Canada’s Budget Proposes Higher Capital Gains Taxes and Investments in Education, Housing, and Mental Health

Government Budget Allocates Funds for Education, Housing, Jobs, and Mental Health

Canada will implement measures to increase taxes on high-income individuals as Prime Minister Justin Trudeau’s government aims to win back the support of young voters before the upcoming election expected next year. The country’s Minister of Finance, Chrystia Freeland, announced in the annual budget release on Tuesday that wealthier Canadians should contribute more, coupled with significant investments in education, housing, jobs, and mental health services.

The proposed budget outlines a total of 53 billion Canadian dollars ($38 billion) in new spending over the next five years, with a major focus on supporting Millennials and Generation Z. The measures will include affordable housing initiatives, student grants and loans, rent subsidies, and work placement programs.

Capital Gains Taxes to be Raised

One of the key components of the budget involves increasing the tax rate on capital gains exceeding 250,000 Canadian dollars ($180,804) from 50 percent to 66.7 percent. This change is expected to generate nearly 20 billion Canadian dollars ($14.5 billion) in additional revenue over the course of the next five years.

Minister Freeland highlighted that providing young people with the opportunity to build a comfortable middle-class life has always been a principle of Canada. However, she acknowledged the increasing difficulty for Millennials and Gen Z to achieve this due to high costs of living and housing. She stated, “They look at their parents’ lives and wonder: ‘How will I ever be able to afford that?'”

While the decision to raise taxes on the wealthy is likely to face some opposition, Freeland argued that it is essential for the country’s wealthiest individuals to contribute their fair share. She urged them to consider the kind of Canada they wish to reside in, asking, “What kind of Canada do you want to live in?”

Mixed Reactions and Concerns

The proposed budget received mixed responses, with the Business Council of Canada (BCC) criticizing it as “good politics to some” but “bad economic policy for all.” The BCC’s President and CEO, Goldy Hyder, expressed concerns stating, “Wealth redistribution is not wealth creation, and the spending measures introduced today will saddle Canadians with debt without encouraging the strong and sustained economic growth they deserve.”

The successful implementation of the budget relies on the support of the left-leaning New Democratic Party, which is essential to pass it through the parliament. Trudeau’s Liberals, currently in a minority government, are facing a significant challenge against the Conservative Party, led by Pierre Poilievre. The general elections are scheduled to take place by the end of October 2025.

Struggles With Housing Affordability Impact Trudeau’s Popularity

Justin Trudeau, who has held the position of the Prime Minister of Canada since 2015, has recently faced a decline in popularity due to nationwide dissatisfaction with the high cost of living and unaffordable housing. According to a January poll conducted by Nanos Research, two-thirds of Canadians expressed discontent with Trudeau’s handling of the housing crisis.

Trudeau responded to these concerns earlier this month by announcing plans to construct nearly 3.9 million houses by 2031, aiming to bridge the gap between housing supply and demand.