One Comment About Taxation – Canada’s Personal Tax System Needs to Change

My wife and I have some long-term friends. We get along swimmingly, but like most friendships, we sometimes disagree. We work through it maturely because we value the history and the relationship. We don’t use disagreements as an excuse to rupture something built over decades.

 

That’s how I feel about Canada and the United States right now. Trump’s approach – the tariffs, the “51st state” rhetoric, the claim that America doesn’t need anything from us – is genuinely corrosive. But many Canadians’ response is just as telling: vacuous slogans, boycotting American booze, cancelling trips, refusing American products on principle. It feels like solidarity. It isn’t strategy – it’s therapy.

 

What that reaction misses is how lopsided the economic relationship is. More than 70 per cent of our merchandise exports go to the United States. Trade in goods and services makes up roughly two-thirds of our GDP. This isn’t a fight between equals, and pretending otherwise doesn’t change the math. Real diversification has been the goal for decades, without ever coming close, for the simplest of reasons – we share a border and a continent with the Americans, not with whoever ends up on top of the global economy fifty years from now. That fact isn’t changing in any of our lifetimes.

 

If symbolic retaliation isn’t real leverage, what is? Making Canada an attractive place to invest, build a business, and take risks with capital – that’s entirely within our own control.

 

And one of the biggest levers we’ve refused to pull is changes to our personal tax system.

 

Canada’s top federal bracket – 33 per cent – kicks in at $258,482 of taxable income for 2026. That top bracket was introduced as one of Justin Trudeau’s first measures after getting elected in the fall of 2015. The new top federal bracket was for income over $200,000 (indexed annually for inflation) that raised the rate from 29 to 33 per cent for that income. It was sold as a straightforward revenue grab from the wealthy. Instead, taxable income reported by top-bracket earners fell sharply enough that, once behavioural effects and the resulting drop in provincial revenue were accounted for, the change was a net revenue loser.

 

In the United States, by contrast, the top federal bracket of 37 per cent doesn’t start until $640,600 for a single filer – and $768,700 for a married couple filing jointly. Stack on the provinces and states, and Canada’s range comes into focus: Ontario, B.C., Quebec and some of the Atlantic provinces impose combined top marginal rates above 53 per cent, topping out at 54.8 per cent in Newfoundland and Labrador.

 

The American range runs lower at the bottom but isn’t uniformly so at the top – nine states levy no broad-based income tax on wages at all, leaving a high earner’s total federal burden at 37 per cent, while New York City and California both push combined marginal rates just past 51 per cent once local surtaxes and uncapped state payroll levies are counted.

 

The floor is where the real gap lives, not the ceiling. Alberta, one of Canada’s lowest-taxing provinces, still charges 48 per cent at the top – at or above almost every American jurisdiction outside New York City and California.

 

For a two-income professional household – say, a physician and a lawyer – both spouses can be paying Canada’s top rate on income that wouldn’t come close to triggering the top U.S. bracket for either one alone, unless they happened to live in one of America’s two most aggressively taxed jurisdictions.

 

Alberta is proof that competing with the U.S. is possible. From 2001 to 2015, the province ran a flat 10 per cent provincial rate – paired with a generous exemption to reduce regressiveness – that provided for a 39 per cent top tax rate that was genuinely competitive with much of the U.S. However, Rachel Notley’s NDP provincial government scrapped it in 2015, and introduced the graduated structure that today tops out at 15 per cent provincially. Alberta remains the most competitive province in Canada as a result of what’s left of that legacy, but Premier Smith would be right to restore it.

 

Then there’s what happens when an entrepreneur actually tries to grow or exit a business. Canada’s Lifetime Capital Gains Exemption – $1,275,000 for 2026 – is a lifetime limit for gains on qualifying small business corporation shares and farming / fishing property. The American equivalent, Section 1202’s exclusion for qualified small business stock, can shelter up to $15 million of gain per company after five years. Unlike Canada’s system, it can apply separately to multiple qualifying companies.

 

The rules for deferring gains on reinvestment tell the same story, only more starkly. In the U.S., Section 1031 of the Internal Revenue Code lets an investor or business owner exchange qualifying business or investment real estate for other qualifying business or investment real estate while deferring the gain. Hold the final piece of real estate until death, and the stepped-up basis heirs receive wipes out the accumulated income-tax gain entirely; investors call it “swap till you drop.” That eventuality is not possible in Canada. Canada’s equivalent – section 44 of the Income Tax Act – is far narrower, offering little real ability to reinvest proceeds on a tax-deferred basis.

 

None of this requires American cooperation, like a trade deal. It requires deciding that comprehensive tax reform is a critical piece of improving our economic sovereignty and is an urgent national priority.

 

My friends and I never get anywhere by cataloguing each other’s faults. We look at our own side of the ledger instead. Canada, so far, has reached for boycotts and a bumper sticker – “Canada Strong” and “Elbows Up.”

