Finance Committee on Sept. 19th, 2024

[Yvan Baker, Liberal, Etobicoke Centre, ON]

However, regarding some of those other areas you referenced in your introductory remarks, can you expand a bit on why those investments are important?

[Heidi Yetman]

I can talk about child care, because I lived in Quebec and had two children. That's a very good example of investing in people, because every dollar spent on child care, for example....

I know the federal government has invested in child care, and I'm very happy to see that. Quebec has had child care since 1997. When I put my children in day care, it was $7 a day. What they discovered in Quebec—and there's a lot of research showing this—is that it was an investment. For every dollar that was put in, something like $1.20 was brought back to the government. I always thought to myself, “Well, why wouldn't everybody do this? This is amazing.” It puts more women into the workforce, and that makes for healthier Canadians. People don't need to depend on the government, for example, for welfare or whatever.

The more we invest in people, the better it is for everybody. Everybody is going to profit from that. That's a very good example. I was very happy that the federal government invested in child care—something Quebec has done since 1997.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

The increasing cost of housing is something that most of our constituents are struggling with. We spend a lot of time talking about it at this committee and in the House. I'm sure it affects your members and their families as well.

[Heidi Yetman]

Absolutely.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I think a big part of what the government has been trying to do, as it plans out its budget, is find resources to make investments that allow us to build more housing.

I'm wondering if you could talk about the importance of that—what you agree with, what you disagree with, what we need to be doing going forward, etc.

[Heidi Yetman]

We absolutely need to do something about housing.

In March of last year, I was in British Columbia speaking to teachers on the ground there. There were resolutions that came out of the meeting I was in about housing. There are teachers who cannot buy a home or who have to live very far from where they work. Even teachers are having a problem with housing.

Housing should be a human right. It's not about making profit; it's about making sure everybody has a roof over their head. Unfortunately, profit is what it usually ends up being about, and that's a problem.

I really believe that housing is a human right. We have teachers, especially in the big cities—Toronto and Vancouver—who are finding it very difficult to have housing. It's important, and there should be investments in that for sure.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you, Ms. Yetman.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

Now we will move to MP Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I have a fairly technical question for you, Mr. Genest-Grégoire.

Actually, I saw you raise your hand. Did you want to comment on something that was said? If you do, please go ahead. I have two and a half minutes you can use.

[Antoine Genest-Grégoire]

I just wanted to quickly mention the fact that businesses aren't eligible for the $250,000 exemption. In their case, the old rate still applies. That's not really an injustice, since there can be no justice between individuals and businesses. Justice and fairness are measured between people.

When we talk about SMEs, we don't know how wealthy their owners are. Some really wealthy people own small businesses, and others who are not so wealthy own them too. There's no point in having an exemption for businesses because, in the end, it's the business owners we're looking to spare with the exemption.

That hasn't changed. For example, people who own a restaurant, whether it's a small restaurant or a chain, will be treated the same way, that is to say whether they sell their shares, their small business or their large business, the first $250,000 they earn, on top of the other existing opportunities, will be treated the same way.

The fact that the exemption does not apply to businesses that realize capital gains has nothing to do with fairness. It's important to differentiate between businesses and individuals. We seek justice for individuals, not businesses.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I'm going to follow up with a quick question about tax neutrality.

Have you looked at the tax benefits of the proposed tax reform we're studying here when it comes to deciding whether to have an incorporated business or a sole proprietorship?

[Antoine Genest-Grégoire]

I'm not sure about those two particular types of businesses, but generally it's a measure that improves tax neutrality.

Basically, the main issue for a business owner right now is the difference between paying themselves through capital gains and paying themselves in dividends. There's been a lot of talk about wages. For the business owner, that's also an option, but it's rarely considered. At the moment, it's far more advantageous to pay yourself in capital gains than in dividends. That's a problem in itself, because it affects the shape of the business. However, we would like the shape or type of business to correspond to its market and needs, and not to adopt the form of business that is most beneficial to the owner's compensation.

So it promotes tax neutrality.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

MP Davies is next.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Ms. Wilson, under measures introduced in the 2023 fall economic statement, the first $10 million in capital gains realized on the sale of qualifying businesses to an employee ownership trust will be tax exempt for the next few tax years, and hopefully it will be made permanent.

