Last week, the Canadian Real Estate Association released a report that claims over $2.3 Billion in economic activity has been lost since the Municipal (Toronto) Land Transfer Tax was implemented in 2008.
The report also suggested that 12,000 jobs could be added over the next five years if the tax is repealed.
Believe their numbers, or not.
But I still think the tax is possibly the most outrageous tax that we Ontarians pay (and that includes having to pay money for disposal of an ink cartridge when we buy a new ink cartridge…), and while I’m not optimistic that a government will ever repeal or eliminate a tax, I think this one should be the first to go if they ever do….
TORONTO, April 29, 2014 – New research released today by the Ontario Real Estate Association (OREA) shows a massive loss of economic activity in the City of Toronto and a corresponding loss of thousands of jobs due to the Municipal Land Transfer Tax (MLTT), imposed in Toronto in 2008.
The report, Economic Implications of the Municipal Land Transfer Tax in Toronto, conducted by Altus Group Economic Consulting, outlined the economic losses incurred by the City of Toronto between 2008 and 2013 including:
• A loss of 38,278 resale home transactions
• A loss of $2.3 billion in economic activity
• A reduction of $1.2 billion in GDP
• A loss of 14,934 full-time jobs
• A loss of $772 million in wages and salaries
“The MLTT is bad for our economy,” said Costa Poulopoulos, OREA president. “For one, it kills jobs. With an unemployment rate worse than the national rate and even that of the province as a whole, the City of Toronto could have used those jobs. It also adds to household debt and pushes the dream of home ownership even further away.”
The study shows the MLTT has cost Toronto billions over the past five years – significantly more than the annual average of $270.2 million in revenue the city collected since 2008. The MLTT is applied to purchases on all properties in the City of Toronto over and above the existing provincial Land Transfer Tax (LTT). By increasing the total expense associated with housing transactions in Toronto, the tax makes buying a home in Toronto more costly. As a result, a significant number of housing transactions within the City of Toronto did not take place, which has, in turn, affected several aspects of Toronto’s economy.
Resale housing transactions across Ontario generate significant economic activity. The purchase and sale of homes generates fees to professionals such as lawyers, appraisers, Realtors and surveyors, as well as taxes and fees to government. In addition, homebuyers often purchase new appliances or furnishings and typically undertake renovations that tailor the new home to specific household requirements.
“This research proves that the MLTT is doing more harm than good where our economy is concerned,” said Poulopoulos. “It gets in the way of the economic spin-off that occurs when homes are purchased and sold. It should be repealed in Toronto and it should never be endorsed by the provincial government for any other municipality in this province.”
By repealing the MLTT, the City of Toronto could effectively increase the number of housing sales and purchases by an estimated 32,216 units over the next five years, resulting in the following economic benefits for Toronto:
• An additional $1.9 billion in economic activity
• An increase of $990 million in GDP
• The creation of 12,570 new full time jobs
• The addition of $650 million in wages and salaries
Toronto residents say the MLTT is a barrier to home ownership
The economic study by Altus is being released in conjunction with new research from Ipsos Reid that revealed home ownership is a dream many Torontonians have but find difficult to fulfil due in part to the MLTT. Some of the study highlights include:
• 85% of Toronto residents agree that the MLTT makes home ownership more difficult to achieve
• 70% of 416-ers say that the MLTT would make them incur more debt in order to pay the tax
• 72% say that the MLTT would make them spend less on renovations, furniture or appliances for the home they would purchase
When I was in South Carolina earlier this year, I was pleasantly surprised that a bottle of Canadian Club only costs $19.95, when the same bottle at the LCBO in Toronto is $37.95.
The woman at the appropriately named “Liquor Store” was no dummy, and when I mused at the price of the booze she quickly shot back, “Yeah, well you have free healthcare.”
True. I can’t argue with that.
But we Canadians are taxed to death.
We pay income taxes up to 50%. We pay a 13% sales tax on every single item we buy outside of groceries, we pay property tax, we pay excise taxes on things like gas for our cars, or alcohol (not to mention cigarettes, but I don’t smoke so I don’t really care….), we pay capital gains taxes when we make money, and we pay estate taxes when we die. We pay all kinds of hidden taxes, like Dalton McGuinty’s “eco-fees,” and all kinds of “disposal fees” when we purchase items – which is the government’s way of taxing us on something we’re getting rid of.
