Political alliances are labels, are they not?
If you heard that somebody was a Republican, wouldn’t you automatically make a bunch of assumptions?
I know I would.
Maybe it’s worse in the United States than in Canada, but I find it interesting how a person can be labelled by the party they belong to, support, or vote for, and an assumption can be made about their general belief system.
I’m fascinated by what’s going on in the United States right now. I’m not the type to slow down at the scene of a horrific and gruesome traffic accident, nor would I watch a literal “slow train wreck,” but to see such a proud and successful country completely unravel before our eyes, and so predictably, is just fascinating.
Fascinating, and terrifying, perhaps. Imagine if Donald Trump won the election in November, I literally think the world as we know it could end. He’s essentially a dictator, or believes himself to be as much, and a large portion of the country has fought tirelessly for 3 1/2 years to stop him from maddening actions that no president has ever undertaken. I could see a world in which he eliminates term limits and becomes the president for life. Isn’t that a thought?
The ironic part about the two-party system in the United States is that somewhere in the neighbourhood of 35% of people will vote Republican, no matter what, and 35% of people will vote Democrat, no matter what. The reincarnation of Joseph Stalin could run for president as the Republican candidate, and those 35% of people would still cast their ballot in red. Same goes for the Democrats. So in essence, it’s the other 30% of the voting body that decides every election.
The dichotomy between Republican and Democrat is so fierce. I don’t know that there’s another example in the civilized world of a two-party system with such opposing values and interests. If the interests and values were a Venn diagram, I don’t know if there’s anything that would overlap. It almost seems as though every interest, value, decision, or favourite chocolate bar of one side simply MUST be opposed by the other.
I recognize that there’s a big difference between “red” and “blue” here in Canada. But I also think that the stereotypes of our two sides are less accurate than that of the United States’ two parties. The idea that a Republican loves guns, opposes abortion, believes in God, is anti-immigration, loves to hunt, and dislikes government is probably more accurate than a similar stereotype of a Liberal, Conservative, NDP, Bloc, or Green supporter in Canada, no? I would get into examples, but I’m not feeling that brave today.
I suppose my point is this: a Venn diagram of values and beliefs here in Canada, among the major parties, would surely show more common ground, would it not?
Talking about taxation isn’t the most exciting topic, but it’s a Friday, and I saw this press release from TRREB, so I wanted to put it up for a brief discussion.
I’m a fiscal conservative, admittedly. Don’t confuse that with being a social conservative, however. This is where those labels come into play.
I’m also not a first-time home buyer, nor will I ever be again. But just as I have lamented over the past decade that the City of Toronto should be spending billions and billions of dollars every year on transit and other infrastructure, which I will never use, I also believe that the land transfer tax that is thrust upon first-time buyers is punitive, and needs to be re-examined.
Don’t get me wrong – it won’t be.
The pandemic caused all the levels of government to hand out money which it may never actually be able to pay back.
The City of Toronto is not permitted to run a deficit, so cutting taxes is likely not going to fly.
But should it?
Whether you’re a fiscal conservative or not, do you believe in this tax?
I’ve told you this story before, so apologies in advance…
I was sitting with new clients a couple of years ago, discussing land transfer tax. They were looking to purchase a $900,000 home, and I told them that their land transfer tax would be almost $29,000. They were stunned, to say the least.
I told them, “You think that‘s bad? I had a client buy for $4,000,000 and they had to pay over $170,000 in tax!”
“Yeah, but they can afford to.”
As I have written before, I disagree with this in two ways.
First of all, the idea of affordability is all relative. The person buying for $4,000,000 and paying $170,000 in tax can’t really “afford” this more than the person buying for $900,000 and paying $29,000 in tax. I think people just have inherently less respect for expenditures made by those with more means.
Second of all, why does that matter? Yes, I’m slightly right-of-centre, but when I hear politicians grandstanding to their base, saying things like, “It’s time the top earners start paying their fair share,” in a system where the top earners pay 54-55% of their income in taxes, it irks me, a little. What does “fair” mean, in that context?
The land transfer tax is one of the more bizarre taxes I’ve ever seen. To pay $170,000 to move? What’s that about? It doesn’t cost much file papers and transfer title, and that’s paid for by the buyer anyways. What is this tax really for?
