Canada Reverses Capital Gains Hike
Prime Minister Mark Carney confirmed the cancellation of a proposed increase to Canada’s capital gains inclusion rate—a measure that, less than a year ago, was touted as vital for funding social programs, spurring clean energy, and championing tax fairness.
Last year, then–Minister François-Philippe Champagne, speaking in the House of Commons, defended the planned increase in the capital gains inclusion rate as a critical way to finance the green energy transition and bolster the middle class.
“These changes will not only allow us to pay for the green energy transition,” Champagne declared, “but they will also create jobs for this and future generations.”
The government of the day characterized this move as a form of “tax fairness,” arguing that gains accrued from investments should be taxed at higher rates to support new spending on social, environmental, and infrastructure projects.
By early 2025, the pendulum had swung: the new government explicitly prioritized fostering private-sector job creation and, in Carney’s words, “rewarding [builders] when they succeed.”
In announcing the repeal, Carney emphasized the importance of building “one Canadian economy – the strongest economy in the G7,” suggesting that higher taxes on capital gains risked undermining that vision.
Champagne now struck a markedly different tone compared to his statements the previous summer. While still advocating for robust investment in social programs, he acknowledged the new direction set by Carney, stating on social media that “by canceling the capital gains tax hike, we’re supporting builders, small businesses, and entrepreneurs—those who take risks to create jobs and drive our economy forward.”
Alongside canceling the inclusion-rate increase, Carney’s administration opted to maintain a separate measure introduced under the prior government: the increase in the Lifetime Capital Gains Exemption limit to $1,250,000 on the sale of small-business shares and certain farming and fishing properties.
In doing so, Carney’s administration aims to reassure investors, entrepreneurs, and even foreign companies that Canada remains fertile ground for big, risk-taking ventures.
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