And the most amazing part is – we pay most taxes out of after-tax dollars.
I’d love to see a study on how much of our money we actually keep. Out of every dollar, I’m sure 75% of that goes to the government in some way. We might not know it, but we do it.
The only time I’ve ever really witnessed a significant tax being reduced or removed was when GST went from 7%, down to 6%, and then down to 5%. However, it was only a couple of years later that “HST” replaced GST & PST, and the new HST was applied to many, many items that either GST or PST did not previously.
Believe me – the point of this blog wasn’t to bitch about taxes.
The point was that I think it’s next to impossible to remove a tax once it’s in place.
The idea of removing the Municipal Land Transfer Tax is a good one, but it’s never going to happen. The government needs money – both our municipal and provincial governments are running deficits, and both of them are being encouraged to spend money on infrastructure (which I am in favour of), so there’s no way in hell they’re going to give up $350 Million in MLTT each and every year.
I do think MLTT is a rather punitive tax.
We already had the PLTT, and the MLTT basically doubled the taxation.
And I guess my overall issue with both land transfer taxes is basically the fact that the government has nothing to do with the transaction. It’s just taking money for the sake of taking money.
It’s kind of a funny tax when you think about it, but I guess all taxes are like that.
We could impose a new “vehicle transfer tax,” and every time a car is bought and transferred off the lot of a dealership the government could take $2,000 from the purchaser.
We could impose a tax on just about anything, couldn’t we?
So perhaps the fact that there’s no HST on the sale of houses is why we get the LTT. Imagine paying 13% on top of your $1,000,000 home? It would make the purchase and sale of property utterly unaffordable. I’m surprised I don’t see the government taking out ads saying, “You’re lucky we don’t charge you HST on your condo purchase, so shut up and pay your LTT.” That would be something…
So are we naive to think that there should be no tax on the purchase and sale of real property?
Just about everything else we buy and sell is taxed, so why not property?
It’s the largest asset any of us will ever own, and it’s unique – in that it’s our home, so maybe, just maybe, it should be unique and thus exempt from taxes?
Or how about a compromise: principal residences aren’t taxed, but investment properties are? I know, I know, that opens a whole other can of worms, with people faking residence to avoid the tax, not to mention the investors would cry foul, and I’m sure CREA would release another report suggesting that investment in real property is down.
I used to get really upset with the land transfer tax, but I don’t anymore.
I guess when I woke up one day and said, “There’s no way in hell they are EVER going to remove this tax,” I realized I could move on, and never give it a second thought.
Still – last week’s press release shows you that people are still trying.
Then again, if we can’t get an alcoholic, drug-addicted, racist, sexist, unhealthy, physically-unfit, ignorant, unintelligent bigot of a mayor out of office, then how the hell to we get rid of a $350 Million tax?
Patrick
at 10:04 am
To quote my Real Estate Agent about that MLTT: ‘Nobody really cares.’
In many ways, I think this is one of the few examples of a government coming up with a very well designed tax. Assuming that you agree that the City needed additional revenue, and you have a (basic) choice between the MLTT, raising property taxes, or higher fees for many city services, then it looks like a reasonable option. Then add in the fact that real estate and construction in this city has been BOOMING, then it looks like a better option.
So, as a homeowner, if you can choose between paying higher property taxes every year on your house, and the MLTT paid only as a part of a much larger transaction, then the transfer tax might seem like a good idea.
Dan
at 10:16 am
The tax is here to stay. It helps offset lower property taxes.
Yes the tax is more costly but I think the CREA claiming it is a significant barrier to home ownership is a bit ludicrous,
I take a lot of issues with the study but the last three points in particular even dumbfound me. I understand that the CREA has a job to do.
Geoff
at 10:22 am
Totally agree. CREA is off the rockers bad. To be honest David I expect more of a balanced review of this from you than you did.
An optional consumption tax (be it real estate, cigarettes, or liquor) is to be far preferred to a mandatory income tax on everyone. I don’t buy houses every year, so don’t pay the tax every year like I would it was a municipal tax.
CREA “research” is starting to smell a lot like US Tobacco’s “Institute for Smoking and Health” reports of the 1980s. “sure, smoking is bad for you.. but it’s not really that that bad now is it”.
