Among other tax relief promises, several of the parties are offering to lower or reduce the personal capital gains tax. There's really nothing to choose between the parties here. The Progressive Conservatives, for instance, are promising to eliminate this tax immediately, which they claim “will free venture capital, reward personal initiative and help reverse the brain drain by encouraging entrepreneurs to build their future in Canada” (Progressive Conservative Policy Summary). However, in their PC Full Policy, they promise to “lower the capital gains inclusion tax for business to 50%, as currently our capital gains taxes are twice that of the U.S.”!

The Canadian Alliance stance is identical on this issue; they promise to reduce the inclusion rate of capital gains taxes from 66% to 50%, which Mr. Day says, “will be especially welcome in high technology fields where stock options are an important part of compensation” (”The Next Step Towards a Stronger Economy”).

The Liberals promise to do the same, reducing the capital gains inclusion rate from 66% to 50% on page 5 of the Liberal Platform.

The NDP, on the other hand, make the unappetizing promise to “treat capital gains income the same as other income”, making them 100% subject to taxation (NDP Commitment to Canadians, p. 16).

The Brain Drain

All of the parties are missing the point. Reducing capital gains taxes is not going to solve the brain drain problem. One reason highly educated, highly skilled Canadians are leaving Canada to work elsewhere is because they make more money working other places such as the United States. If you had the choice of making $60,000 USD a year or $60,000 CDN a year, which would you choose? Because our currency valuation is tied to the value of the American dollar, Canadian dollars are turning into pesos. The brain drain has also become a problem because of a lack of opportunity in Canada. I personally know highly trained people that just haven’t been able to find the work they’ve trained for years to do in Canada, and I’m sure you do, too. Add to this that Canadians working in the U.S. pay less tax, and that many American locations are just as “livable” and attractive as places in Canada, and the only mystery is why any of these people stay.

Industry-sector salaries are not something the federal government can control (nor should they), but our currency policy needs overhauling, and none of the parties have anything to say about this aspect of the problem.

Tax cuts are a starting point, I suppose, and at least the Conservatives, Liberals, and Alliance are talking about the problem. Besides reducing the capital gains tax, Mr. Day proposes to “address the brain drain issue by eliminating the existing 5 percent surtax” (”The Next Step Towards a Stronger Economy”). What are your ideas for solving the “brain drain” problem? Post them in the forum.

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