"Evolution of Capital Gains Tax in Canada
The introduction of capital gains tax was not unique to Canada; the U.S. adopted such a tax during the 1860s to support its Civil War efforts, and the UK in the 1960s to fund social security initiatives. From its inception in 1972 until 1988, Canada taxed 50% of capital gains at the individual's top marginal rate. This inclusion rate increased to 66.67% in 1988 and to 75% in 1990. This lasted about a decade and in February 2000, the rate was reduced down to two thirds, which lasted until October 2000, where it was dropped back to 50%, where it has remained to this day."
Canada had a large deficit in the 90's which prompted them to increase the inclusion rate to 75%. Contrary to popular belief, the deficit was not reduced from higher taxation on capital gains but rather from a reduction in consumption expenditures. The capital gains taxes didn't generate much in additional revenue for the country as investments in the country dried up. In addition, the Cad to US exchange rate went from US $0.86 by the end of 1990 to US $.67 by the end of the decade. The Canadian dollar eventually rebounded but it wasn't until 2003!
People should not be surprised to see the Canadian stock market trend lower with these new tax changes. Additionally, you can still purchase US $.73 with one Canadian dollar but don't be surprised to see this go much lower over the next year.