Some will argue that the tax itself need not be traced or linked to an actual expenditure or benefit, but am I naive for suggesting it could or should be?
I’ve always had problems with the land transfer tax, but I realize the tax is not going anywhere. I was in real estate long before the municipal land transfer tax was brought in by David Miller, so I remember times when lower prices, and only one tax, rather than two, meant a lot less money to fork over to the government, for seemingly nothing.
Today, we’re in a different world. And the tax is more punitive than ever.
Here’s a press release from the Toronto Regional Real Estate Board:
TRREB Urges City to Move Forward with LTT Relief for First-Time Home Buyers
With the City of Toronto’s Executive Committee considering a report today, with options to improve affordability for first-time home buyers by providing relief from the City’s Municipal Land Transfer Tax (MLTT), the Toronto Regional Real Estate Board (TRREB) is calling on the Committee to move ahead with longneeded adjustments to the MLTT First-Time Home Buyer Rebate.
“First-time home buyers have been unfairly penalized by the MLTT for years. Adjustments to the MLTT first-time buyer rebate are long overdue,” said Michael Collins, TRREB President.
The average price of a residential property in the City of Toronto at the start of 2008, when the MLTT was first implemented, was $415,000, and the MLTT first-time buyer rebate was allowed up to a maximum of a $400,000 home, meaning that first-time buyers were almost completely exempt from paying any MLTT, as was City Council’s intention. The average price of a City of Toronto residential property is currently $881,000, and the MLTT first-time buyer rebate is still only allowed to a maximum of a $400,000 property. This means that a first-time buyer purchasing an average priced property today would pay $9,620 in MLTT, on top of about $10,000 of Provincial Land Transfer Tax (PLTT), for a total of about $20,000 in land transfer taxes, which must be paid up front on closing of the real estate transaction.
“Clearly, City Council’s intention of providing relief for first-time home buyers, up to the average priced property, is no longer being met,” added Collins.
Not only are first-time buyers not being given the relief that was intended by City Council, they are being forced to pay MLTT at the highest rates, even if they purchase a below average priced home. This is because the MLTT rate structure is such that the highest rates kick in starting on homes priced at only $400,000, which is 55% below the current average price. As noted by the City staff report being considered by the Executive Committee, two-thirds of first-time home buyers purchase homes priced between $400,000 and $800,000, well below today’s average home price in Toronto.
“The City is essentially forcing people, including first-time buyers, purchasing BELOW average priced properties to pay the highest MLTT rates. This is simply not progressive or fair,” said John DiMichele, TRREB Chief Executive Officer.
The City staff report, and TRREB survey research (conducted by Ipsos Public Affairs), show that the number of firsttime buyers entering the real estate market has been declining significantly in recent years. TRREB believes that this is largely because of affordability issues.
“First-time buyers are increasingly being priced out of Toronto’s real estate market and the Municipal Land Transfer Tax has exacerbated this. It is time to make adjustments to the MLTT rebate for first-time buyers, so that they receive the relief that was always intended by City Council,” added DiMichele.
I already know what many of you will say, and that’s okay. I know where you’re coming from, and we’ve had this discussion many times.
If you own your home, and aren’t going to move, then you’d much rather see the existence of land transfer tax than an across-the-board increase in property taxes, since only the latter affects you.
But you can’t ignore the fact that, before 2008, most first-time buyers didn’t pay land transfer tax. And now they do, and through the nose.
I laugh when I see the “sliding scale” that shows the first tier of tax applying to the amount between $0 and $55,000. I mean, really? How out-dated is this? It’s such a slap in the face, and while I realize that some properties across Ontario do cost a fraction of what those in the GTA cost, we need to realize that the GTA is the engine that keeps the province running. It’s where an overwhelming majority of people live, and thus where an overwhelming majority of the provincial land transfer tax will be coming from.
During last year’s federal election, there was so much talk about “helping first time home-buyers,” but with the First-Time Home Buyer’s Incentive essentially being a flop (I haven’t had a single person ask about this, by the way), couldn’t the other levels of government look at the land transfer tax(es) as an actual way of helping buyers?
Since the election, it seems as though there have been more measures to punish first-time buyers, rather than to help them. Most of the changes through the CMHC, while perhaps not directly targeting first-time buyers, surely affect that segment the greatest.
