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Damages Beyond Real Estate - Capital Gain Tax Change

Last week I gave my 3 predictions on what to expect after the change of inclusion rate for capital gains by the Federal government budget.

The idea is to tax the rich, add capital gain tax and build 3.9 million homes by 2031.

While we all know that housing is a critical issue, will this tax change really create more housing or will it backfire?

Planning is one thing, executing is another.

In the past 10 years, I have been constantly meeting with companies who want to pitch me investing in them.

They usually show me the boring hockey stick graph stating where they are now and their projection in a few years.

Their proposals all have one thing in common.

A problem and a solution to solve the problem


But guess what, 90% of them ultimately failed.

After all, talking is cheap. 

So, I normally pay more attention to what problem they are solving,  and how they solve it to make a better life.

Often, I found that they are creating more problems when trying to solve one.. 

The federal budget has come out for a week already and I am closely monitoring the news and feedback from people regarding the change.

Never in history a change can make everyone happy.

But this budget is just another level.

Global News did a poll, showing one-third of Canadians would never consider voting for this government in the next federal election.

Why is that?

Didn’t the government say this capital tax change will only affect 0.13% of the population?

Why majority of people do not like it?

In this episode, I won’t repeat the impact on real estate that I have talked about last week.

I am going to talk about what and why 2 other groups of people do not like it.

Make sure you stay till the end to see what are the huge impacts to Canadian residents when these people do not like the change.

The first group  - Startups companies 

Over the past decade, Canadian startups have seen an increase in venture capital funding, reaching record levels in recent years. Cities like Toronto, Vancouver, and Montreal have become hubs for tech investment, attracting both domestic and international venture capital to invest in.

Toronto has been ranked one of the top tech job markets in North America.

Vancouver has become known for its vibrant cleantech and AI sectors.

Montreal has gained recognition for its expertise in AI and gaming.

Companies like Shopify have become international success stories, showcasing the potential of Canadian tech on the global stage.

Before an innovative company can become successful, there are 2 things that they must have.

Money and Talent.

High techs are not born with money to start their journey.

They need angel investors, venture capitalists to buy into their idea to fund their companies.

Investors invest into the start-up.

Now they can hire talented people, buy tools to make it more efficient and go for their big dream.

Investors are waiting for the day when this hockey stick really takes off and sells their shares.

When the entrepreneurs and investors sell their shares of the company, it triggers a capital gain.  

Raising the inclusion rate means a significant portion of these gains will now be subjected to higher taxes.  

Investors have options to invest in the US, Mexico or Canada these days.

This change just makes Canada a less attractive place for investors.

Now let’s talk about the second factor that a start-up must have - Talents.

Start-ups need talents to build their big dreams.

Instead of money, talents invest their knowledge, experience and time into the company as a staff.

I remember back then when I worked in the high tech company, me and my colleague love stock options.

Tech guys don’t have pension plans. 

Stock options are a great way to plan for their retirement.

Increasing the inclusion rate just makes them have a second thought whether they should stay working in Canada.

So the high capital gain tax discourages this big group of entrepreneurs, investors and talents.

Maybe it is really only affecting the 0.13% today.

The impact of this is much much bigger than the government can think of.

Group #2 Doctors

10 years ago, we thought all Canadian residents with a health card should have a family doctor.

Well don’t take it for granted.

Today, you are lucky if you have your family doctor.

Most family doctors do not take new patients because they have enough and taking more does make more money.

After the pandemic, many family doctors retired.

New doctors? 

Well, many of them crossed the border to the US for a way better income.

Here is the thing.

25 years ago, Canada began allowing doctors to incorporate their practices to manage their earnings more efficiently.  The plan is for them to sell their corporation and keep the capital gain for their retirement.

This financial benefit is an incentive for doctors to stay in Canada.

Canada has great universities and hospitals, and trained a lot of good doctors and specialists.

Yet, many well-trained doctors decided to move to another country to practice. 

It is bad for Canada and bad for all of the taxpayers and not good for our health.

After all, we all rely on them at some point of our life. 

Do you have a problem giving even more incentives to keep those Canada made well-trained doctors?

I certainly don’t.

The new inclusion rate on capital gain just gives well-trained doctors another reason not to stay in Canada.

Basically we are training doctors for other countries.

If tax the rich, adding an inclusion rate is the solution to the problem.

I am afraid the solution will create bigger problems.

Fewer entrepreneurs, fewer investors, fewer Canadian successful companies, less productivity, less employment, less talent and more importantly, less doctors to care about the most important thing for all of our life - our health.

Maybe it is only affecting 0.13% of taxpayers today, it is definitely discouraging many many more individuals who are trying to get there.

What do you think?

Do you believe in the hockey stick projection on the 3.9 million more homes by 2031.

Obviously you care about Canada’s future if you watch up to this point.

I really want to hear your thoughts on this?

Share your comment with all of us.

Share this video with others, especially your friends in the high tech sector and the healthcare industry.

Let them voice their concerns.

Subscribe to my channel if you haven’t done so.


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