One Comment About Taxation – Taxation Policies Matter – Especially When it Comes to the Fluidity of Capital

Recently, I’ve been using Amazon a lot. From books and Christmas gifts to preparing my own book for release on their platform, it’s a slick platform that millions of people around the world use. And it made its creative founder – Jeff Bezos – one of the wealthiest people on earth.

 

In 1994, Bezos moved to the Seattle area of Washington state to found Amazon. From a taxation perspective, Washington state is an interesting story. Despite being a solid Democratic (“blue”) state, it is one of a small number of states that does not have a personal income tax. Washington funds its operations through a sales tax and business and occupation tax levied on gross receipts. In addition, Washington has one of the most aggressive estate taxes in the U.S. in that it applies at a much lower level than the federal estate tax and most other states.

 

In 2022, Washington implemented a new 7% capital gains tax on the disposition of long-term assets when the capital gains exceed $250,000 (adjusted for inflation in future years) in a year. It was targeted at high-income earners with initial projections that it would raise $500-$600 million per year. Effective 2025 forward, Washington introduced a further 2.9% tax on capital gains exceeding $1 million, meaning gains above that threshold are now subject to a combined 9.9% tax.

 

In late 2023, Bezos announced that he was moving to Miami, Florida for “personal reasons” to be closer to his parents. Florida is another one of those states that has no state personal income tax (including no capital gains tax). While it may be true that his move to Florida was for “personal reasons”, it’s interesting that after Bezos established Florida residency, he began selling substantial blocks of Amazon stock.

 

In 2024, it is estimated Bezos sold $13.6 billion worth of Amazon stock. By establishing Florida residency and avoiding the new Washington State capital gains tax, he apparently avoided approximately $954 million in tax – an amount that far exceeds the entire annual revenue target for that new state tax in its early years. In 2025, Bezos sold another $5.6 billion of Amazon stock thus avoiding millions more in Washington state tax.

 

Canadians should be interested in this story. Why? Well, first off, the Washington capital gains tax was structured similarly to the 2024 Canadian capital gains proposal (since abandoned). If implemented, like the Washington tax, it would have exempted the first $250,000 annually from the increased inclusion rate. That exemption is a rough around the edges method to try to target only high-income earners, but it ignores the simple fact that capital gains are generally lumpy and thus once or twice in a lifetime gains can be punitively taxed despite long term annual income that is modest.

 

Second, such a targeted attack on the wealthy naively assumes that capital is not mobile and that the wealthy will not react to a simple tax grab. The fact is that many wealthy taxpayers will not sit back and accept tax increases that are not fairly distributed. If the grass is greener elsewhere, then people will certainly look to those greener pastures. Capital is agnostic and will flow to where the economic garden is fertile to provide opportunities for rapid and safe growth.

 

Canada’s economic garden for the past decade has been challenging to say the least. As Jack Mintz pointed out in a sobering article last week, Canada’s GDP fell by 0.3 per cent in October 2025 and while he cautions to not pay too much attention to any single month’s number, growth has been virtually at a standstill this past year, just 0.4 per cent since October 2024. With population growing 1.4 per cent, per capita GDP fell by a full percentage point. That is obviously not good.

 

Over the past decade, the amount of private capital leaving Canada has been staggering. But it has not been loud exits like that when Bezos left Washington for Florida. Instead, it has been quiet and steady and particularly heavy in the last few years. It has not slowed down with a new Prime Minister at the helm. If anything, my experience is that it has increased during the last year.

 

Why? Because tax policy doesn’t operate in a vacuum. It shapes behavior, influences decisions, and, over time, alters the economic landscape of a country. Canada’s past decade – marked by poor tax policy and a lack of attention to productivity – is sending signals. And capital, unlike politics, doesn’t wait around to see how things play out.

 

Many tax practitioners have long been aware of this phenomenon. In the first 24 years of my career, I worked on about a dozen tax cases involving Canadians leaving. But the number of files that my colleagues and I have worked on in the past 10 years has skyrocketed to well over one thousand for the reasons discussed above. That might not seem like a lot, but the wealth attached to those files is tens of billions of dollars. Any investment returns on those billions will – for the most part – not be part of the Canadian taxation system and thus lost taxation revenues.

 

The only way to replace those lost taxation revenues is to materially increase immigration numbers, increase economic output or both. With Canada’s economy being in long-term doldrums, it has relied heavily on immigration to mask outflows rather than addressing the underlying productivity problem.

 

Canada doesn’t need more politically motivated tax changes or vacuous messaging like “spend less to invest more.” It needs stability, competitiveness, and coherent policy to retain and attract success.

 

As former Citicorp CEO Walter Wriston said, “Capital goes where it’s welcome and stays where it’s well treated.” Until that happens, the quiet exit of people and capital from Canada will continue – not with fanfare like Bezos’s move to Florida, but silently – with long-term consequences.

 

If Canada won’t welcome capital, at least Amazon will. And judging by my recent orders – they’re doing just fine.

 

One Comment About Leadership – A Great Leadership Tool – Write a Fictitious CEO Letter to Your Employees

 

One of my friends – Hilton Barbour – is a leadership guru and an expert in strategy and culture building. Every New Year, Hilton does an annual leadership exercise that I think is very powerful. In his own words:

 

Every New Year I attempt to synthesize my thoughts on leadership through the lens of a memo from a fictitious CEO writing to his/her employees. The exercise forces me to distill what I’m seeing, reading and experiencing in the world into a semi-cogent narrative. A narrative of what I believe leaders need to communicate — and act upon — to build great cultures. Selfishly, it is also the type of memo I wish I’d received at times in my career when the road ahead looked turbulent and the available choices difficult.

