Increased populism coupled with rising governmental deficits following years of pandemic and post-pandemic high fiscal spending levels has led to increased calls for wealth tax levies.
In the US, President Biden has proposed a minimum 25% tax rate on households with a net worth of more than $100mm.
Additionally, lawmakers in several states including Massachusetts, California, Hawaii, Illinois, Connecticut, New York, Oregon and Maryland have proposed variations of wealth taxes.
Given the significant political differences in Congress, it is unlikely that Biden’s proposal makes progress in 2024. However, we expect taxation of the wealthy to remain a key issue for several years to come, particularly with control of Congress and the Presidency in play later this year.
In Canada, President Trudeau has proposed increasing capital gains taxes to fund housing.
The Trudeau government has proposed increasing the share of capital gains subject to taxation to two-thirds (as opposed to one-half currently) for individuals with annual investment profits above $250,000 CAD. This increase would also apply to corporations and trusts.
If approved, this legislation would raise the effective marginal tax on capital gains to 36.3% from 27.5% currently.
The UK recently unveiled substantial changes to the taxation of non-UK domiciled individuals (Non-Doms).
For many decades, the UK has allowed Non-Doms who are living in the UK to elect to be taxed on their foreign income and gains on a remittance basis. Under the current tax regime, Non-Doms will pay UK income tax and capital gains tax on all UK source income and capital gains realized in the UK. However, they only pay income and capital gains tax on foreign earnings and gains if and when they remit those back to the UK. This treatment enables wealthy UK Non-Doms to earn substantial income or capital gains outside of the UK which may never be taxed within the UK.
Beginning April 6, 2025, the UK government will abolish the current Non-Dom regime and replace it with a new residency-based regime. Under this regime, UK residents will be taxed in the UK on all sources of worldwide income and capital gains as they arise (however, during the first four years, individuals will not be required to pay UK tax on funds they remit to the UK form elsewhere in the world).
