Carbon pricing has never been that popular among farmers – most notably grain farmers on the Prairies who were spending thousands of dollars (and paying a carbon charge on top of that) to dry their harvests.
Increasingly, however, it looks like farmers have something to be happy about with carbon pricing – or at least, something to be less unhappy about.
Ottawa’s policy of requiring farmers to pay carbon charges for natural gas always had the look of a policy gaffe, particularly since gasoline and diesel by agricultural operations were exempt and greenhouse operators had 80 per cent of their natural-gas consumption shielded from carbon pricing.
After first dismissing and then slow walking those concerns, the federal government changed course in the spring – announcing that it would return the proceeds from carbon pricing on natural gas use in agriculture to farmers.
While farmers might have hoped for a straightforward exemption, as is the case with motor fuels, what they got was a version of the rebate system for consumers. All farming operations in provinces subject to federal carbon pricing (Ontario, Manitoba, Saskatchewan and Alberta) are eligible for rebates based on reported farming expenses, independent of how much natural gas they use.
When the government unveiled detailed estimates in last month’s fall economic statement, there was still grumbling that not all costs were being fully accounted for. But an analysis from the Parliamentary Budget Officer indicates that Ottawa could be kicking in funds above and beyond what farmers are paying out in carbon charges on natural gas. That analysis estimates that agricultural operations will pay $164-million through to fiscal 2023-24. (Interestingly, the growth in revenue slightly outpaces the growth in the per-tonne cost of carbon, implying marginally higher greenhouse gas emissions.)
Ottawa’s payments to farmers are bigger than those estimated outlays, however, adding up to $221-million, plus another $9-million in added administrative costs for the Canada Revenue Agency. Assuming the PBO is not simply wrong, that means Ottawa has added nearly $60-million to the kitty to cushion the impact of carbon pricing, and to give farmers additional funds to reduce their emissions.
At least in the short term. The government has yet to spell out what its funding for agricultural carbon rebates will be past fiscal 2023-24.
Taxing questions
The question of how home sales are taxed continues to spark interest from readers, including John Francis of Tobermory, Ont., who inquired if it’s possible to limit the ability of house flippers to profit from the rules for capital gains income.
There’s good news for Mr. Francis: For the most part, house flippers don’t benefit from the rules that exclude 50 per cent of the value of capital gains from being taxable. As the Canada Revenue Agency details here, in most cases, those who make money from selling real estate will have to declare those profits as part of their business income.
That doesn’t apply to someone selling their principal residence; key to making that distinction is whether the person bought a property with the “main intention” of selling it for a profit, the CRA says. If that is not the case, the principal residence exemption applies, and there is no income or capital gains tax payable.
If profit were the aim, then in most cases, any resulting gain would be taxed as business income. One exception is the purchase of property with the intention to generate rental income. In that case, renting the property is the focus of the business. Any eventual sale is separate from the main purpose of the business, and hence, taxed as a capital gain (and thereby benefitting from the 50 per cent rule.)
In addition, the federal Liberals proposed a so-called anti-flipping tax that would levy an additional cost on anyone who sold a property within a year of purchase – unless they had an officially approved reason for doing so, such as a change in jobs. The government hasn’t said what form that tax will take, with the Liberal platform giving only the hint that “legitimate investments in refurbishment” would be allowable deductions.
One other possible exception: cottages (or depending upon your province, a cabin or camp). A property purchased primarily for the enjoyment of the buyer or their family (and which doesn’t qualify as a principal residence) is deemed to be personal-use property, and subject to the capital gains tax if sold for a profit.
Line Item
More tax, but more spending: More than eight in 10 middle-class families saw their federal income tax bill rise under the Liberals, asserts a new study from the right-leaning Fraser Institute. The study details how 86 per cent of households with incomes between $84,625 to $118,007 paid more in income tax as of 2019, with an average increase of $800 for all families in that income range – even after the Liberal reduction in income tax rates. That’s largely due to the elimination of income splitting for families with young children, the institute says. That analysis excludes other taxes such as carbon pricing and Canada Pension Plan contributions, as well as any changes to income transfers. That last exclusion is somewhat problematic for the analysis, however, given that the Liberals boosted payments to families through the Canada Child Benefit. In 2016, that program paid $6,000 to a family with two children and an income of $85,000 – enough to pay for the added income taxes nearly seven times over.
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Patrick Brethour