 

Hilton is bang on. Leadership has never been more vital – or more difficult.

 

When I first became aware of Hilton’s annual exercise, I was fascinated. I decided to try it myself. In “Hilton style,” I began writing my own letters to the Moodys Tax team – in some cases with his guidance and kind feedback. I found the exercise incredibly grounding and inspiring. It forced me to clearly articulate what I stood for as a leader, what our firm stood for and the actionable items that were priorities. I haven’t written one of those letters since I stepped away from the leadership position at the firm a couple of years ago, but I always look forward to receiving Hilton’s letter each year. It’s thoughtful, practical, and, above all, powerful.

 

Hilton’s 2026 letter can be found here. I’d encourage all leaders to read it — and apply it. Again, it’s powerful.

 

One Comment About Economics  – 2026 Canadian Economic Outlook By Jack Mintz

 

As mentioned in the tax section above, Jack Mintz – one of Canada’s most esteemed economists who I am happy to call a friend – wrote a sobering article in the Financial Post last week on the state of Canada’s economy. The title of the piece is Economic Progress Won’t Be Easy in 2026.

 

From the article:

 

While enjoying eggnog and holiday food, many Canadians may have overlooked two December news items that suggest this year will be challenging for the Liberal government’s economic strategy. That strategy was summed up in the Liberal election plan: “build a stronger Canada” and “diversify our trade.” These are brave words, almost wartime words. But if we do lose access to the world’s largest, most dynamic market, making Canada stronger will be harder.

 

The first bit of news was the report that Canada’s GDP fell by 0.3 per cent in October. We shouldn’t pay too much attention to any single month’s number. But growth has been virtually at a standstill this past year, just 0.4 per cent since October 2024. With population growing 1.4 per cent, per capita GDP fell by a full percentage point. As Canada’s lost decade continues, it’s no surprise the latest Nanos poll shows Canadians are worried about the economy, which helps explain why the Conservatives are virtually tied with the Liberals today.

 

The second item was a report that third-quarter U.S. growth came in at a surprising annualized rate of 4.3 per cent. And despite Donald Trump’s tariffs the year-over-year September growth rate was 2.3 per cent, six times higher than Canada’s. Moreover, AI adoption, tax cuts and deregulation will likely boost U.S. growth again next year. The one dark cloud is a potentially jobless recovery, as U.S. companies don’t expect to expand hiring.

 

If Mark Carney wants to show he is building a stronger Canada, 2026 had better bring improvement. Inflating the economy with $80 billion in federal deficit-spending will spur growth and jobs in the short run. And AI adoption will help drive growth, too, though probably more slowly than in the U.S.

 

…

 

Capital projects take time — years, most likely, if provincial co-operation has to be obtained and Indigenous claims dealt with. And investors not invited to the Build Canada party may decide to take their money elsewhere rather than try their luck with Canada’s onerous regulatory and tax regimes, which remain in place for non-privileged projects.

 

Carney’s hope is to diversify trade, including in oil and natural gas (though autos are another matter). There is nothing wrong with diversification if it enables access to more profitable markets. But replacing the U.S. market with Europe is like relegation to the minors. Like us, both the EU and U.K. are expecting only one per cent growth in 2026. In recent years, Europe has been dragged down by the high electricity prices its green policies, over-regulation, taxes and internal trade barriers have brought.

 

In the end, our prosperity still depends on access to the U.S. market. On that point, this year’s CUSMA review will be tough. In his December report to Congress, U.S. Trade Representative Jamieson Greer criticized: the Online Streaming Act, which “discriminates against U.S. tech and media companies”; supply management, which “unfairly restricts market access for U.S. dairy farmers”; and “discriminatory procurement policies in Ontario, Quebec and British Columbia.” The EU has raised similar concerns.

 

Many of these trade barriers the U.S. complains about hurt our own growth by raising costs for businesses and consumers forced to buy from protected Canadian companies. Getting rid of some of these long-standing irritants would both improve trade with the U.S. and our other partners and also strengthen our economy. They would be an economic win-win. Mark Carney’s most important assignment for 2026 is to figure out how to turn them into a political winner, too.

 

I agree wholly. My December 31, 2025, 1-1-1 newsletter had similar sentiments when it came to recognizing that our country’s economic success and growth is structurally dependent on access to the U.S. market. And that won’t change anytime soon no matter what political party is in power or how many “trade deals” are signed with other countries.

 

I also agree with Jack’s concluding comments. While I’m hopeful for a better economic year for Canada, I am not that optimistic unless bold leadership is taken by our federal and provincial governments. Combine those concerns with recent geopolitical events – like the long-needed takedown of Venezuela’s dictator which may open up Venezuela’s oil markets to the world again (and in particular the U.S.) – and one wonders what impact that might have on our country’s oil and gas industry.  In the long run, I’m concerned.

 

Notwithstanding, I’m hopeful – but not overly optimistic – that Canada will have a better 2026 economically than 2025.

 

Bonus Comment – Quote From Annette Simmons – American Author and Consultant – About Leadership Communication

 

“People don’t want more information. They are drowning in information. They want faith — faith in you, your goals, your success, in the story you tell.”

 

Totally agree!! And one tool to obtain that faith is to tell the story with the fictitious CEO letter. Leaders, let’s make 2026 the year of obtaining faith from your team.

 

Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today.  Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.