Should the “average” first-time buyer in Toronto really be expected to pay over $20,000 in transfer tax?
Tell me you’re a Liberal, or a Conservative. Tell me you’re a die-hard NDP’er, or that you’re a happy supporter of the Green Party. But tell me that this really shouldn’t be a party-specific debate.
While I understand that a true “fiscal conservative” is more likely to oppose this tax, I just don’t think this is a political issue as much as essentially every issue is, like wearing face-masks, south of the border.
Can we not appeal to common sense here?
In 2018, the City of Toronto collected a whopping $818 Million land transfer tax, which represented 6% of their operating budget.
It’s impossible to replace $818 Million from the city’s bank account, but it can’t be ignored that before 2007, the city didn’t have this revenue, and yet they found a way to make the city run.
In July of 2007, Mr. Miller’s motion to bring the tax into effect was defeated.
In October of 2007, Mr. Miller’s motion passed.
The land transfer tax was expected to bring in $175 Million in 2008. Nowadays, we’re looking at almost a billion dollars.
Mr. Miller was going to bring this tax into effect, no matter what. And since then, the City of Toronto has continued to increase it, over and over again, each time they need to raise more revenue.
As we drive down the main drags of our neighbourhoods and see more and more stores and restaurants boarded-up or now featuring “FOR LEASE” signs, we would all probably agree that this isn’t the right time to be talking about cutting taxes. The timing of TRREB’s press release and lobbying of the government shows just how tone-deaf and out-of-touch they are, but that’s nothing new.
At the same time, if not now, then when?
There’s probably never a good time, and that’s the problem.
People talk about others “being left behind,” especially as it pertains to the younger generation, and/or the proverbial have-nots.
So what’s wrong with discussing a better way for those folks to get ahead in the real estate market?
I don’t think a discussion about decreasing land transfer tax for first-time buyers has to fall into the “fiscal politics” category. I think it could just as easily be labelled “human interest,” could it not?Back To Top Back To Comments
at 7:56 am
We all know the LTT is a tax grab so the city can re-allocate funds to suit whatever needs to be covered. I rarely ever use transit (not convenient since I drive to 905). My beef is that why should the ones who work their butts off (never ask for a hand out) must subsidize the low income? I had to pay the LTT 3 times in the last 10 years. I call it the David Miller tax times 3. Policies and taxes should be across the board just like going to a store and paying HST. My .02 cents.
at 10:12 am
So all “low income” folks do not “work their butts off.” Nice. Thank you for your idiotic “comment.”
at 10:27 am
I expected a rebuttal from my comment. Let’s be more politically correct. Those who work to successfully pay their way.
at 2:04 pm
The biggest myth is that people who make money work harder than those who don’t. That is such an ignorant thing to say.
at 9:18 pm
Agreed. There are lots of jobs that pay significantly less than mine, that I wouldn’t even consider doing for the same money I make.
at 3:44 pm
“What’s truly essential (in our society)? Well, it turns out that most of the people in this country who are essential to its functioning are the lowest paid.”
— Jon Stewart
at 9:16 am
I am sure this would make a lot of people upset as we all pay into this.
Canada Pension Plan CEO getting a nice pay increase during a pandemic.
at 8:34 pm
$5.4 million works out to about a cent and a half per month for every Canadian over age 19. Hardly worth getting “upset” over.
at 11:24 am
Paying compensation to one person at $5.4M where the CPP performance has dropped. Typical gov’t where they like to pay themselves regardless of the situation. Ask those essential health care workers (i.e. nurses) and retail workers where their pandemic $2 increase was removed a week ago.
at 8:04 am
The price bar that is set for property purchase in Toronto is based on the total transaction cost. Not transaction cost before LTT. So if LTT was eliminated, the offers and transactions “base price” would just drift up to fill the gap. If the LTT was trippled, the “base price” would drift DOWN instead.
To me, it’s really a false argument. Obviously there’s levels where the LTT could outright disrupt the economic basis, but it’s no where near that at all (I would guess around 15-20% before it really starts to really affect elasticity.)
