75% Capital Gains Tax: Is This in Canada’s Future?

All candidates of various political parties have tax-related promises, although it remains to be seen if the proposals will benefit the greater majority. Meanwhile, Bank of Montreal stock and Imperial Oil stock are ideal holdings in tax-advantaged investment accounts.

| More on:

The snap federal election is a few weeks away, and tax is again a major campaign issue to win votes. Candidates and their political parties are proposing several changes to the current tax schemes. The New Democratic Party (NDP), in particular, pledges to increase the capital gains rate to 75%.

NDP’s proto-platform calls for levying higher taxes on the ultra-rich and large corporations. The proposal includes raising the top marginal rate to 35% for Canadians earning more than $216,511 this year. A higher luxury goods tax is also on the table.

Prime Minister and Liberal Justin Trudeau, Conservative Erin O’Toole, NDP’s Jagmeet Singh, Green Party’s Annamie Paul, and Yves-Francois Blanchet from Bloc Québécois are vying for the PM post. Their lists of promises are long. Taxes, including a higher capital gains tax, could be in Canada’s future.

On the investment front, the TSX continues to impress investors. Canadians can hold their investments in a Tax-Free Savings Accounts (TFSAs) or Registered Retirement Savings Plan (RRSP) for tax-savings or tax-shelter purposes. But for lasting income streams, Bank of Montreal (TSX:BMO)(NYSE:BMO) and Imperial Oil (TSX:IMO)(NYSE:IMO) are the logical candidates.

Hands-down choice

Believe it or not, but Canada’s oldest bank hasn’t missed a dividend payment since 1829. BMO is the “King of Dividends” with its 192 years dividend track record. By 2029, the unbeatable feat will be two centuries. The country’s fourth-largest bank started the practice of sharing a portion of profits with shareholders.

Investors describe BMO as the most investor-friendly stock on the TSX. The blue-chip asset’s total return in the last 48.77 years is 27,417.48% (12.21% CAGR). Today, it trades at $128.50 per share and pays a 3.30% dividend. BMO also outperforms the TSX, thus far, 2021 (+36.6% versus +19.35).

Assuming you own $75,500 worth of BMO shares in your TFSA, your quarterly tax-free income would be $622.88. Once you buy the bank stock, you can hold it for life. Income streams will flow like guaranteed pensions. The $83.28 billion bank has been through the worst periods in history, yet it still stands tall in the 21st century.

Dividend prince

Imperial Oil’s dividend track record is equally impressive. The energy stock may not be the highest dividend payer (2.86%), but the payouts are safe. It’s been paying dividends for more than 140 years and increased the payment for 25 consecutive years. As of September 7, 2021, the share price is $33.97 — a year-to-date gain of 43.82%.

The $23.93 billion company hails from Calgary and is Canada’s second-largest integrated oil major today. Imperial Oil also manufactures and sells about 25% of the country’s daily consumption of petroleum products. America’s oil giant ExxonMobil has a 69.6% ownership stake in the Canadian petroleum refiner.

Retail brands like Esso and Mobil are integral parts of Imperial Oil’s industrial and wholesale business segments. The latest buzz is that the company will soon construct a world-class renewable diesel complex at its Strathcona refinery near Edmonton, Alberta. According to its chairman, president, and CEO Brad Corson, the facility will be a significant value-generating, forward-looking project.

New taxes should benefit the majority

The candidates in the coming elections made several tax-related promises before Canadian voters. Let’s keep our fingers crossed that whoever wins, the new tax measures and programs will benefit the greater majority.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »