The Ben Mulroney Show - Canada needs to take another look at death taxes, and Trump's tariff exemption demands

Episode Date: July 31, 2025

Mauricio Zelaya - EY-Parthenon Canada Partner & National Economics Leader Dr. Eric Kam - Economics Professor at Toronto Metropolitan University If you enjoyed the podcast, tell a friend! For more of the Ben Mulroney Show, subscribe to the podcast! ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://link.chtbl.com/bms⁠⁠⁠⁠⁠⁠⁠⁠⁠ Also, on youtube -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.youtube.com/@BenMulroneyShow⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Ben on Twitter/X at https://x.com/BenMulroney Insta: ⁠⁠⁠⁠@benmulroneyshow⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠@benmulroneyshow⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠@benmulroneyshow⁠⁠⁠⁠ Enjoy Learn more about your ad choices. Visit megaphone.fm/adchoices

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to discuss this. We're joined now by Eric Kam, economics professor at Toronto Metropolitan University and great friend of the show. Welcome to the show, Eric. Thank you, Benedict. There's nothing more uplifting than talking about death. Okay. So give us a primer on generally speaking, what are death taxes? Okay, so give us a primer on generally speaking, what are death taxes? So what Canada does is that when somebody passes away, the revenue agency treats all of their capital assets as if they were sold

at what they consider a fair market value. And then all capital gains are taxed on a final tax return at 50% of the gains. And that includes everything except your principal residence. So that's how the government comes in and estimates how much money in most terms. How much they can get. And listen, fundamentally, I believe,

like they've already taxed those things over the course of that person's life. But there's a justification for it and we take the world as it is. So that's what it is. Okay. And what is being proposed? What they're thinking about doing is moving to a model. See, we're the only country that doesn't have what's called an estate or inheritance tax.

The USA, the UK, they all have inheritance taxes, which means that it's not paid by the deceased as per se, it's paid by the estate or by the heirs. And because of that, there are many more things you can do to shelter that money. And some of them are almost obvious, right? If you have a spouse or a partner,

you can roll things over, change the name on your assets, use things like tax-free savings accounts, which don't count, or of course the big ones, give gifts away during your lifetime. Sell everything you own to your kids for a dollar or donate to charity. So what really Canada is looking to do is go to a more egalitarian idea because most of the rest of the world doesn't, in a sense, punish you for dying.

Canada uses an old model where the last thing they do is tax you in your coffin, and that's pretty cruel, Ben. Well, it's cruel to the person who, the person is dead, so it doesn't matter to them, but from the perspective of the government, look, my contention, generally speaking about governments is they rarely have revenue issues. They have spending issues. And so are we looking at changing this because the government is looking for more revenue? Yes. That's what always happens in Canada.

You're very right. You're right. You know, it's funny, Ben, that the government is a lot like the houses that make up the country. We don't tend to have an earnings problem. We tend to have spending problems. And we spend too much money. And so the government looking at this is what they're trying to do is say, let's get rid of the tax on deemed gains. Yeah. And let's go after a broader amount of money, but try to sell it as you have more ways to hide your income.

But don't ever be fooled. Our government is heading into some very, very leaner. We're in lean. We're going to leaner financial years. So you know what? Anywhere they can use to increase their tax base, they are in a sense elected by the population to do so. Eric, the last election was a tale of two cohorts, right?

You had young people who were lining up behind Pierre Poliev and you had older Canadians who were banking on Mark Carney. It looks, and we all know how that went. This feels to me like it's going to impact, at least in the short term, this older generation who probably have discussions about estate planning far more than young people do. Yes, it will impact young people if they're ever in line for an inheritance.

But the money right now belongs to that generation that voted for Mark Carney. And in a few segments ago, we were talking about how Mark Carney ran on a lot of things. He did not run on recognizing Palestinian statehood. And I do not think he ran on revamping our death taxes either. No, absolutely not. I mean, I, but you said there, there was two camps and I think there's two camps as well. I think there was the camp that was fooled by Mark Carney and the camp that

wasn't fooled by Mark Carney. And that's another story. Listen, I, I am, I've decided after the election, I want to be part of the solution. So I'm going to criticize when, when election, I want to be part of the solution. So I'm going to criticize when, when necessary, and I'm going to champion when possible. And so I'm not, I'm not going to prosecute the election anymore. That's done. There will be another election in a few years and we can ramp up.

We can decide where, where the chips lie there. But I'm just, I'm wondering what older Canadians are going to think of this when this was not on the ballot. They're not going to like it then. Older Canadians are not going to like it. And frankly, neither are younger Canadians because these things are intergenerational. So if you affect old people, you by definition also affect young people because everything trickles down. And while I'm not a lawyer, since you had me on, let me say that the one thing you have to do is prepare a comprehensive will and power of attorney. If nothing else, make sure the government knows that your assets are distributed efficiently

in a tax conscious manner the way you want them to be. Because if you die in test dates, and that's not something you discuss with your urologist, that means you don't have a will, they're going to just take your money and ignore your wishes. So please everybody have a will, have some planning, sit down with your kids and make a plan or else you're going to get royally screwed. It seems to me that without fiscal discipline, this is a stopgap measure that is going to repeat itself again. I mean, listeners in Toronto will remember that under David Miller, the mayor, David Miller, I've made up this scenario in my head, but in my mind, it absolutely happened. Where you're sitting

around a room saying, guys, we've run out of money. Give me something that can get more money out of the people. And somebody said, well, you know, you could have a, you could have a local version of the land transfer tax. I mean, sure, there's one already at the provincial level, but you could do one here. And he said, yes, let's do that. That did not solve our problems in the city of Toronto. We are still massively in debt.

So adding to the tax burden, even on dead people, is not going to fix what's broken. There are too many leaks in the CIV and more money just means more opportunity for it to go to waste. You know, Ben, taxes are done on the guise of efficiency versus equity, but taxes in and of themselves are never really the answer. All they are is a mass level of redistribution. If you want to just take a really quick snapshot in the couple of minutes we have left, all you have to do is look at income inequality for our country, which is getting worse

and worse by the day. There's something called the Gini coefficient. The mathematical formula would put you in a coma, but the point is, is if it comes out to a zero, you have perfect equality and one is a complete disaster. Canada right now is at a 0.31 out to a zero, you have perfect equality and one is a complete disaster. And Canada right now is at a 0.31. And you say that sounds pretty good. Well, it was at a 0.2 about five years ago. So I look at the, to me, Ben, quickly, the important measures, child poverty is at about

15%. And top 10% of Canadians now own about 70% of net wealth. So really what the government is doing is scrambling to fill their coffers, but it's not a plan, Ben. It's just a disaster scenario. Yeah. And I'm glad you brought that up because the fact is 10 years of the most left-leaning government in the history of this country.

And the fact that one of the net results is the highest degree of income inequality that we've ever seen. It tells me my takeaway from that is that you can't tax your way to a more fair society, to a more equitable society, that the taxes are a means to an end. And you have to ask yourself, what is the end? And I do not believe that they ever thought that through in Ottawa. They just thought that if they give us the money, we can build whatever we want. And the net result is as a country that is not in in the state that I think even

Justin Trudeau is not looking at Canada today and saying, yeah, I left in a better a better state than I found it. OK, quickly, number one, he's only looking at Katy Perry. Number two, what is our country do to reduce inequality? It's funny. We have four key tools, right? We have progressive income tax, we have child benefits, and we have old age security, universal health care.

Interesting because none of them have ever been proven to reduce inequality, Ben. Really? Interesting. Wow. I learned something new every day with you, Eric. Hey, thank you so much. Enjoy the rest of your Thursday. Stay healthy, my friend. Quiet night in on Friday. It's good to have a routine. And it's good for your eyes too.

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of a serial killer and hear exclusive interviews with the killer's family. Listen to the full season of Crime Beat early and ad free on Amazon Music by asking Alexa to play the podcast Crime Beat. Welcome to the Ben Mulroney Show on this Thursday, July 31st. I guess tomorrow's August. This summer's flying by everybody. Welcome to the show. Thank you so much for joining us.

And I don't know where you're listening or how you're listening to us. Or sometimes you might even be watching. You might be watching on YouTube. But you might be listening on the radio or on a streaming app. You might be listening in podcast form. Or you may have found some of our clips on social media. Wherever you find us, every one of those components

to The Ben Mulroney show helps us grow this show and we want this thing to be around for a long time. Long long time. Let's welcome to the show Mauricio Zalea from EY Parthenon Canada, partner and national economics leader. We're talking about Canada seeking tariff exemption as Donald Trump demands complete open markets. Mauricio, I apologize. I went off on a sports tangent, but I hope I hope we can get to our conversation now.

