Don’t raise capital gains

Dear Editor: Editor: As you know there is a rumour that the Liberal government is thinking of increasing the capital gains tax and/or diminishing the dividend tax credit, in its upcoming budget.

Really? Does the Liberal Party really want to get tagged as being anti-investment at a time when capital investment is more important than ever? Rest assured that the Conservatives will brand the government as being anti-investment going into the next election.

Canada competes globally for capital against the U.S. (thinking of cutting income taxes), Europe, Asia and elsewhere. Do we want to be known as the high tax place where people don’t want to be transferred, from abroad or within the country?

The highest marginal tax bracket in New Brunswick is now 58.75 per cent, in Ontario, 53.53 per cent, in B.C. 49.8 per cent, thanks to the government’s last budget. Is this not enough? Do you really need to increase capital gains taxation too?

There are no free lunches in the financial markets or in tax policy. Increasing capital gains taxes might seem like picking low-hang- ing fruit, with no adverse consequences, but it is not.

This calculation does not take into account the investment that won’t take place because of punitive taxation, the jobs that are never created, the income tax that is never collected from those jobs.

As well, high capital gains taxes result in investors being reluctant to switch from one investment to another because the switching cost is so high. Result: misallocated capital and stagnation.

Please think again before the budget is delivered. There is an alternative to increasing taxes. It’s called cutting spending. Even a freeze on certain program budgets could accomplish a lot. Peter Woodward

Kelowna