Liberal leadership hopeful Chrystia Freeland will scrap the changes to the capital gains tax she once championed as finance minister if she wins the race to replace Prime Minister Justin Trudeau, Global News has learned.
A source close to Freeland told Global News on background the reversal is meant to counter U.S. President Donald Trump’s tax policies, including plans for lower capital gains and corporate tax rates.
“This puts Canada at a significant risk of losing jobs and investment that will move to the United States instead,” the source said. “We must adapt, and quickly.
“If Chrystia Freeland becomes Prime Minister, a government led by her will not move forward with the legislation to increase the capital gains inclusion rate.”
The source added Trump’s election and Republican control of both chambers of Congress have “dramatically” changed the “economic reality.”
Bloomberg News first reported Freeland’s position on the capital gains tax, citing a person with knowledge of her plan.
In the 2024 federal budget introduced in Parliament by Freeland last spring, the Liberals proposed to raise the capital gains inclusion rate — how much of the proceeds from an asset’s sale are subject to tax — to two-thirds, up from 50 per cent, on all capital gains earned over $250,000 annually. That inclusion rate would also rise to two-thirds for all gains made by corporations and many trusts.
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At the time the legislation for the proposed changes were introduced in June, Freeland said it would bring about “tax fairness,” help spur housing construction, and “support investments in growth and productivity that will pay dividends for years to come.”
“I do think this is a moment when Canadians should be watching closely what happens in the House and watching closely to see how all MPs vote on this, I would say, defining measure,” she told reporters at the time.
The Liberals’ capital gains tax changes are currently in limbo, as the legislation to put the measures in force did not pass before Parliament was prorogued earlier this month. But the Canada Revenue Agency (CRA) has indicated it will follow precedent and administer the changes according to the Liberal proposal, which was adopted in a ways and means motion formalizing the government’s intention prior to the legislation being presented.
The proposed changes have drawn controversy from business groups and other critics who say they would affect far more than the 40,000 Canadians who the Liberals said would be impacted per year.
Conservative Leader Pierre Poilievre said last week he would reverse the capital gains changes if his party takes power in the next federal election, with language similar to what Freeland is now using to criticize the measure.
“We cannot afford economically destructive Liberal taxes that will drive even more business and jobs out of our country,” Poilievre said in Vancouver when announcing his position.
Liberal MP Anthony Housefather said in a post on X after Poilievre’s announcement that he would like to see Liberal leadership candidates direct the CRA to not enforce legislation before it’s passed by Parliament, and “drop” the planned capital gains changes altogether.
Freeland and other Liberal leadership candidates, including Mark Carney and Government House Leader Karina Gould, have also distanced themselves from another key Liberal policy: the consumer carbon price.
Freeland has she would “replace” the controversial measure “with a system that will work within our federation and will be developed collaboratively with provinces and territories” while still fighting climate change.
Freeland repeatedly defended the carbon price in the House of Commons and to reporters when she was in cabinet, stressing that it put money back into the pockets of Canadians and was an effective way to reduce emissions.
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