Liberal MPs fear Justin Trudeau’s budget is a gift to Pierre Poilievre — and that the Grits are shooting themselves in the foot

Freeland’s decision to increase the inclusion rate of capital gains for corporations and those earning $250,000 a year or more from their investments is raising alarm. While concerns it will discourage investments in the economy are not unfounded, the Liberals’ proposal does include several caveats. Canadians selling their small business shares, or farming or fishing property, for example, will see their lifetime tax-free limit on capital gains increased to $1.25 million, and indexed to inflation, and a new Canadian entrepreneurs’ incentive will reduce the capital gains inclusion rate to 33.3 per cent on a lifetime maximum of $2 million. The prime minister noted Friday that entrepreneurs will be able to keep more of their first $6 million (but after that, they will be hit with a much larger tax bill).

With the business community heavily opposed to the changes, many Liberal MPs fear that in addition to benefitting Poilievre, many of their donors will turn their backs on the party, concerned that income held by corporations, the inheritance passed on to their children, or the sale of income properties will now take a big hit.

Liberals have seen this scenario play out before.

In 2017, when then-finance minister Bill Morneau announced the finance department was looking to curb the use of private corporate ownership — concerned too many Canadians were using it to shelter income from taxes — there was a nationwide backlash. Despite framing the effort as a move that would affect only the wealthiest Canadians, lobby groups won the public relations war by defining the issue as one that targeted doctors, lawyers, plumbers, and electricians. During one memorable moment at a town-hall meeting in Kelowna, Prime Minister Justin Trudeau was put on the spot by two female doctors who accused him of moving the goalposts for hard-working Canadians. 

This time, the prime minister seems to hope the government can mount a stronger case on the issue of tax fairness and generational fairness — one that speaks to Gen Z and Millennials.

Polling from Abacus Data suggests the Liberals have a 15-point deficit against the Conservatives when it comes to support among 18 to 29 year olds. This is the same group of voters that gave Trudeau a majority government in 2015, but whose support has steadily declined. 

But with Gen Z and Millennials now accounting for more than 40 per cent of the electorate, it’s no surprise the Liberals are budgeting billions on student grants and scholarships, and billions more to unlock home construction for a group of voters who feel left behind.

Gen Z and Millennials don’t just feel poorer than their parents — the data suggests they are. And while Gen X and baby boomers may moan loudly about the Liberals’ tax changes, their complaints might help support the Liberals’ case.

The federal government wants to sell this as a nation-building exercise. By talking about building housing at a pace not seen since the Second World War, they hope to inspire voters to imagine a better future, one that’s driven by government action.

But that, of course, depends on the Liberals’ ability to implement it. It also depends on voters deciding they want the Liberals in power long enough to see it through. 

It is a tall order. 

Perhaps it shouldn’t be a surprise the Liberals are returning to their old playbook, the 2015 platform, for inspiration: taxing the rich and deficit spending to invest in the future. Back then, the Liberals were running against a tired Conservative government by promising to do things radically differently, and inspiring NDP voters along the way. 

But now, they’re a decade-old government. Can the formula work again?

In an exchange with Poilievre this week, Trudeau seemed to salivate at the thought of campaigning against the Conservative leader’s support for what he calls the “ultra rich.” 

But so far, Poilievre hasn’t pronounced himself on the capital gains changes. In an interview with Radio-Canada, he suggested the Liberals’ plan wouldn’t bear fruit. The rich would sell their assets before the new rules kick in and take their money offshore, he said. “I will ensure that the state costs less, to reduce taxes, inflation, and interest rates for the working class,” he said, in French. “I will give nothing to the rich.”

The Conservatives are banking that Gen Z and Millennials want less government, not more. 

The battle lines for the next campaign have been drawn.

Clarification — April 20, 2024 

The first line of this column has been updated to clarify it’s the new spending amount, not the net spending amount, in the federal government’s 2024 budget.