It’s like buying milk. Whether you buy Skim, 1%, 2% or homo, you’re still getting 2L of liquid: skimming out the 3.25% cream doesn’t get you 70ml less liquid in the carton.
at 8:54 am
I was about to say the same. You should incorporate the cost into your budget. It doesn’t hurt or help first time buyers. You have x amount of cash, you know the LTT, you have x-LTT left which implies you can pay y price. Everyone is in the same bucket. It only effects you if you want prices to be higher…
That being said, LTT is way too high relative to pretty much anywhere in North America. On the other hand, you are taxing the people who have generated incredible wealth by essentially doing nothing, and if you do need to tax then this is the least offensive avenue. It does effect first time home buyers, but first time home buyers are probably a very small proportion of total transactions.
at 9:11 am
Ontario is now going to teach kids from grades 1 – 8 finance and budgeting.
at 9:56 am
Yes, finally. And as soon as it was announced opposition immediately started complaining about it. This is what I despise about politics. I think everyone would agree that we need financial literacy education in schools. This government is finally going to do it and what happens? It’s gets criticized. Unbelievable.
at 11:02 am
The younger generation need finance and budgeting more than ever. Kids are being given lots of expensive toys (i..e. iphones, ipads, mac books, etc.) and have no idea the concept of money.
at 9:24 am
I couldnt agree more Pragma and hoob. If the objective is to make housing more affordable for the first time buyers, there are lot more avenues out there but TREB probably wont talk about them.
at 9:48 am
So first-time buyers are extremely wealthy and since they have done nothing to earn that wealth, they should therefore pay up and shut up. Got it.
How about read the article.
at 9:51 am
I have to disagree. While what you are saying is true, what’s the harm in providing a break to 1st time buyers? If they are really a small percentage of buyers I don’t think it’s going to push up prices.
at 9:58 am
My response was to Hoob/Pragma. Appraiser snuck his comment in while I was writing mine.
at 9:51 am
Every dollar that a first time buyer has to spend on LTT is a dollar that they can’t spend on the property — as smart commenters here know. In a competitive seller’s market, LTT savings will end up in the seller’s pocket… after commissions are deducted, of course. Would David like to collect a commission on that extra $20,000 instead? Wouldn’t we all?
at 10:30 am
Yup… and any LTT rebate for a first-time homebuyer doesn’t make the net total purchase price cheaper, ie means a first time buyer is able to offer “original max budget + presumptive LTT amount”.
So that means a pool of sellers whose properties appeal to first time buyers, will generally speaking, see a drift in total offer prices higher, since all those first time buyers are able to offer higher than before (by adding that presumptive LTT amount.)
So a first-time-buyer LTT rebate means more money into the pockets of sellers of properties that appeal to first time buyers, NOT in the pockets of the actual buyers.
And it means at the bottom end of your sales market, you’ll have an even tighter logjam of offers and price sensitivity, driving up the threshold of admissability for those very same first-time home buyers.
And pretty much any incentivisation of first-time buyers will result in this same general effect on the market: FTB offer just that much more, the logjam at the bottom end of the market gets even more tangled, and the net proceeds to sellers in that market edge up accordingly.
at 11:27 am
@ Verbal Kint
This rhetoric is getting old. You think David gives a shit if a house sells for $20K more so he can make another $500 in commission? He’s secretly trying to eliminate the LTT so buyers have more affordability, house prices rise, and David can pocket more? This is like “wearing a mask kills people” conspiracy level nonsense. Get a life, man. The other commenters on here add so much value and you’re so hollow it’s just pathetic.
at 11:48 am
Do you think I’m giving David too much credit? He’s got a B.Comm and talks a lot about supply and demand, so of course he knows what would happen if first time buyers got a break on LTT in a supply constrained seller’s market.
You think David DOESN’T realise this? Boy, people think *I’m * hard on the guy!
at 11:52 am
Nailed it. Bloody tiresome.
at 1:31 pm
Don’t give this guy attention and eventually he’ll crawl back to his hole. Keep responding to his stupid comments and he’ll keep coming back. If this comments section were a high school cafeteria, he would be the kid eating alone very day who eventually starts pissing himself so other kids will notice him.
at 1:37 pm
David’s original take was scatological. I’m glad I didn’t go to school where you folks did! Bad neighbourhood? Lead pipes?
at 8:38 am
David’s blogs are insightful but it is the comments that keeps me interested in this forum. Keep them coming Verbal Kint
at 8:50 am
It’s been a while since a solid Friday Rant!
at 9:04 am
When I sold my home in Etobicoke to move to Welland, the buyer of the home had to pay $30,950 in combined LTT’s. I on the other hand only had to pay $2675 LTT for my home.