 

Strong is a tax system that competes. Ours doesn’t, and pretending otherwise is the actual rupture. That’s the fix within our control.

 

One Comment About Leadership – Leaders, Stay Principled

 

Last week, I spoke to a group of young leaders. It was great to see a packed room full of young people genuinely interested in leadership formation.

 

After my prepared remarks, there was time for questions. Earlier, I’d made the point that principled leadership is an excellent path forward. One person picked up on that directly:

 

“Was there ever a time in your leadership journey where you felt the need or requirement to not stick to your principles?”

 

Excellent question. I had to think on my feet in the moment, and I’ve reflected on it since. My answer, then and now, is an emphatic “no.” I’m sure I’ve strayed unintentionally here and there – but that’s what self-reflection and course-correction are for.

 

Being intentionally principled has served me well throughout my career. Like a compass that always points north, my decisions – past and future – point back to the same fixed set of principles. That consistency sometimes gets me in trouble; a principled decision won’t always be the popular one, or the one in fashion at the moment. But it means I know exactly where I stand, and so does everyone I work with.

 

Leaders, stay principled.

 

One Comment About Economics / Politics  – Canada’s Q2 Real GDP – Is the Crowing By The Government True?

 

Last week, Statistics Canada reported real GDP grew 3.3% annualized in the second quarter of 2026 – the fastest pace since early 2023, ahead of the Bank of Canada’s own 2.5% forecast. The data is good news. What isn’t good news is what the government did with it in the following forty-eight hours.

 

The Prime Minister posted that the number proves his plan – “build our strength at home and diversify our trade partnerships abroad” – “is working.” That line is spin dressed up as an economic statement, and it’s aimed at exactly two audiences: people who won’t read past a headline, and the partisan flag-wavers who’ll cheer any number with Carney’s name stapled to it. It doesn’t survive five minutes with StatCan’s own breakdown.

 

Start with “diversify.” The single largest driver of the quarter’s export growth was passenger cars and light trucks, up 27%, as auto production rebounded from a two-quarter slump – shipments that overwhelmingly go to the U.S. That is not diversification. That is Canada selling more of exactly the same thing to exactly the same customer this government spent over a year telling us we needed to get away from. Calling a rebound in U.S.-bound auto trade evidence that a diversification plan is “working” isn’t analysis – it’s counting on nobody checking.

 

Then there’s the part of the quarter that had nothing to do with any government plan at all. StatCan flagged a 2.5% jump in the GDP deflator – the largest since mid-2022 – driven by a 6.5% spike in export prices on the back of oil prices tied to the war in Iran. Corporate income jumped 9.6% on the back of that windfall, concentrated in energy, while manufacturers ate higher input costs. A war in the Middle East is not industrial policy. Ottawa didn’t engineer that price spike and doesn’t get to bank the credit for it, but you won’t find that caveat anywhere in the celebratory messaging.

 

What you also won’t find is any mention of what’s coming. This data covers April through June – before 50% U.S. tariffs on a range of Canadian goods took effect and before Canada’s own retaliatory measures start on September 8, 2026. StatCan’s own advance estimate has July growth flat at 0.0%, and economists at BMO and elsewhere went on record the same day saying this momentum is unlikely to survive the renewed trade fight. Leaving that out of a victory lap isn’t an oversight. It’s the omission doing the persuading.

 

None of this makes the 3.3% figure fake. It makes the story wrapped around it dishonest by selection: real facts, arranged for people who won’t look past the misleading self-congratulatory back slapping, to support a conclusion the underlying data doesn’t actually support.

 

If the “plan” gets credit every time the number is good, it should get blamed the next time a price shock cuts the other way. Watch whether that happens.

 

Bonus Comment – From Thomas  Jefferson – Third President of the United States – About Principled Leadership

 

“In matters of style, swim with the current; in matters of principle, stand like a rock.”

 

Agree! Principles are the rock; the compass keeps you pointed toward them.

 

I hope today’s newsletter has been thought-provoking for you.

 

As many of you know, I’m passionate about helping people make better decisions – whether in tax, leadership, or business. If you’d like to go deeper on those topics, my recently released book, Making Life Less Taxing Version Two is now available and expands on many of the practical ideas I’ve written about over the years.

 

I’m also putting the finishing touches on my next book, Leadership Compounds: How Small Decisions Build Culture, Credibility, and Legacy. It explores a simple but powerful idea: leadership isn’t about grand gestures – it’s about the small, consistent decisions that compound over time.

 

For those interested in a more hands-on approach, I’ll soon be announcing a bespoke consulting initiative – The Acorn Growth Program – designed to help leaders and organizations grow intentionally, one small (but important) decision at a time. Feel free to reach out to me directly for more information.

 

And if you’re not already on my mailing list, feel free to sign up for my In the Mood Network newsletters to receive more content. No fluff – just practical insights on tax, leadership, and economic policy.

 

Thanks for reading. As always, I welcome your thoughts and feedback.

 

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