Every time I drive across a bridge, I quietly thank the engineers who designed it. They respect the laws of physics because they know gravity doesn’t compromise. Tax policy should be no different. Ignore economic gravity long enough, and reality will eventually demand its due.

Canada keeps testing that principle. Not with one bad idea, but with a recurring pattern of tax measures built for a headline, drafted without regard for how people and capital actually move, followed by the inevitable correction or elimination once gravity reasserts itself.

Start with some recent examples of ideas that were never going to hold weight. The short-term rental expense denial rule strips a landlord of the ability to deduct legitimate expenses against rental income if the property runs afoul of provincial or municipal licensing rules. It uses the tax system to punish a licensing violation, with consequences wildly disproportionate to the offence since these landlords are, for sure, the cause of Canada’s housing problems. A tax-compliant drug dealer can deduct their business expenses but these landlords cannot. It isn’t just poor policy – it’s upside-down logic.

The luxury tax on aircraft and vessels is the cleanest example of gravity winning outright. Introduced in 2022 to tax the portion of a private aircraft or vessel’s price above a set threshold, aimed at the ultra-wealthy, it was repealed effective November 5, 2025, once it became clear it was mostly succeeding at pushing Canadian aircraft and yacht sales across the border. The tax on luxury vehicles, harder to avoid and easier to defend politically, survived untouched. Capital doesn’t negotiate. It simply goes where the drag is lowest. Economic gravity eventually won.

Then there are the measures where the warnings existed and were overridden anyway. The July 18, 2017 private corporation tax proposals tackled three things at once: income splitting, converting income into capital gains, and passive investment income held inside private corporations. The timing gave away the intent: released in the dead of summer, with comments due a mere 76 days later, on October 2, 2017. It was not a genuine consultation. It was a box checked to minimize scrutiny. The income splitting rules were sold as a crackdown on the wealthy, but the wealthy have never needed income splitting. The rules actually landed on the average small business owner. The result was a genuine firestorm because the proposals were never built to survive contact with the people they affected.

The Underused Housing Tax (“UHT”) told the same story. Aimed at non-resident, non-Canadian owners of vacant housing – another politically attractive housing villain – the tax was drafted so broadly that average Canadians who owed no tax at all still faced filing requirements and large penalties just to prove an exemption they were entitled to. The UHT was mercifully scrapped in Budget 2025 after a three-year run.

The bare trust reporting rules follow this exact same arc. Despite years of warnings from the tax community and a series of recent amendments, the upcoming filing season is setting up to be yet another preventable gong show.