David Fleming
at 11:33 pm
@ Geoff
I’d love to review CREA’s study, but honestly, I’d be out of my league, and any comments on their facts and figures would be rampant speculation on their part.
ScottyP
at 10:56 am
I smell complete and under bullsh*t with respect to CREA’s findings.
15,000 jobs and $1.2 *billion* lost due solely to existence of the Municipal Land Transfer Tax? As if.
Appraiser
at 3:16 pm
@ScottyP:
So you call bullsh*t on the report. And you reach your conclusion, which is clearly well thought out and oh-so-articulate, by declaring “as if.”
What your telling the world is you did not read the report and you don’t need to, because your mind is already made up.
Tell me something ScottyP, does the P stand for poopy-pants.
ScottyP
at 5:45 pm
Your schtick was mildly annoying before, Appraiser… now, it’s simply become vapid and boring. Yawn.
Appraiser
at 6:00 pm
So in other words, you don’t have anything of substance to add to the discussion. Check.
ScottyP
at 6:00 pm
Just (*yawn*) playing down to your level, Appraiser.
Joe Q.
at 11:08 am
I would love to dig deeper into this report (note that it is OREA, not CREA, who put it together) because some of these numbers seem off the rails. Repeal the MLTT and generate close to $2B in economic activity in Toronto as a result? Really?
No-one likes paying more tax, but at the same time, Toronto has one of the lowest property tax rates in the GTA. Given the choice between raising property taxes or instituting something like the MLTT, many would go for the MLTT.
I also find it disingenuous that the press release does not mention land-transfer tax rebates for first-time buyers. The rebates mean that a first-timer will pay substantially less MLTT, usually a few thousand dollars. In the context of “multiple offer scenarios”, this is a rounding error, so I have a hard time believing that it is a big impediment to home-ownership.
ScottyP
at 5:48 pm
Well said, Joe Q.
Appraiser
at 6:35 pm
@Joe Q.
Ever wonder why there are so many multiple offers? Do you have any idea what affect a chronic shortage of listings has on average prices? Time to connect the dots my friend.
P.S. The $2B is the total estimate over a 6 year period – hardly unrealistic.
FroJo
at 11:28 am
Capital gains on primary residence. “Bring it!” I’d say if it were not political suicide in the current market.
Suddenly MLTT doesn’t look so bad.
Peter
at 9:06 pm
Capital gains on primary residences, and those who conceptually oppose fighting the MLTT are products of a truly deranged set of societal values, a welfare state committed to ignoring property rights, hard work and meritocracy.
It makes me sad for society when I see this level of reliance on the “public” teat. I am shocked on this forum and in this city how pervasive rampant socialism has become.
Clearly
at 11:52 am
ok, so let’s move on knowing who’s publishing this and why.
the real estate industry derives its success on 2 points: rising prices and rising # of transactions.
what the mltt affects is the number of transactions and the distribution of total cost paid.
hard to believe that between the booming years of 2008-2013 with records numbers of transactions one could argue there would have been capacity for MORE transactions without a major bust in the marketplace.
if a buyer has a limit of 1mm to spend all-in after tax, legals, renos, etc…then there is (practically speaking) no way they will spend more than that. the mltt does not affect the total cost paid if the buyer has properly accounted for it in the affordability budget. what the mltt affects is the governments take of the total cost paid, and subsequently, the net proceeds to the seller. thus, one would argue that the introduction of a mltt would reduce the sale price…what have prices done over 2008-2013??
the recent environment enabled the smooth introduction of the mltt. there may come a day when the (conservatives) repeal it in order to provide a boost to the housing market if/when necessary…but really? is this just another tool for the govt to meddle with the markets? haven’t they meddled enough??
whatever happened to the kiss principle and taxes? on a positive note, a case of clearly canadian (water) costs the same here as in the US – 29.99! now that’s keeping it simple…
Patrick
at 11:55 am
David, you asked for “…a study on how much of our money we actually keep. Out of every dollar, I’m sure 75% of that goes to the government in some way. We might not know it, but we do it.”