A crazy difference on two similar properties. Almost like being on a different planet.
at 9:20 am
What level of taxation you consider “fair” is a very subjective point. Is it “fair” to disproportionately tax people who have more wealth. From a societal perspective I would say it is fair and necessary. The alternative is extreme wealth inequality, which is very dangerous for society as we have seen throughout history, and which I think is the big driver behind what is happening in the US right now.
We’ve done the experiment over the last 30-50 years. Income from labour has been taxed at a much higher rate than income from capital, which is mostly held by 5% of the population. The burden of gov revenues has slowly shifted from corp/capital taxation to labour income. And can we look at that and say it has been a great success? I think there are very few metrics you can look at and say people are better off now than they were 40 years ago(I’m referring mostly to the US). Income inequality at the highest levels in a 100+ years, manufacturing decimated as companies are incentivized by tax rates to capture just a little more return on capital. Current trends have this as the first generation of Americans that will make less money and on average have shorter life spans than their parents.
You don’t need to be altruistic to believe that that wealthier people need to be taxed at higher rates. You can, and I do, take the completely selfish approach and say if I want to see a healthy and dynamic country and keep Canada a great place to live, and I don’t want to see protests in the street and a country that is polarized and tearing itself apart, then we need to make sure that the wealth divide doesn’t keep growing, and that means taxing those who have more.
at 9:26 am
at 10:05 am
This is true, there is only one problem with this. Unfortunately, the extra revenue does not end up helping the low income population. I know it is socialist but I think it’s an absolute disgrace that there is homelessness in the richest countries in the world.
at 10:53 am
As a social worker, I can tell you that homelessness has far more to do with mental health and substance abuse than proportionate wealth.
at 11:49 am
I’m no expert by any means on mental health or substance abuse, however I just saw a report that opioid over does hit a high during uncertain times during covid. Correct me if I’m wrong but I’m guessing lack of money may drive some people to drugs in the first place which might result in homelessness.
I am aware that many homeless people have mental health issues. I believe there is a solution to most problems and it’s usually just a matter of will and money. Didn’t a lot of mentally ill people end up on the streets due to closure’s of institutions, what about a decade or two ago, which I’m going to assume had something to do with cost cutting?
at 8:05 am
I don’t have data either, but why assume lack of money/jobs driving the spike when Kim said mental health has far more to do with it?
The shutdown had people locked up all day. In many situations, people were self-isolating alone. The damage this pandemic has done to mental health is likely correlated to the increase in drug-related abuse you’ve heard about.
at 11:54 am
It’s Monday and probably no one is going to read this therefore I’m not going to spend time clearing things up but you are mixing up some points between my two posts…
at 11:13 am
Perhaps I missed David’s point, but isn’t it a bit arbitrary to tax the acquisition of property. It would be much more “fair“ to abolish the LTT and increase property taxes to fill the void. The reason it is not done, and perhaps was implemented in the first place, is because of political implications. It’s a good policy if you’re trying to get elected, but probably not so much economically. Property taxes are stable and predictable, whereas LTT fluctuate depending on volume of transactions and make it hard for cities to budget.
at 11:26 am
Your idea makes sense as far as it goes, but by the same token, taxing income makes even more sense insofar as you *know* the person can afford to pay the tax, which is not necessarily the case for home buyers and property owners (e.g. my wife and I are retirees who live on roughly $60K pre-tax per year; we also happen to live in a $1m+ house in downtownish Toronto).
at 12:13 pm
Taxing incomes is not enough as it’s on the federal level. Ontario gets screwed on transfer payments even though we pay the most out of all of the provinces. The Miller tax became the revenue stream for Toronto. Don’t forget Ford scrapped the vehicle registration tax which was another revenue stream. The bottom line is that the city needs to justify a “tax” to balance the books. Maybe the federal government needs to stop giving free money away (foreign aid) and take care of Canadians first.
at 4:43 pm
If they up the land tax it could force people in your position to sell, move and downsize. In Vancouver they allow you to defer land tax and the estate pays with the sale of your house. I think that is a terrible policy.
