Prime Minister Justin Trudeau’s former finance minister said he rejected the idea of hiking the capital gains tax while in office due to concerns it would stunt Canada’s economic growth, and called the move “very troubling for many investors.”

Bill Morneau was Trudeau’s first finance minister from 2015 to 2020 before resigning due in part to disagreements over fiscal policy. He said on Wednesday that raising the tax rate on capital gains means people are effectively hit with a retroactive tax increase, since they won’t get the profits they expected from investments.

In the federal budget published Tuesday, Finance Minister Chrystia Freeland unveiled a measure to raise the capital gains tax inclusion rate to two-thirds from one-half, applicable to all gains made by corporations and trusts. For individuals, the new tax rate applies to gains over $250,000. 

The measure is projected to raise $19.4 billion over five years, including $6.9 billion in the current fiscal year.

“This was very clearly something that while I was there, we resisted,” Morneau said on Wednesday, speaking in a webcast organized by accounting firm KPMG. 

“We resisted it for a very specific reason: concerned about the growth of the country,” said Morneau, who now holds several roles including on the boards of Canadian Imperial Bank of Commerce and NovaSource Power Services. 

He said capital-gains rates are something investors “worry about a lot,” and the measure could have a chilling effect on future investing.

“From my perspective, this is clearly a negative to our long-term goal, which is growth in the economy, productive growth and investment.”

Freeland’s officials have pointed out the capital gains tax inclusion rate in Canada has been higher in the past — it was 75 per cent from 1990 to 1999.

More broadly, Morneau criticized the amount of new spending in Freeland’s budget, especially when stacked on top of big-spending budgets from provinces this year.

“We’ve seen significant increases in provincial government spending and that is obviously working against the central bank goals of reducing inflation,” Morneau said. “I don’t think there was enough effort in this budget to reduce spending, to create that appropriate direction for the economy.”

Meanwhile, the finance minister of Canada’s biggest province also criticized Freeland’s move to raise tax revenue.

“I just don’t think you can tax your way to prosperity,” Ontario Finance Minister Peter Bethlenfalvy said on Bloomberg TV, noting that Ontario is extending a gasoline and fuel tax cut.

Ontario’s budget last month projected a $9.8 billion deficit in the fiscal year that started April 1 — an increase from the $3 billion deficit in the previous year.

The federal budget projects a deficit of $39.8 billion this fiscal year, about the same as the previous year.