Wealthy Canadians sour on state of economy amid capital gains changes

Article content

Ottawa’s changes to the capital gains tax appear to have gotten under the skin of Canada’s wealthiest wage group, an ongoing poll that tracks the financial outlook 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 respondents in the country’s highest-income group had a sharply lower opinion of the state of the economy and of their personal financial situations.

Article content

Article content

Only 31 per cent of those in the $100,000-plus wage group think the national economy is moving in the right direction, a nine percentage point drop from the previous survey. And their outlook for the economy over the next 60 days similarly soured, with 31 per cent — a massive decline of 15 percentage points from the previous reading — saying they didn’t see the economy improving.

“The group had a more pronounced down pitch in this report than in previous reports,” said John Wright, executive vice-president of Maru Public Opinion, which has run the poll since April 2020.

Though Wright could not conclusively say the that the change reflected in the poll — 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 walk away from thinking that. I think it (the capital gains tax) is an ingredient,” Wright said.

Looking more broadly at the survey, Canada’s high-income earners aren’t the only ones whose outlook for the economy has slumped.

Only one-third of Canadians as a whole think the economy is headed in the right direction, down three percentage points from the previous survey in March with the poll recording a 12 percentage point drop among British Columbians to 33 per cent from 45 per cent. Optimism receded pretty much across the country except in Ontario, where there was a slight uptick.

Article content

Article content

Similarly, people don’t feel optimistic about the economy’s prospects over the next two months with fewer Canadians — 36 per cent in April versus 39 per cent in March — indicating they think things will improve.

Optimism about the economy leached away the most among women, falling six percentage points to 31 per cent; among those middle aged and those older, down seven percentage points and six percentage points to 26 per cent and 39 per cent, respectively; and among those living in B.C. where optimism for the economy dropped 10 percentage points to 36 per cent.

While optimism fell, financial anxiety rose as 41 per cent of people compared with 37 per cent in March said they expected to struggle to make ends meet over the next two months.

Those experiencing rising levels of financial anxiety included the oldest age group, where one-third said they would struggle to cover costs, up seven percentage points, while almost six in 10 in the lowest-income group earning less than $50,000 said they worried about making ends meet — an increase of five percentage points. Middle-income earners making $50,000 to $99,000 weren’t spared, either. Just under four in 10 said they thought they would have a tough time meeting all their expenses, a jump of five percentage points.

Article content

All this negativity pushed down Maru’s Household Outlook Index (MHOI) to 86 after it had coasted at 87 for February and March.

Anything below 100 on the index — which measures Canadians’ outlook on the economy and their personal finances by asking them a series of recurring questions — indicates negative sentiment and anything above indicates optimism. The index has been stuck in the red since December 2021 and hit its most pessimistic reading of 83 in March 2023.

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

• Email: gmvsuhanic@postmedia.com

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content