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fiscal policy

Prime Minister Justin Trudeau takes questions at a town hall meeting in Calgary, Alta., Tuesday, Jan. 24, 2017. THE CANADIAN PRESS/Jeff McIntoshThe Canadian Press

Gluskin Sheff + Associates chief economist David Rosenberg says he has been hearing whispers that the federal Liberals will table a "soak the rich" budget in the weeks ahead – one that includes a steep hike in the tax rate on capital gains.

Mr. Rosenberg said in his morning note that the capital-gains inclusion rate could rise to 75 per cent from the current 50 per cent, which has been the rate since 2000. Returning the rate to that level, combined with the most recent uptick in the top marginal personal income tax rate, would mean that Ontario investors would pay as much as 40 per cent tax on capital gains.

Such a move by the Trudeau government to draw more revenue into federal coffers would take Canada in the opposite direction as the United States, Mr. Rosenberg said, noting that "the implications for the Canadian dollar is decisively negative, not to mention the deflating effect on asset values."

He continued: "It is a classic move to make everyone poorer, cloaked under the veil of redressing income inequality."

Earlier this month, Bank of Montreal chief economist Douglas Porter said in a research note that his team is "fielding plenty of questions" about an increased capital-gains rate.

"We have no specific indication or information that Ottawa is seriously considering such a change ... other than to note that [the Department of Finance] is casting about for revenues, they are taking a long look at all so-called tax expenditures, and this government seems to have few qualms about taxing the 'rich'."

Mr. Porter offered a similar stance to Mr. Rosenberg: "Don't do it," he wrote.