The capital gains debate has turned dramatic and mysterious

Announcing the Liberal government's proposed changes to capital gains taxes last week, Finance Minister Chrystia Freeland repeated a thought experiment she first suggested in her budget speech back in the spring.

The richest Canadians, Freeland said, should ask themselves whether they "want to live in a country where those at the very top live lives of luxury, but must do so in gated communities behind ever higher fences, using private health care and airplanes, because the public sphere is so degraded and the wrath of the vast majority of their less-privileged compatriots burns so hot."

Days later, after announcing his party's intention to vote against the changes, Conservative Leader Pierre Poilievre released a 16-minute video on the topic that referenced Adolf Hitler and Joseph Stalin.

It's not clear what the examples of those two monstrous dictators should tell us about how capital gains should be taxed in Canada — whether, for instance, 50 per cent of capital gains over $250,000 should be taxed at the normal rate of personal income, or whether the "inclusion rate" should be set at 67 per cent instead.

Nor is it obvious that an increase in the inclusion rate is the only thing keeping the country from realizing the plot of a dystopian horror film.

But if the government was looking for a fight, it has one now. And even if the rhetoric has strayed rather far from the substance, there are real stakes to this fight.

To this debate, Poilievre has now added not only odd historical references but also an element of mystery — a promise to pursue some unspecified tax reform if he forms government.

The Liberals have leaned heavily on the argument that the proposed changes are about fairness and equality — that it is predominantly the richest Canadians who will be asked to pay more. Freeland has said that in any given year, "only 0.13 per cent of Canadians — with an average annual income of $1.4 million — will pay more on their capital gains."

Because capital gains typically are not realized every year, Freeland's preferred figure likely understates how many Canadians eventually will feel some impact. According to one estimate, 4.3 per cent of tax filers will pay more in taxes at some point in their lifetime as a result of the change in how personal capital gains are taxed.

That would still leave the vast majority of Canadians unaffected. But Poilievre's line of attack has been based in part on merely poking holes in the government's rhetoric.

Last week, the Conservative leader asked Freeland to somehow put into law a commitment that no one in the bottom 99.87 per cent of income-earners will pay more as a result of the changes. Seizing on Freeland's own comments, Poilievre challenged the finance minister to promise that not a single welder, plumber, carpenter, electrician or farmer would be affected.

More substantively, the Conservatives have echoed the Canadian Medical Association's claim that changes to capital gains taxes will make it harder to recruit and retain doctors. But it's also fair to ask how much of the burden of supporting provincial health care delivery should fall on the federal tax system.

The Grain Growers of Canada has raised concerns about what the changes will mean for the transfer of family farms. According to the group's calculations, the transfer of an 800-acre farm in Ontario, generating $14.1 million in capital gains, would soon incur taxes of  $4.97 million, as opposed to $3.8 million under the lower inclusion rate.