Federal tax policy was not kind to Canadians in 2024. That shouldn’t be a surprise: it wasn’t kind to Canadians in 2023 or 2022, either, or in any year since 2016, when the Trudeau government established a new income tax bracket of 33 per cent, with the result that today, the combined federal and provincial top tax rate is over 50 per cent in every province except Alberta (48.0 per cent) and Saskatchewan (47.5 per cent).

To recap tax policy changes in 2024, Ottawa began the year with its sixth consecutive Canada Pension Plan tax hike. In 2018, before the government’s CPP “enhancements,” a worker earning $85,000 faced a combined employer/employee CPP tax of $5,188. In 2024 the same worker’s tax bill was $8,111 — about 56 per cent higher, partly because of the government’s new “CPP2” tax.

Unfortunately, things will only get worse in 2025. The CPP tax bill for that same Canadian earning $85,000 will rise to $8,860, bringing the total tax increase from the government’s seven annual CPP “enhancements” to 71 per cent – the much higher tax bill resulting from both higher tax rates and the higher income thresholds to which the tax applies. “Enhancement” used to be such a nice word.

The federal government has also been increasing the carbon tax yearly. On April 1st it raised it from $65 to $80 per tonne. Like the CPP tax, the carbon tax will be going up again this year — to $95 a tonne.

Another big tax change in 2024 was the capital gains tax hike announced in June. The Trudeau government claimed it was increasing taxes only on “0.13 per cent of Canadians in any given year” — a statistic that’s both misleading and incomplete. First, 0.13 per cent of Canadians “in any given year” is mainly a different group than the 0.13 per cent of Canadians in the previous or following years, so many more than 0.13 per cent of Canadians will at some stage pay the tax.

Second, the tax hike also affects corporations, of which millions of Canadians are owners or part-owners. Overall, economist Jack Mintz estimates that through their ownership of private corporations about 4.74 million Canadians would be affected by the higher tax rate, or 15.8 per cent of tax filers (based on 2021 data). In other words: about 100 times more Canadians than the Trudeau government suggested.

And in reality, just about all Canadians own shares in publicly-traded corporations, either directly or through their pension plans, both public and private, and will therefore be hit by the negative effects of the higher capital gains tax on such corporations.

Worse still, because capital gains taxes are taxes on investment, hiking them will reduce business investment. Unfortunately, as many economic analyses have shown, business investment in Canada is already weak, having in the last decade fallen further behind rates in the United States and other developed economies, thus contributing to Canada’s productivity and economic stagnation crisis. Higher capital gains taxes will only make this worse.

Finally, the Trudeau government ended 2024 with a two-month sales tax “holiday” whose main effect was to impose administrative and logistical nightmares onto business owners, most of whom opposed the initiative, with 75 per cent saying it would be costly and complicated to implement. Needless to say, it does nothing to increase productivity or improve economic incentives.

Quite the opposite; government deficits rose further to fund the tax “holiday,” thus increasing the future tax burden, which if anything will reduce economic productivity. Federal tax policy clearly wasn’t kind to Canadians in 2024. Unfortunately, 2025 is looking no better.

Matthew Lau, a Toronto writer, is an adjunct scholar with the Fraser Institute.

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