Home Economy Wealthy Canadians bitter about state of economy amid capital gains shifts

Wealthy Canadians bitter about state of economy amid capital gains shifts

by SuperiorInvest

Only 31% of Canadians in the highest income group believe the economy is going in the right direction

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Ottawa's changes to the capital gains tax appear to have hit Canada's wealthiest wage group, an ongoing survey tracking the financial prospects of Canadians suggests.

The latest reading of the Maru Household Outlook Index, taken two weeks after the federal Liberals released a budget that included a surprise increase in the inclusion rate for capital gains over $250,000, found that respondents in the The country's highest-income group had a markedly lower opinion of the state of the economy and their personal financial situation.

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Only 31 percent of those in the group with salaries over $100,000 think the national economy is moving in the right direction, a drop of nine percentage points from the previous survey. And their outlook for the economy over the next 60 days also worsened, with 31 percent (a massive 15 percentage point drop from the previous reading) saying they didn't see the economy improving.

“The group took a lower tone in this report than in previous reports,” said John Wright, executive vice president of Maru Public Opinion, which has been conducting the survey since April 2020.

Although Wright could not conclusively say that the change reflected in the survey, which was conducted between April 26 and 29, was a result of the April 16 budget changes, he said it almost certainly played a role.

“I don't think you can stop thinking that. I think (capital gains tax) is an ingredient,” Wright said.

Looking at the survey more broadly, Canada's high earners aren't the only ones whose prospects for the economy have plummeted.

Only a third of Canadians as a whole believe the economy is heading in the right direction, down three percentage points from the previous survey in March; the poll recorded a 12 percentage point drop among British Columbians, from 45 per cent to 33 per cent. Optimism declined across virtually the entire country, except in Ontario, where there was a slight rebound.

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Similarly, people are not feeling optimistic about the economy's prospects over the next two months, as fewer Canadians (36 percent in April versus 39 percent in March) indicate they believe things will improve.

Optimism about the economy lost the most among women, falling six percentage points to 31 percent; among the middle-aged and the elderly, seven percentage points and six percentage points to 26 percent and 39 percent, respectively; and among those living in British Columbia, where optimism about the economy fell 10 percentage points to 36 per cent.

While optimism fell, financial anxiety rose as 41 percent of people, compared to 37 percent in March, said they expected to have difficulty making ends meet over the next two months.

Among those experiencing increasing levels of financial anxiety was the oldest age group, where a third said they would struggle to cover costs, an increase of seven percentage points, while almost six in 10 in the lowest income group who made less than $50,000 said they were worried about making money. All in all: an increase of five percentage points. Middle-income earners earning between $50,000 and $99,000 were also not spared. Just under four in 10 said they thought they would find it difficult to cover all their expenses, an increase of five percentage points.

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All this negativity brought Maru's Household Outlook Index (MHOI) down to 86 after hitting 87 in February and March.

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Any value below 100 on the index (which measures Canadians' perspectives on the economy and their personal finances by asking them a series of recurring questions) indicates negative sentiment and any value above indicates optimism. The index has been stuck in the red since December 2021 and reached its most bearish reading of 83 in March 2023.

Maru conducted the survey among a random selection of 1,532 Canadian adults.

• Email: gmvsuhanic@postmedia.com

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