Under the proposed reforms contained in budget 2024, the lifetime capital gains exemption for capital gains on the sale of a small business or fishing and farming property will increase by 25% from $1 million to $1.25 million. That will be indexed to inflation after 2025.

In addition, the Canadian entrepreneurs' incentive will reduce the inclusion rate to 33.3%—so a drop—on a lifetime maximum of $2 million in eligible capital gains.

Combined with the enhanced lifetime capital gains exemption, when that incentive is fully rolled out, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business. According to the government, entrepreneurs with eligible capital gains of up to $6.25 million will be better off under these changes.

Do you disagree with those assertions?

[Montana Wilson]

I am not familiar with what you are speaking about regarding the agricultural piece.

[Don Davies, NDP, Vancouver Kingsway, BC]

Those are the actual rules announced by the government in the last budget.

Ms. Trottier, just quickly to you, you stated that those fighting back against the capital gains increase don't want to admit one simple truth, which is that the unequal treatment of capital gains and earned income has been jet fuel for inequality in Canada.

Can you expand on that, please?

[Dr. Claire Trottier]

When you already have access to a significant amount of capital and you make capital gains, you're increasing your wealth, so there are a lot of mechanisms by which wealthy folks continue to increase their wealth more and more. Certainly the preferential treatment for capital gains has contributed to that.

The situation right now in Canada is that the richest 1% of Canadians own about 25% of the wealth in this country, which is the equivalent of the wealth held by the bottom 80% of Canadians, so there is quite a dramatic concentration of wealth in this country.

I'm in agreement with several of the other witnesses that we should actually be going much further than these proposed changes.

[The Chair, Liberal, Peter Fonseca]

Next we'll go to MP Hallan.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you, Mr. Chair.

I want to direct my questions towards Ms. Wilson, and then I'd like to move a motion.

Ms. Wilson, thank you not only for standing up for small business but also for explaining that small businesses, through their success, hard work and the risks they take for this country, reinvest back into their communities and in most cases in the most vulnerable.

You articulated earlier about builders not having as many projects or not wanting to invest in more projects. It could also mean that a business may not want to scale up because of this job-killing capital gains tax hike. If I look further, that means you would have fewer projects to work on as well. Is that correct?

[Montana Wilson]

That's correct.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

The youth unemployment rate right now is at one of the worst levels ever. Would you agree that this also would impact that unemployment or disincentivize others from even just getting into the trades?

[Montana Wilson]

I can speak a bit to my personal experience.

Of our total staff, this summer we hired 20% co-op students. That is a rarity in the industry.

We are taking the financial gains we have and are investing them back into our youth, because that's the only way we're going to bridge the current labour market we have and that missing middle piece of the labour market. If we don't invest in the youth and grow them up, so to speak, we are not going to have them in our labour force. It's important for us to be able to put that capital back into the business, and the more capital we have to do that, the better it is for our youth.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

This job-killing capital gains tax hike would disincentivize companies from investing further, not just in themselves but in Canada.

[Montana Wilson]

I do believe that's true.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you so much for your testimony.

Mr. Chair, I'd like to move my motion now. I'll give a bit of preamble first.

We all know that carbon tax, conflict of interest Carney has officially joined this corrupt Liberal-NDP government. As another example, our fake feminist Prime Minister, Justin Trudeau, did what he does best: He pushed to the side another female minister and replaced her with a man, someone who is just like him, another elitist.

Now carbon tax Carney is the de facto finance minister, from what we see. He's also conflict of interest Carney. We learned about that just recently. Since he has become the de facto finance minister, Brookfield pension funds and Telesat have received payments from the government. Is that a coincidence? I think there's something going on there.

Also, carbon tax Carney is going to reap the benefits of getting all the power and all the money without any accountability for the position he's been given by the Prime Minister. Also, he gets to have a seat beside the Prime Minister, making influential economic policy for the country, and he is shielded by the conflict of interest laws because he has been hired by the Liberal Party and has not been sworn in as an office-holder.

We have a motion before committee that I had tabled earlier. I don't think this should take much debate. I think it's a no-brainer to have an economic adviser to the Prime Minister and a two-time central banker before the House of Commons finance committee. That should be something I think all of us should be calling for.

On Tuesday, the NDP voted to call carbon tax, conflict of interest Carney to the ethics committee, so they were in favour of that.