My goodness, remember this blog post?
That was March of 2019, yet it feels like yesterday.
95 comments from readers ensued, and they were mixed, to say the least. Then again, I suppose choosing a feature photo of the Titanic sinking into the abyss didn’t help the snark-level I demonstrated that day.
My rant began with my disdain for people who are willfully uninformed, then segued into my mistrust of government, and finally landed on a potential new tax being floated.
Yep, you guessed it: the capital gains tax on a primary residence.
The government pushed back on the idea that this tax was even being considered, but we all know that it was. Justin Trudeau said in a Tweet, “To be clear: We will NOT put a 50% tax on the sale of your home,” and called Andrew Sheer a liar in the process. However, with what I know about government, that doesn’t mean that a 49% tax wouldn’t be considered…
For those who don’t remember, this was the un-proposed but leaked-proposal tax scheme:
50% tax on any profits after one year
25% tax on any profits after two years
15% tax on any profits after three years
10% tax on any profits after four years
5% tax on any profits after five years
As I wrote back in 2019, I fail to see how somebody owning a property for five years is “speculating,” and perhaps this wasn’t so much of a “speculation tax” but rather simply a revenue-generating tax that was arbitrary and vague enough to pass the smell test.
This story was somewhat quiet for the remainder of 2019 and into 2020. But after the pandemic began, and after Justin Trudeau began to give daily press-conferences from his cottage, handing out billions and billions of dollars in “relief” to every person and every cause, it became quite apparent that the government would have to find a way to pay for all of this.
How do you pay for money given to taxpayers?
Well, by taxing those same taxpayers!
Give with one hand, and take from the other, with no guarantee that those who are given, are taken from. In fact, it usually works the other way around.
Yeah, I know, I sure love to bitch about government, right? And taxes!
But this time around, the conversation affects each and every person reading this blog. Because this time around, the government is, in my opinion, going to take from everybody!
I don’t know if any of you are regular subscribers to Blacklock’s Reporter, which is an online political newspaper, but last month, this site reported that the CMHC had provided a $250,000 grant to the UBC’s “School of Population & Public Health” (I can’t believe that’s a thing??) to research Canada’s first home “equity” tax.
These funds were given through an institution called “Generation Squeeze.”
The federal government denied the tax, or the research on the tax, but it didn’t stop people like me, and media people who think like me, from believing otherwise.
July 21st, 2020: “Liberals Deny Tax On Home Sales – Honest!”
That’s just one of the responses, and yes, it’s from the Toronto Sun, which many people discount. But I don’t know who would deny the content therein.
If you want a more respected opinion, then fine. This was written by Murtaza Haider & Stephen Moranis, who are a calming voice of reason on real estate in 2020:
July 24th, 2020: “Why Capital Gains Tax On Principal Residences Is Still A Bad Idea”
While I may be more mistrusting of government than many of you, I simply refuse to believe that a $250,000 grant to an organization who, in 2019, called homeowners in Canada, “lottery winners,” has nothing to do with researching a home equity or capital gains tax on one’s primary residence.
A near $1 Trillion debt also does not help the idea that the tax isn’t being floated.
What is Generation Squeeze?
Their website features a stock photo of a young hipster (beard, mustache, hair long on top and short on the sides), pouting appropriately, with the tagline: “Are you Feeling Squeezed?”
The options for said squeeze rotate between, “….by starting a family?” to “saving for retirement?” to “the cost of housing?” and more.
“Generation Squeeze is a voice for young Canadians – in politics, in the market, backed by cutting edge research. Together, we’re squeezing back!”
This sounds like a decade ago when one of my 17-year-old baseball kids, in response to why he doesn’t respect his parents, said, “Because kids today fight back!” Fight back against, what, exactly? The parents working hard, generating income, putting food on the table, etc.
I understand that “fight back” as much as this “squeeze back,” only that initial fight wasn’t provided a $250,000 grant from a government that gives out $912 Million to family friends, but that’s a topic for another day…
So before you run out of criticisms for what I just wrote above, I’d like to double down.
Generation Squeeze is being run by a UBC professor named Paul Kershaw, who I can tell I don’t like simply from his photo. Yes, I judge a book by its cover, but in the words of Brian Fantana, “Fifty percent of the time, it works every time.” I’ve grown to believe that many university professors have no real-world experience, and merely seek to indoctrinate impressionable children all day, with no fear of reprisal, because they are tenured. They work eight months per year, twenty hours per week, and thus have lots of time to look for problems where others wouldn’t find any.
This particular professor could be described as “progressive,” if you’re an optimist, or “left-leaning,” if you’re a realist:
Kershaw’s work has contributed directly to historic investments in BC child care, the first ever tax on empty homes in North America, eliminating limitless rent increases in Ontario for units built before 2019, changes to municipal zoning, approval of dozens of new rental housing developments facing NIMBY’ism, a shift in BC to reduce income taxes by taxing unhealthy home prices more, and the first-ever reporting of age trends in federal public finance.
I’m a jerk, right?
Well, I’m obviously not pointing out the investments in childcare with snark, but rather the points that follow, obviously signaling that this person is not a huge proponent of real estate as a means of creating wealth.
