunge us further into debt.
Contrary to Prime Minister Trudeau’s claims, raising capital gains taxes will not improve fairness. It’s bad for investment, the economy and the living standards of Canadians.
Authors:
From The Center Square
While setting aggressive goals for electric vehicle market share, the Biden administration also wants tariffs and or restrictions on the importation of vehicles and the minerals needed for their batteries – creating heightened concerns over supply chains in what can be described as a “Catch-22” situation.
Solutions to some of the problems include battery recycling and increased domestic mining, however, the U.S. is currently limited in its capacity for both. Federal funds are spurring new recycling plant projects, but questions remain on whether there will be enough used material to meet projected needs.
In his e-book, “The EV Transition Explained,” Robert Charette, longtime systems engineer, and contributing editor for IEEE Spectrum, says making the transition is harder than anyone thinks. He recently told The Center Square it is truer now than it ever was.
“None of this is simple,” he said.
His argument centers on the lack of planning and systems engineering on initiatives that are politically, not engineering, driven. While change is possible, he suggested it would require trillions more in government spending and enforcing those changes through law.
Charette identified many serious issues in setting up the EV battery infrastructure – and even if those challenges are met, he said, there may be tradeoffs between affordability, security and environmental concerns.
Profitability. Battery recycling is a still-developing process which is time consuming and expensive. The cost of purchasing recycled materials may be more costly than buying them new.
Manufacturing demand and potential backlog. The U.S. will require eight million batteries annually by 2030 to meet the government’s EV target, with increases each year after that.
Standardization. Batteries vary in configuration, size, and chemistry.
Domestic mining. While decreasing our dependency on outside sources, what are the environmental impacts? It can also take years to acquire permits and get a lithium mine up and running.
Mineral shortfalls. Secure and sustainable access to critical minerals like copper, lithium, cobalt, and nickel is essential for a smooth and affordable transition to clean energy. An analysis by the International Energy Agency indicates a “significant gap” between the world’s supply and demand for copper and lithium. Projected supplies will only meet 70% of the copper and 50% of the lithium needed to achieve 2035 climate targets.
The report said that “without the strong uptake of recycling and reuse, “mining capital requirements would need to be one-third higher. The agency also emphasizes China’s dominance in the refining and processing sector.
Transportation of discharged batteries classified as hazardous waste is one of the costliest steps of the recycling process. Experts suggest updates to federal EPA and DOT regulations for how battery-related waste is classified. In addition to health and safety, they say clearer definitions of what constitutes hazardous waste would help reduce transportation costs. Many recycling plants are being built in regions where production sites are located to address this.
Supply chain and skills gap shortages. The timetable set by the government is not aligned with the capabilities of the current supply chain. Software plays a key role in the management and operation of an EV battery, and automakers are competing for a limited supply of software and systems engineers.
Competing interests. The goal is to create a circular battery economy, reducing the need for raw materials. However, an EV battery that is no longer useful for propelling a car still has enough life left for other purposes such as residential energy storage. Experts propose a battery material hierarchy where repurposing and reusing retired EV batteries are more favorable to immediately recycling them, detouring them out of the cycle.
Charette says the biggest problem with recycling projections is that they are built on assumptions that have not been tested.
“We won’t know whether these assumptions hold until we reach a point where we are recycling millions of EV batteries,” he said.
Because most EV lithium-ion batteries produced through 2023 are still on the road, the International Council on Clean Transportation reports that the majority of materials being used as feedstock by recycling plants currently come from scrap materials created during battery production.
According to Charette, manufacturers also claim future generations of batteries will last 15 to 20 years, which he says would put a bigger kink in the used-battery supply chain.
Another issue contributing to consumers’ reluctance to buy an EV is the inability to determine the overall health of your battery. Current testing methods are inefficient and costly.
EV adoption has so far not met projections and with all the competing interests, Charette said the market will ultimately tell us what direction the situation is headed. He is also intrigued over the impact government pressure will have on the eventual outcome.
He said many individual components have yet to be worked out, adding that although there is a vision, “we’re a heck of a long way from that vision to getting where we need to go.”
In his opinion, battery recycling issues are even further behind than transitioning the electric grid to renewable energy sources.
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