Tax capital gains like other income, yes – but tax all kinds of income less

Prime Minister Justin Trudeau, Finance Minister Chrystia Freeland and cabinet ministers pose for a photo before the tabling of the federal budget on Parliament Hill in Ottawa, on April 16.There is a good argument for increasing the tax on capital gains, and it goes like this. The foundation stone of sound tax policy is neutrality.

For these sorts of comparisons, however, it’s not just the personal income tax rate that counts, but the combined rate, corporate and personal income taxes together. That’s because corporations make distributions to individuals out of income on which they have already paid tax. What is that percentage? At 50 per cent, the current i.e. prebudget rate, the effective tax rate on capital gains is actually lower than it is on other sources of income.

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