I mean, what are “unhealthy home prices,” and why does this one man get to define what is or isn’t healthy?
In any event, tell me that he’s forward-thinking and progressive, but I see a person with an axe to grind against home-owners. So what then, do we make of the federal government’s decision to give this man and his think-tank $250,000 to “investigate?”
Here are two quotes from Generation Squeeze:
“Many Canadians bank on profits from home ownership to secure their financial future and gain wealth.”
“We need to make it so that no Canadian relies on gains in housing wealth to feel secure, and we need to rethink policies that by encouraging the financialization of housing push the cost to buy or rent a home even further out of reach.”
That’s a very, very nice and diplomatic way of saying what they really think and feel, isn’t it?
And what about Paul Kershaw’s 2019 Op-Ed in the Globe & Mail?
How about these quotes:
“Canada won’t meet CMHC’s affordability goal in 2030 unless home prices fall and/or young people’s incomes grow at rates we haven’t seen for decades.”
So this man is proposing we take action to ensure real estate prices fall? This is who was just given a $250,000 grant from the CMHC?
“This requires a shift by raising taxes on unhealthy home values to slow down prices, and pay for tax cuts on regular incomes.”
Ah yes, the old “More taxes is the answer” viewpoint.
As I said previously, who defines “unhealthy?”
Does a $6,000,000 house in Rosdeale represent an “unhealthy” price, or is this simply a function of supply and demand? Maybe Rosedale is a beautiful, historic, affluent, safe area that’s close to downtown, and where most everybody would want to own? Maybe that’s why prices are high?
This is dangerous thinking. The idea that one person, or think-tank, or wing of government can ignore the time-tested forces of supply and demand and define the “health” of prices in a market is a slippery slope.
But I fear we can’t stop the momentum behind this.
I firmly believe that Justin Trudeau saw the pandemic as an opportunity to buy votes, as all politicians are accustomed to doing when in power (or campaigning), regardless of party. The money handed out from the steps of Justin’s cottage every single day for months on end was well beyond pandemic-related, and now that the government is presumably finished, they have to find a way to pay for all of this.
Raising HST from 13% to 15% is an obvious solution, but I think that would affect everybody equally, and equality isn’t what governments truly strive for. More to the point, the willfully-uninformed would notice this, but they might not notice a new capital gains tax.
A capital gains tax on primary residences could raise hundreds of billions of dollars, depending, of course, on how it’s implemented. I can’t fathom the discussions around when/what/where/why/how, and yet I don’t think the government would simply declare, “Any primary residence purchased from January 1st, 2021, onward, will be eligible for a capital gain.”
Because that wouldn’t raise enough money. And it’s the least unfair implementation of an incredibly unfair policy, and I hold the government to a much, much lower standard when it comes to taking people’s money.
I don’t see any way in which some form of capital gains tax on a primary residence does not find its way into the tax code by the end of next year. Unless, of course, Prime Minister Trudeau is no longer the Prime Minister?
Nah. That will never happen. He’ll do twelve years, mark my words now, just as you’re marking my words about this tax.
Alright, I got that out of my system.
On to something more productive: a great article in the Financial Post this week on this subject:
This was written by Jasmine Moulton, who is the Ontario director of the Canadian Taxpayer’s Federation.
The sub-heading is beautiful:
Opinion: A home equity tax would be but the latest example of politicians using housing as their personal ATM
But the article itself, for those of you that subscribe and can read it, is even more beautiful.
My favourite parts:
But more taxes won’t increase affordability. If the government really wants to know why housing is unaffordable, it could have saved the $250,000 and looked in the mirror. Governments at all levels drive up the cost of housing in two ways: by restricting the housing supply and by increasing housing costs through taxes and fees.
Instead of addressing their own regulations that suffocate supply, governments have instead focused on red-herring policies to suppress demand, such as targeting foreign buyers. Ontario’s non-resident speculation tax collected a meagre 156 payments in Toronto in the first quarter of 2019, this in a city that expects to grow by 41,000 people per year. Foreign buyers are a drop in the bucket.
Governments could increase supply by acting promptly and reasonably on zoning matters. In Ontario, re-zoning can take up to seven years and there’s currently a lengthy backlog, including 100,000 units held up in Toronto alone.
Governments also drive up the cost of housing with taxes and fees. The Building Industry and Land Association found that some development charges in the Greater Toronto Area had increased by up to 878 per cent since 2004. That adds a cost of $164,500 to the average condo in new high-rise developments in Toronto.
As a writer, I can tell you that one of the most frustrating and exciting aspects of literature is when you see something that another person wrote, and wished you had written it yourself.
This is brilliant. It’s just so undeniably true.
And it’ll be great fodder in a few years when the capital gains tax is in place, and we all look back at articles like this, from people who have such rational thoughts, and wonder, “Why did we end up with this tax?”
You could have 12,000,000 Canadians sign a petition against this tax, and it wouldn’t matter. Governments do what they want.
The tax is coming, folks. Maybe not the whole shebang, but or not all at once, but it’s coming. Just remember you read it here in August of 2020…