Editorial Turning back the clock for risk takers

NOW YOU SEE IT — NOW YOU DON’T]

Just what gives with that flip-flop on capital gains taxation as now proposed by Finance Minister Michael Wilson in his recent White Paper on tax reform?

Wasn’t he one of the most vociferous senior members of Brian Mulroney’s Conservative team campaigning so strenuously just a few years ago to throw those socialist Trudeau grits out of office in favor of a fresh young free-enterprise regime that would get the economy back on a sound track?. Canada needed more entrepreneurs and risk takers of the ilk that built this country, we were told. And because there were a lot of believers in that refreshing philosophy, we favored them with an unprecedented mandate.

And for starters, they all but eliminated the stifling capital gains tax — “to encourage individual Canadians to invest in new or growing enterprises, the budget proposes a personal lifetime exemption for capital gains of $500,000” (May 23, 1985).

But now he proposes to kill that dream, capping it at $100,000. But worse, he’s sharply raising this capital tax rate itself to the point that by 1990, any capital gains will be taxed almost as heavily as that of regular earned income. Then there will be the provincial bite. Ontario, for example, levies an additional 50% of any federal tax owing.

We have long contended that the actual cash take to the federal treasury has been relatively small when weighed against the cost, work and irritations to collect it, which is considerable. It would amount to little more than a down payment for just one of those nuclear submarines the feds are now proposing to purchase.

We suggest that Mr Wilson’s new move that will turn back the clock on the nation’s risk takers was taken largely for political purposes. But that cost may prove high.

His original move, unquestionably, had much to do with the buoyant stock market we have enjoyed since the introduction of the $500,000 lifetime capital gains exemption. New investment capital has been flowing more freely into the economy. We are currently witnessing the biggest exploration boom in the search for precious metals that this country has ever seen. But now we fear the removal of this investment incentive will put a real damper on our whole economic growth. The recent sharp drop in the stock market already reflects this ill-conceived move.

Yes, this is the wrong time to be turning off the risk takers and entrepreneurs, whose dollars will now be looking for safer no-risk havens — like treasury bills.

If he had to trim tax reduction incentives, we wonder if he looked into those his government offers any taxpayers who make contributions to political parties?