Liberal leadership hopeful Chrystia Freeland has pledged to repeal the federal government’s recent hike to the capital gains inclusion rate if she succeeds Justin Trudeau as party leader, according to a source close to her campaign.
This policy reversal, first reported by Bloomberg, marks a significant shift for Freeland, who introduced the controversial measure as finance minister in last April’s federal budget. At the time, Freeland defended the move as a way to ensure Canada’s wealthiest citizens contributed more to federal spending initiatives.
“People who are enriching our country with their work, and are doing really well, we’re asking those people to contribute a little bit more so that we can make the investments that Canadians need,” Freeland said during her April budget address.
However, a source close to Freeland’s campaign indicated that the re-election of U.S. President Donald Trump has prompted the shift, citing economic uncertainty created by Trump’s policies.
“Trump is intentionally creating uncertainty in order to scare investment away from Canada,” the source said. “This puts Canada at significant risk of losing jobs and investment to the United States. We must adapt quickly.”
Background on the Capital Gains Tax Hike
The capital gains tax hike, which came into effect in June 2024, increased the inclusion rate—the portion of gains on which tax is paid—from 50% to 67%. The measure applied to individuals earning over $250,000 annually in capital gains and all gains realized by corporations and most trusts.
The policy was expected to generate up to $19.4 billion in federal revenue over five years but faced sharp criticism from economists and innovators, who argued it would discourage investment and harm Canada’s competitiveness.
Only 0.13% of Canadians—those earning an average annual income of $1.4 million—were affected by the change, which primarily targeted profits from the sale of investments, stocks, and secondary properties.
Despite its narrow impact, the policy became a lightning rod for criticism. Conservative Leader Pierre Poilievre vowed last week to reverse the tax increase, calling it a “job- and investment-killing tax.”
“This Liberal tax was a bad idea before President Trump’s tariff threats. It is outright insanity now,” Poilievre said in a statement.
Freeland’s Broader Policy Reversals
Freeland’s promise to repeal the capital gains tax hike is one of several policy reversals tied to her time in the Trudeau government. She has also expressed willingness to reconsider the unpopular consumer carbon tax, another measure she previously defended.
Liberal leadership contenders have until Thursday to declare their candidacy, with the party’s new leader set to be chosen on March 9. Freeland’s campaign centers on economic pragmatism and her ability to counteract Trump-era challenges, signaling a shift in the Liberal Party’s approach to fiscal policy under her potential leadership.
As Parliament remains prorogued until March 24, the future of the capital gains tax hike—and its potential repeal—remains uncertain.
Since announcing her leadership bid, Freeland has positioned herself as the candidate best equipped to stand up to Trump and navigate the evolving economic landscape.