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Policy Forum: Inequity and Inefficiency in the Tax Treatment of Capital Gains

Author

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  • Michael Smart

    (Department of Economics, University of Toronto)

  • Sobia Hasan Jafry

    (Department of Economics, University of Toronto)

Abstract

This article makes the case for increasing tax rates on capital gains income under Canada's Income Tax Act. The current tax preference for capital gains costs $35 billion annually in forgone government revenues, with much of the benefit accruing to high-income families. To address the inequity of the present system, and to reduce tax non-neutralities, the 50 percent inclusion rate for capital gains should be raised to 80 percent. This would constitute a simpler, more efficient way of taxing high-wealth individuals than recent proposals for a novel tax on wealth, and would likely generate far more revenue as well.

Suggested Citation

  • Michael Smart & Sobia Hasan Jafry, 2021. "Policy Forum: Inequity and Inefficiency in the Tax Treatment of Capital Gains," Canadian Tax Journal, Canadian Tax Foundation, vol. 69(4), pages 1157-1174.
    • Handle: RePEc:ctf:journl:v:69:y:2021:i:4:p:1157-1174
    DOI: https://doi.org/10.32721/ctj.2021.69.4.pf.smart
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