Many business managers and economists have publicly expressed concern recently about a deteriorating environment for corporate investment in Canada. Federal Finance Minister Bill Morneau has rejected these concerns, notwithstanding data showing that capital investment growth has slowed dramatically in the past few years.
Why did that happen?
While many factors contribute to a country’s business climate, public policy — including at the federal level — plays a key role. Since taking office in 2015, the Trudeau government has raised taxes on upper earners, created mass uncertainty with its mandated carbon-pricing scheme, and run up huge budget deficits (raising the spectre of future tax increases). This contrasts with recent U.S. government initiatives to reduce the corporate tax rate and eliminate numerous costly business regulations.
Funny how the US president is not named for the booming economy.
Anyway, Trudeau also decreased the annual limit on the Tax Free Savings Account (TFSA) from $10,000 to $5,500. The mega rich with tens of millions of dollars likely don't care about that change but those in the middle class who would like to shield their tiny investments from taxes got a significant hit. A few thousand dollars a year invested plus compound interest could easily result in tens of thousands of dollars in capital gains taxes down the road.
Trudeau portrayed the TFSA as an unfair tool for the rich but in reality it's the best long-term investment account for low-to-middle income earners. For reference, the Individual Savings Account (ISA) allows UK citizens to deposit £20,000 (~$34,000) this year. So, Trudeau didn't merely raise taxes on upper earners, he also gave the middle finger to the average Canadian.