Thank you, Chair and committee members. I'm grateful for the opportunity to appear before this committee.

My name is Günter Jochum. I farm about 20 minutes west of Winnipeg with my wife and daughter.

I'm also president of the Wheat Growers Association. We are a volunteer-based farm advocacy organization dedicated to developing ag policy solutions that strengthen the profitability and sustainability of farming and the agricultural industry.

The average age of a Canadian producer is over 55 years old and over 98% of those farms are owned and operated by Canadian farm families. We are very concerned about the changes to the capital gains inclusion rate that was announced through budget 2024. While we acknowledge that the proposed increase to the lifetime capital gains exemption to $1.25 million recognizes the accelerating appreciation of farmland values, we are concerned that the introduction of a two-thirds inclusion rate on capital gains makes it more expensive for young farmers, like my daughter Fiona, to take over the family farm.

As farmers retire over the next decade, many of these farms will be transferred to the next generation. While this will secure retirement for thousands of farmers, the transfer will also incur capital gains. Under the proposed changes, nearly every grain farm across Canada will be impacted by a two-thirds capital gains inclusion rate. This is because the $1.25 million lifetime capital gains exemption is too low to account for rapidly appreciating farm values. Many will have already expended their exemption by the time they sell their farm, meaning that most farms will have gains subject to the two-thirds inclusion rate.

Furthermore, most Canadian grain farms are structured as corporations and do not benefit from the 50% inclusion rate for the first $250,000 of capital gains. When I consulted my tax accountant, he estimated that I will pay 30% more taxes. These numbers are staggering. If the capital gains inclusion rate is increased for family farms, it will impose a substantial tax burden on new farmers, such as my daughter Fiona, at the beginning of their careers.

Budget 2024 emphasized fairness for every generation, yet the proposed changes to capital gains exacerbate farm transfer challenges and make these transfers more expensive for the next generation of young farmers.

Furthermore, budget 2024 described that differences in taxation rates between income earned from wages, capital gains and dividends currently favour the wealthiest among us. This policy inadvertently targets farmers who produce food to meet domestic and global demand. As small businesses that are family run, they do not represent the wealthiest among us.

General succession planning is a cornerstone in the agri-food sector, particularly in farming. Currently, fewer than 1% of Canadians are involved in farming—a percentage that is likely to decrease over time. By making farming financially less attractive, the number of farms will continue to dwindle, leading to greater consolidation and fewer family-owned farms.

Farmers are known for their ingenuity and entrepreneurial spirit, and many have accumulated significant assets. However, farmers are often asset-rich and cash-poor, meaning they possess valuable assets such as farmland, quota, equipment and livestock, but lack liquid cash. This becomes especially challenging with changes to the capital gains taxes. Often, farmers sell a portion of their land or assets to facilitate intergenerational farm transfer. They might realize a substantial capital gain, forcing them into difficult financial positions and requiring them to find ways to generate the necessary funds to meet fiscal obligations.

Increased capital gains taxes could complicate estate planning and succession as the tax burden on asset transfers may be higher, which could lead to more family farms being sold off or broken up to pay taxes. All this flies in the face of what budget 2024 calls “fairness for every generation”.

Thank you for your consideration.