I know it isn’t exactly fair that you could be forced to sell but at the end of the day we all know a $60k a year retirement isn’t enough….
at 4:53 pm
It is if you aren’t paying rent or a mortgage. As I’ve mentioned here recently, my wife and I live in a long-since-paid-off house in the downtown core. Our annual budget is $59K, unchanged in nearly a decade. And we want for nothing. Honestly.
at 9:25 am
My grandmother watches CNN like it’s going out of style! Every single night she tunes in and watches the mess down south like it’s a 75 part miniseries. She says it would be more entertaining if she didn’t know it’s real and really actually happening. But still that doesn’t stop her! I have to admit that it’s kind of amusing. It provides no shortage of memes and social media jokes but it’s also sad at the same time.
at 11:34 am
Here’s a plot I made of Toronto/Ontario LTT (with and without the first time buyer rebate) compared to realtor sales commissions vs. home prices:
Interesting how TREBB has targeted LTT as being too high due to home price inflation.
at 11:50 am
Hi David. I’m glad you used “common sense” in your reasoning.
I would like to see that phrase make a comeback, but people still associate it with Mike Harris, so whenever I use it, people think I’m talking in code and implying something sinister.
The world, especially in these difficult times, needs more common sense.
at 12:59 pm
The solution is to tax 100% of capital gains, of any kind, with fair distribution among all levels of government.
Using an online income tax calculator, I’m unable to get to an amount that shows “a system where the top earners pay 54-55% of their income in taxes” (at $10M it’s a bit more than 53%). It appears that one must make more than $1M a years before paying an average of 50% in income tax.
at 2:33 pm
further, the only people who would pay that high a %age are people making $1M+ in salary, which almost no one does. Pretty much every other form of comp – dividends, stock options, capital gains – has much lower taxation. Per my friends who do wealth planning and legal structuring, the people who pay the most as a %age are professionals making in teh $400-600k range, and are not typically cracking the 40% rate. Everyone above that is taking lots of income through their holding companies, family trusts, etc, and is paying a lower rate.
at 9:16 pm
The city should absolutely get rid of the land transfer tax for everyone. If you need to have a tax, do a flat tax for land transfer of $5000 for a purchase..
Increase property taxes. I know this might sound crazy to some, but as an example the street I live on has about 5 elderly ladies living in 3 bed or 4 bed single family homes by themselves. Instead of a young family that wants to have a house to live in paying $40,000 in a transfer tax, all of the homeowners could pay an extra 5% or 10% in property tax to cover these fees.
This makes it cheaper to move and hopefully encourages people to be in a house that is the proper size for them.
Taxing homes higher makes sense as the gains are tax free.
As for taxing the wealthy, have ta rates of your corp the same as personal and get rid of the capital gains exemption, then there is a level playing field and everyone will have to pay a much lower percentage of their income.
at 9:37 pm
I think it is smart for city council to apply a LTT. If there is a large demand to live in the city and you don’t have the supply, you should apply a premium.
Ultimately they are taking money the seller would get and this is taxing the seller more than the buyer. The buyer is paying it either way, the difference is the upfront cost as a good portion that would’ve went to the seller would be in the mortgage.
Given how it is collected the funding should only be utilised for services that can be cut result and quickly vice fire, end, police, infrastructure etc.
If you don’t want to pay the tax commute, just understand it doesn’t take long to over pay with a commute in time and maintenance.
at 1:52 am
If you can’t afford the LTT perhaps rent or move outside of the city. Toronto is an expensive place. It will only continue to get more expensive. Ownership comes with a high price and continuous maintenance. Getting the current low mortgage rates is already an amazing benefit to the buyer. If you are buying for 1000000 and can’t afford 30000 in closing costs then don’t buy. There are other options.
at 6:44 am
That is the unfortunate truth but it doesnt have to be like that.
The Divine Miss M
at 8:56 am
Great post, David. The municipal LTT is also a deterrent to many move up buyers. We’d have sold our small Leaside home years ago and moved up, but the ancillary costs related to selling and moving were (and are) prohibitively expensive. We’ll wait until it’s time to retire outside of the city somewhere, cash in and move on.
at 9:16 pm
LTT is low hanging fruit.
The big pinata will be to implement a tax on the capital appreciation on primary residences when you sell it.
at 9:45 am
The same can be said for realtor fees lol.