Freeland’s futile capital gains gambit to embarrass the Conservatives

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Finance Minister Chrystia Freeland appears to be attempting to embarrass Pierre Poilievre by forcing the Conservative Leader to vote against a new tax on the rich. This is wrong.

Fiscal policy should not be used as a cudgel against political opponents. More important, the tax itself is unsound. The Conservatives should not hesitate to vote against it.

The tax, which raises the inclusion rate – the proportion subject to tax – for individuals realizing more than $250,000 in capital gains annually, is part of this year’s budget, but Ms. Freeland introduced it separately Monday through a ways and means motion.

This means the Conservatives will either have to vote for it, contradicting their anti-tax principles, or against it, in which case the Liberals will accuse them of being in the pocket of the wealthy.

The Liberals have attached enormous political significance to the tax increase. Ms. Freeland went so far Sunday as to declare that, without expanded social programs paid for through higher taxes on the rich, Canada faced a dystopian future in which children arrived hungry at school and teenage girls became pregnant because they could not afford contraception while the wealthy sheltered behind ever-higher walls protecting them from the wrath of the populace.

If Canada were in such a precarious state, it would offer a terrible indictment of her government’s legacy after eight years and seven months in office.

Fortunately, the situation is less fraught than that, though it’s certainly true that things are not going well. The policies of Ms. Freeland and Prime Minister Justin Trudeau are partly – though by no means entirely – responsible.

Over the life of three governments, but especially over the course of the past three years, the Liberals have greatly expanded entitlements: a national child-care program, a new dental-care program, the beginnings of pharmacare.

But revenues were never sufficient to justify such spending, which is why the federal government ran deficits in the tens of billions of dollars year after year even outside the pandemic years when they were necessary.

To prevent deficits from getting even worse, Ms. Freeland is increasing a tax paid by people who are better off. Or so she says. In reality, everyone suffers.

Canada’s economic performance and productivity growth are deteriorating, compared with the United States and other major developed nations. That weakness makes it harder every year for people who are starting out to land a job that pays a decent enough wage to make it possible to afford a car, buy a house, have children.

The priority should be to stimulate growth through lower taxes. Raising them will only make things worse, which is why one of the strongest critics of the proposed tax increase is Bill Morneau, Ms. Freeland’s predecessor as finance minister.

The move is “clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments,” he said in April.

What could be more extraordinary than a former finance minister criticizing his immediate successor within his own party?

Ms. Freeland and Mr. Trudeau sincerely believe in the justice of their cause. They also think they have found a canny way to embarrass the Conservatives.

“I do think this is a moment when Canadians should be watching closely what happens in the House and watching closely to see how all MPs vote on this,” Ms. Freeland told reporters Monday. If Mr. Poilievre and his Conservative colleagues rise in the House to vote against the motion, expect to see the Liberal attack ad on your smartphone within hours.

Nonetheless, the Conservatives would be right to vote against a tax that will only make a difficult situation worse.

A statement from a party spokesman certainly suggests Mr. Poilievre is trending toward a no. “This is a tax on health care, homebuilding, small businesses, farmers, and people’s retirements,” it read. The Conservatives “will study the motion very carefully before determining next steps.”

The Liberal strategy for the next election seems clear: We improved the quality of life for millions through expanded social programs, which we financed by asking the rich to pay their fair share.

But the Liberals are far less popular than the Conservatives, who are calling for lower taxes, balanced budgets, smaller government and fewer regulations. It seems the people have already made up their mind.