There are lots of studies about this, and the answer is a heck of a lot less than 75%. The OECD’s numbers show that total Canadian government tax revenue was 30.7% of GDP (including corporate taxes and income) in 2012. That’s the total revenue of all level of government combined. To play with the numbers the stats are here: http://stats.oecd.org/Index.aspx?QueryId=21699
There are lot of other studies about this too, but the bottom line is that the total cost of all taxes to the average person is much less than %50. Sorting the OECD numbers for 2011, there are 23 higher-tax countries than us, so we’re 24th out of 34.
Peter
at 9:51 pm
This is not an accurate assessment of David’s point:
GDP is an inaccurate metric to use to refute David’s point. Consumer spending is but one component of calculating GDP. Government spending, foreign investment, exports and imports all comprise GDP. Imagine the people of a nation were all taxed at 30% on a flat basis, and that everyone ‘s tax bill totalled $30 billion, for simplicity – this is the numerator.
The denominator is government spending (which is almost ALWAYS larger than the tax revenue), plus consumer spending (another big number), plus investment (huge number) plus/minus the difference in exports-imports.
Are you doing the math? If the nation is taxed at 30%, then tax revenue / GDP would be a MUCH lower number. In this example its feasible to imagine that it could something like:
30 B / + 70 (investment) + 160 (total. spending) + 10 (investment in inventories) = 12.5%
(exports and exports are a wash)
I used the actual ratios of these items to each other from the actual Federal budget in the 2011-2012 fiscal year, and adjusted to me fictional income of $30 B. You can see that the percent of tax as a % of GDP is mechanically MUCH lower than the average income tax rate.
If 30.7% of GDP is the total tax revenue of a country, I would imagine that actual tax rate across the whole economy in Canada would be somewhere between 60 and 80%. I would say David’s guess is supported by my math and the actual Canadian budgets from the last few years.
DZ
at 10:57 pm
The Fraser Institute calculated Tax Freedom Day to be June 10th last year, which translates to 44%. We might be paying 80% if government employees and suppliers were exempt from taxes, but they’re not. 🙂
Peter
at 7:59 am
Yeah, that was an exercise of demonstration, not of calculation, admittedly by the F.I.
Patrick
at 11:56 am
Peter,
I don’t disagree that the (total tax)/GDP percentage is not ideal to compare to an individual, but I chose it because it was all-encompassing. The main point that I was trying to respond to in David’s post was the bit about how much tax ‘…goes to the government in some way.’ By using total tax, that’s including all personal taxes, as well as corporate taxes (felt by a person through higher prices), and all the various gov’t fees and charges. I looked to find the total value of Canadian wages to use as a second stat (as a worst-case), but couldn’t find a comparable statistic in the OECD database. So, I stuck with percentage of GDP alone.
I looked at the Fraser Institute study mentioned by DZ below, they came up with 42% of an average income. They compare all taxes (including those on corporations), and compare it to average income, which is what I wanted to do as a comparison with the OECD number that I referenced (but using potentially different source data). This counts corporate tax, but no corporate income, so its going to overstate the tax percentage to some degree.
For the sake of a comment on a blog post, I’m satisfied to say that the total tax collected by government (through all forms of taxation) is less than 50%, and FAR less than the 75 or 80% you and David are guessing at.
Patrick
at 12:20 pm
Peter,
Also, if you want to find ‘the average income tax rate’, its an available number. From 2011, Statscan says its about 20% (fed and prov, inc payroll taxes) to the average household: http://www42.statcan.gc.ca/smr08/2011/smr08_154_2011-eng.htm
I didn’t bother trying to piece through your math, since it uses a made up tax revenue (30B) and you then compare that to numbers you took from the 2011 federal budget (why compare real to fake?). Using the budget documents you refer to, total Federal revenue was 235.6B that year. If you want to write teach a math lesson, you might try starting with the correct numbers.
Kyle
at 12:28 pm
While i think OREA is using some Rob Fordian math to calculate the Economic impacts. I do agree that this tax in its current state is a bad one. Taxes are meant to do a few things: raise revenue, encourage positive behaviours and have some semblance of fairness (or pareto efficiency). This tax achieves just one of the three and fails miserably on the other two.