Tomorrow is the day. It is tariff day. If we don't have a deal in place, life could be very, very different. Could it not? So much for having me here. I enjoyed the preamble. You must have wondered what the heck was going on. I'm sorry.

No, no. Yeah, I mean, there's so many moving parts right now. And yeah, I mean, we'll see what comes out of tomorrow's deal, if at all. I mean, to be honest, what we've been advising our clients right now is whether there's a deal in place or not to continue to expect a lot of uncertainty

in the markets, right? And we just don't know with the Trump administration. A great example is just yesterday, they unexpectedly announced a 50% tariff on copper. And now for the moment, Canada is exempt from this, but it will put us in a tougher situation. But as I said, these are deadlines that we don't know how artificial or how real they are. But nonetheless, we should take them as such. And we should hopefully we can find some sort of agreement come tomorrow. As as as you I'm sure you have been paying attention to these negotiations and so much of it's been what we've seen in public

is not necessarily what's going on behind the scenes, but it does seem that despite Canada's best efforts, and it should be said, good faith efforts, Donald Trump seems set in his ways. Donald Trump wants what he wants and what he wants is a world of tariffs. And I just don't know that that we that you know, Mark Carney said he was the guy to do this. I don't know that anybody could have negotiated with this sort of mindset on the other side of the table. We just don't know what he's really looking for.

And to your point, we do have to temper our expectations. I mean, if there's some learnings that we can have from some of the deals that have been made over the last little bit with, say, the EU, with the UK and Japan. The benchmark right now for tariffs is around 15%. Now it's much better than the IPA tariffs that we have right now of 25%. We hope that the USMCA compliant goods will continue to be exempt. I guess we can call that a win if we'd like to do so. And at the same time, reduced or perhaps even remove some of those sector specific tariffs that we have on say our

energy products and Patash. But to your point, we just don't know what the actual outcome is. At the same time, there's a little bit of learning as well, because we can see that everything is on the table, meaning that it's not just about the terror, but perhaps is your way to negotiate some form of commitment to make investments into the US. Now, I don't believe Canada will go down that road, but at the same time, maybe that's something to the extent of they come to an agreement to purchase some form of military products because Canada does have to hit those NATO targets.

So can we expect some of that? I don't know. Uh, what do you say to the argument that no deal is better than a bad deal? Hey, I would agree. Uh, because, and, but here's the thing with the Trump administration, even if you make a deal, they can renege on that pretty quickly. We've seen that. We've seen that all around.

Exactly. So it is important to to stay firm on what we think we can. We can it does have a little bit more leverage, but that's not saying much than the other countries that they made deals because we are so highly integrated with the US. Yeah, Mauricio, I don't don't mean to cut you off. But I there's something that sticks in my head. I heard it on another radio station. Somebody Flavio Volpe of the Canadian auto parts organization said, Donald Trump doesn't seem to understand I know he wants everything built in the United States. He wants all car manufacturing to move south of the border. But what he doesn't understand is it takes five years to build a factory and get it up and running. And in and if if Canada if all of a sudden one of our auto plants goes the way of the

dodo bird, there's gonna be a five year period in there where cars are simply not built that affects the bottom line of an American company. Because they are a sure it's built in Canada, but it's an American company. And the only people who benefit from a situation like that is is sort of the the the Asian car companies that build their cars in Tennessee. I agree completely with that sentiment. And at the same time, even with the automotive parts as well. Right. I mean, we think about the whole supply chain. It's so highly, really integrated.

It's very challenging, in fact, to say that a product is made in Canada or in the US. It's really a North American based auto sector. So he's completely right. And we're seeing this across sectors. You can't just up and start a plant over the next few quarters. This takes a lot of planning. So that sentiment is correct. Mauricio Zalea, I want to thank you so much. I want to apologize to you and I want to make it up to you. Next week, if we're living in a different world, I would love to have you back here for an entire segment and we can have more of a fulsome conversation. Looking forward to it. Thank you so much.

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