What is capital gains tax? How is it going to affect the economy and the younger generations?

The federal government says its plan to increase taxes on capital gains is aimed at wealthy Canadians to achieve “tax fairness.”

The federal government says its plan to increase taxes on capital gains is aimed at wealthy Canadians to achieve “tax fairness.”

The government’s new revenue stream is projected to rake in $19.3 billion over the next five years by increasing the capital gains tax rate from 50 per cent to 66 percent for individuals with more than $250,000 in capital gains in a year.

Dr. Malik Shukayev, associate professor at the University of Alberta’s Economics Department told CTV News capital gains tax is the tax individuals pay when selling their properties, assets, bonds or stocks.

“Capital gains tax happens when people buy some investment property and then sell it out at a higher price. So, the difference between the sale price and the purchase price is the capital gain,” said Dr. Shukayev.

When it comes to businesses, Shukayev says, the difference between the cost of establishing the business and the market price when selling the business is considered a capital gain.

When you buy stocks for one price and then you sell them for a much higher price, that’s also considered capital gains, Shukayev added.

He says that businesses and corporations pay taxes on their yearly revenue, and that is not the same as capital gains tax. Capital gains are the profits companies or individuals incur when selling assets, he notes.