Firstly it does nothing to encourage positive behaviiour. In terms of behaviours, it pretty much encourages people to buy outside of Toronto, which reduces the tax base. It discourages transactions, which has impacts to people’s mobility and flexibility. And ultimately has contributed to the tight supply of SFH and consequent high prices we see for them. Take a look at who is winning and losing in this equation. Buyers paying the tax, and future buyers who face tight supply are the ones on the losing side. Government and citizens get the tax revenues (the only real intended outcome) and banks get the additional interest from financing these costs. Yes, i know some people get rebates on MLTT, but does it make sense that the policy helps Banks and hurts buyers? I think not.
Secondly it is highly punitive to a small subset of the population (i.e. those buying a house that year), it might be more acceptable if more municipal taxes existed on so called “luxuries” or “sins” (e.g. tax cars, tax bottled water, tax restaurant meals, tax fancy watches and clothes, etc), but as it stands Toronto is uniquely targetting housing and nothing else.
Joe Q.
at 1:45 pm
We used to have a vehicle registration tax — since repealed. It brought a lot of money into city coffers.
I’m also not clear on how the banks benefit from the MLTT — to me it’s part of the closing costs, and I wasn’t aware that you could “finance” that part of the purchase.
Kyle
at 2:24 pm
When someone closes, they have a finite amount of cash and a certain amount of initial outlay (down payment, transfer taxes, disbursements, legal fees, HST on your legal fees, etc) the remaining gets financed by the Bank. The higher transfer taxes, disbursements, legal fees, HST on your legal fees, etc are, the less of that finite cash goes to your down payment and the more your mortgage will be.
Now that the vehicle tax is gone, it’s even more glaringly unfair that only home buyers are being targeted. It needs to be spread across a broader tax base. Tax things like bottled water and take out coffees, even if it is only pennies per drink. I personally didn’t like the vehicle registration tax either, too easily avoided and does not really discourage bad / encourage good behaviour. Registering your car is not bad behaviour, driving it to and from work (with no one else in it) is, so i say tax that and tax out of town commuters too.
Dan O
at 4:59 pm
Or you can factor it into you closing costs…
Re: vehicle registration tax – I think you are a bit off. We pay money to register pets, bikes etc, the vehicle registration tax was pretty minimal but you could also argue it tried to provide the incentive to take public transit (which some would argue as good behaviour).
Kyle
at 5:31 pm
Not sure i see your what any of your points are.
Cash is cash. You can label your cash as”closing costs” if you want, but unless you have a tree that grows additional money whenever you need it, the amount still comes out of the cash available on hand. The higher the closing cost, the more the Bank will need to cover.
Some people own a car AND take public transit. Charging them $60 a year, does not change their behaviour for the positive, quite frankly i can see lots of instances where it has the opposite effect. If you want more people to take public transit, don’t tax owning, tax driving.
jeff316
at 9:13 am
Unless you are a car collector, owning = driving so taxing owning is the easiest, most efficient way of taxing driving.
Kyle
at 10:38 pm
Not in the real world. Let’s look at two people. Person A owns a car and drives it to and from work alone everyday. Person B owns a car and only drives on weekends and takes public transit to and from work. Now ask yourself how charging these two different types of people $60 a year is going to change their behaviour? Do you really think Person A is now going to give up his car because of the new tax? Person B who is already exhibiting the good behaviour may just decide f’ it I’m paying even more for my car, I might as well start using it more. Frankly, taxing car ownership is probably one of the stupidest ways to try to get people to use their car less.
Jason H
at 12:39 pm
“We could impose a new “vehicle transfer tax,” and every time a car is bought and transferred off the lot of a dealership the government could take $2,000 from the purchaser.”
That already exists.
Any time you sell your vehicle (privately) the purchaser has to pay HST on the vehicle purchase which percentage wise is larger than the Land Transfer Tax.
G___
at 2:21 pm
Homes a special from a tax policy perspective, the gvt wants to “encourage” ownership. As such, no HST AND no capital gains tax on the sale/disposition/transfer of a Principal Residence as defined by the ITA.
George
at 2:52 pm
Property tax should be higher. Land transfer tax is arbitrary and should be removed since it penalizes people for moving (a silly reason to tax someone). Property tax charges people a fee to live in the city, which makes sense because it matches costs to beneficiaries.
Jason H
at 4:14 pm
So here is where the issue could be… Let’s punish the people who never move and call a home a home… I like the idea of the (I know I’m about to pay it.. it sucks but meh whatever) tax for people moving instead of when I’m settled I have to pay higher taxes annually.
