Freeland would scrap capital gains tax changes if elected Liberal leader: source

Liberal leadership candidate Chrystia Freeland would scrap changes to the capital gains tax that she introduced as finance minister, CBC News has confirmed. The news was first reported by Bloomberg.

April’s federal budget announced an increase to the taxable amount of capital gains — the profits that individuals or businesses make from selling an asset like a stock or a second home.

The new rules increased the inclusion rate from one-half to two-thirds on capital gains above $250,000 for individuals, and on all capital gains earned by corporations and trusts, meaning that portion of capital gains would be taxed as regular income.

If her bid to replace Justin Trudeau is successful, Freeland would throw out those changes, a source close to the former deputy prime minister said.

Freeland originally defended the changes to the inclusion rate when she was still finance minister, saying they were meant to address issues of tax fairness. She said at the time that the increase would pull in $19 billion to fund supports for new housing and big-ticket social programs like dental care and pharmacare.

This is the second key Liberal policy Freeland has walked away from in her bid to become the next Liberal leader and prime minister. Freeland would also drop the consumer carbon tax if she wins.

The source suggested that the reason for Freeland’s about-face on the capital gains tax is due to concerns that U.S. President Donald Trump could enact changes to the U.S. capital gains tax. The source said Canada must be able to respond to changes south of the border or risk losing investment. When the inclusion rate increase was first proposed, then-president Joe Biden was proposing an increase to the U.S. capital gains tax rate.

Conservative Leader Pierre Poilievre recently said that he would reverse the increase to the inclusion rate on capital gains if his party forms government after the next election. On Wednesday, Poilievre criticized Freeland for reversing her position on the inclusion rate.

“Her slogan should be: ‘I’m Chrystia and I was wrong about everything,'” he wrote in a post on X.

Commenting on Bloomberg’s article on X, NDP national revenue critic Niki Ashton accused Freeland of “siding with billionaires.”

Legislation to officially introduce the capital gains changes was before the House of Commons, but is now essentially dead after Trudeau asked for Parliament to be prorogued.

But the Canada Revenue Agency is still collecting the tax on the higher inclusion rate, because the government passed a “ways and means” motion in Parliament.

The Conservatives and a number of business advocacy groups have called on the government to order the CRA to stop collecting capital gains at the increased inclusion rate given that official legislation hasn’t been passed.