The profligate Trudeau government is proposing a tax reform to ensure fair tax contributions from all, but in reality it’s nothing more than a stealth tax hike designed to fill government coffers at the expense of Canadian charities. The tax grab is coming by way of proposed changes to the alternative minimum tax (AMT), and the country’s donors and charity fundraisers are upset.
In a letter to Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland, philanthropist Donald Johnson, along with 30 other heads of hospitals, universities, charities and other non-profits, objected to the regulatory changes.
“We are deeply concerned about the proposed changes to the alternative minimum tax in the 2023 federal budget, especially concerning donations of publicly listed securities to charitable organizations. This move is a significant shift from Canada’s tradition of supporting a robust charitable sector. We can craft a tax system that remains equitable and champions our societal generosity,” they wrote.
“In 1997, Finance Minister Paul Martin notably reduced the capital gains tax on gifts of publicly listed securities by 50 per cent. This initiative was further boosted in 2006 by Finance Minister Jim Flaherty, who removed the remaining capital gains tax on these gifts. As a result, a once-rare practice became common, with Canadian charities receiving annual donations of listed securities exceeding $1 billion.”
A report by the C.D. Howe Institute titled, “Capital Gains and Charitable Donations: The Silent Targets of Federal AMT Reforms” also drubbed the proposed changes. “Our estimates indicate that about 10 per cent of the overall value of charitable donations and almost half of the overall value of donations of publicly listed securities will be impacted by the reduced tax incentives for charitable giving in the proposed AMT,” explains the report.
C.D. Howe criticized the “stealth” tax hike and the government’s stated rationale for it, saying that, “The official objective behind the AMT is to ensure a fair tax contribution from all individuals and entities. What is not clear is how disallowing the use of entirely legitimate tax provisions like loss utilization, tax credits for charitable donations and partial inclusion of capital gains enhances fairness.”
This year’s budget estimated that the changes will net the government a windfall of about $625 million in 2024-25 and $745 million by 2027-28. Clearly, this isn’t about ensuring tax fairness. It’s a revenue grab by a government with runaway expenses.
Since Trudeau came to power, federal government employment has jumped by 31 per cent, increasing by 80,000 employees. (The Canadian population increased by only 8.5 per cent over that period.) Federal spending has also increased — jumping from $280.4 billion in the 2014-15 fiscal year to this year’s projected expenses of $496.9 billion. Next year, the government expects to spend $151 billion more than it did in 2014-15.
“And under Freeland’s current plan, the spending will move higher in the years to come. Her budget projects spending will ring in at $555.7 billion in 2027-28,” according to the CBC. “Total program expenses as a share of the economy — a figure that includes all government spending other than public debt charges — is at its highest point in three decades. In 2014-15, program spending was 12.8 per cent of gross domestic product. It’s over 16 per cent now.”
All this spending has been financed with increasingly higher taxes and debt. The Trudeau government has never posted a budget surplus and debts total $1.2 trillion.
This attempt to divert money away from non-profits that are reliant on the public’s generosity will only serve to further hurt Canadian society.