Dan O
at 5:00 pm
Exactly!
Discourages people from uprooting. Buy a home. Have a family. Invest in your community…
Pete
at 3:11 pm
Don’t buy this for a second. As you’ve noted, there are too many buyers in this market and not enough sellers. As the buyers are the ones who pay the LTT, I fail to see how it has impacted the number of home sales at all.
If there were truly a detrimental impact, we’d see lots of sellers, but hardly any buyers will to pay the tax.
Kyle
at 3:26 pm
It’s corny but true, that real estate is a “ladder”, most people aren’t strictly just a buyer or just a seller. They are usually both (i.e. selling one place to buy another). And to the extent that someone who already has a house is considering moving, the extra transaction costs plays a part in deciding whether to sell vs other alternatives. Lots of people are choosing to renovate rather than sell, others are waiting longer to sell and going straight to their forever house. This lowers supply of properties available, which has lead to lower sales.
jeff316
at 3:45 pm
“And to the extent that someone who already has a house is considering moving, the extra transaction costs plays a part in deciding whether to sell vs other alternatives.”
On an 800 000$ house, the Toronto portion of the land transfer tax is 11 750$ which is negligible when compared to the costs of buying a house in this market or undertaking significant renos.
Realistically, if you’ve got money for a reno, the land transfer tax isn’t a make or break number and it’s the lack of supply and high prices that are stifling moves up the “property ladder” (which many would argue was an industry creation to begin with).
Kyle
at 4:10 pm
It’s not just the MLTT, it’s all the transaction costs combined. In most downtown neighbourhoods, 800K is a starter not a move up house, it’s what people are selling to move to 1.1M houses. And when those folks are contemplating that 1.2M move, total LTT is $36K, legal and disbursements are a few more thousand and the commission on the sale of your 800K house is another $32-40K. So you’re now looking at 70 – 80K over and above the 300K price difference for the move up house. That is very significant, especially when you consider how far you could improve your current house by doing renovations instead.
Jason H
at 4:16 pm
So maybe CREA needs to recommend reducing commissions 😉
jeff316
at 9:06 am
And that’s fine, but that’s not what you were implying in your response to Pete.
If you’re selling a 650 000$ house to buy a 800 000$ house, the Toronto land transfer tax represents less than 18 percent of your closing costs, and less than two percent of the cost of buying a home.
Kyle
at 9:43 am
@ Jeff316
I agree the MLTT in isolation may not be huge on houses below 800K relative to all the other costs (though some may argue 12K is nothing to sneeze at, and don’t forget it’s graduated and rises much faster as the purchase price increases). But my point is, it’s just one more cost on top of all the other costs that buyers face. Aside from the double LTT, legal and disbursements, most people also have moving costs and spend some money on fix ups or new furniture and housewares before moving in. It all adds up, and acts as a big disincentive for people to move (which is my original argument). I am seeing this exact thing in my own neighbourhood (Roncesvalles and High Park). It’s funny when you look at the mls map of the west end, there’s a big gaping hole in my neighbourhood. Of the thousands of houses that make up the M6R postal code, only one is available for sale and it has been more or less that way since last fall. No one is selling, but yet every tenth house has a dumpster or a contractor parked out front.
@ Jason H
I certainly wouldn’t be disappointed if commissions started getting cheaper!
Appraiser
at 5:56 pm
@ Pete:
Incorrect. There aren’t too many buyers, there are too few listings. Big difference.
There are often negative, unintended consequences when a poorly conceived and totally arbitrary tax is imposed. The MLTT is a clear example of just such an instance.
Joe Q.
at 8:03 pm
Appraiser, in what way do you feel the MLTT is arbitrary? And what do you propose as an alternative?
Appraiser
at 8:26 pm
The tax is arbitray because it targets one particular consumer to the exclusion of all others.
The most logical alternative is to increase property taxes, which is long overdue in Toronto.
Joe Q.
at 9:08 am
Most people would not call that “arbitrary”. It’d be “arbitrary” if it only applied to house numbers ending in “1”, “4” and “7”.
jeff316
at 9:11 am
Yeah I was going to post that you haven’t used the word “arbitrary” correctly at all.
Kyle
at 10:22 pm
I don’t want to get into the middle of this spat, but I want to point out two things: 1 “arbitrary” is appropriate in that there are an infinite amount of activities you can tax. And deciding to only tax people who are buying houses is as arbitrary as deciding to only tax people who who are left handed. In both cases there is absolutely no justification for singling them out. 2. If your comeback is based on semantics or typos, then you really don’t have a comeback.
Joe Q.
at 10:09 am
Hardly a semantic argument at all. There are indeed an infinite variety of things you can tax. We already tax almost all of them through the HST (some of them through HST plus other taxes — think gasoline, alcoholic beverages, hotel rooms, etc.).
Resale homes are exempt from regular sales taxes. Now we have the LTTs which are in effect a sales tax of a few percent (greatly preferable to paying HST…)
One could argue that if the treatment of home-buyers is arbitrary, it is arbitrarily preferable.
Kyle
at 10:48 am
You are correct, the Federal and Provincial tax treatment of houses is preferable, and not arbitrary. In fact it is by design. But the context of this discussion is the MLTT, stress “M”, so when Toronto who has pretty much no other form of tax, other than property tax (yes, i’m excluding user fees that don’t cover their own cost of administration) decides to roll out a new onerous form of tax to a very small subset, it is hardly incorrect to use the word arbitrary.
Debating the use of “arbitrary” and focusing on an obvious typo (yes, it was the LTT that was effectively doubled, not the MLTT) in complete disregard of the actual valid points raised just makes you look petty, pedantic and argumentative and weakens some of the good points you yourself have raised regarding the studies assumptions. When i look at these comments, i hear lots of people who are for the MLTT, but not a single person has been able to articulate why it is a good tax, other than the fact that it raises money and someone other than them pays it. Yes those are valid reasons, but i think i see a tonne more valid points on why it isn’t a good tax being left unchallenged. Instead you guys are challenging completely tangential moot shit.
jeff316
at 10:59 am
Arbitrary: based on random choice or personal whim, rather than any reason or system.
Arbitrary: (of power or a ruling body) unrestrained and autocratic in the use of authority.
Arbitrary: subject to individual will or judgment without restriction; contingent solely upon one’s discretion: an arbitrary decision.
Arbitrary: decided by a judge or arbiter rather than by a law or statute.
Arbitrary: having unlimited power; uncontrolled or unrestricted by law; despotic; tyrannical: an arbitrary government.
Arbitrary: capricious; unreasonable; unsupported: an arbitrary demand for payment.
None of those apply to the MLTT. You can like or dislike the MLTT but it is anything but arbitrary – particularly given the preferable tax treatment at fed/prov levels and the first time buyer exemptions.
There have been plenty of good arguments in favour of the land transfer tax made here, including the preferable tax treatment at the fed/prov levels, the benefits of taxing flippers, discouraging speculators, targetting tax measures to groups that have the ability to pay, the general lack of effect on the market, that it gets priced into the cost of the house anyway, and that even if the odd person is disuaded from moving up the ladder (which is a total load that even you’ve had to admit to) they can redirect that economic activity to another sector. You’ve just ignored them.
Kyle
at 3:24 pm
“based on random choice…rather than any reason or system. I’d argue that this tax falls squarely into that definition. Feel free to agree to disagree
The Pros that you’ve described are incidental benefits not reasons that make the tax good or effective.
1. preferential tax treatment at fed/prov level – Those levels have intentionally made home ownership tax preferential to encourage it as part of a policy. So you’re telling me it is good and effective policy for another level of government to basically undo it?
2. targetting flippers – make all buyers suffering so that a tiny minority of flippers pay = a tax that is neither good nor effective
2. speculators – same thing as above so no extra points for repeating yourself
3. targetting those that can afford to pay – fair enough, this is sort of valid, but should never be looked at in isolation. Just cause someone “should” be able to afford to pay it, doesn’t mean they should pay for everything. Does most of the benefit of the tax go to them? NO! Could this be hurting the market more than it helps? YES! Those that can afford to eat out, those that can afford to park downtown, those that can afford vacations, those that can afford nice clothes, those that can afford private school, etc “should” all be able to afford to pay more tax, so again we’re back to Toronto’s arbitrary decision, why only tax only home buyers?
4. general lack of effect on the market and that it gets priced in anyway – just cause something reaches a new equilibrium point does not make it a good policy. For example if someone implemented a policy to tax short people only, economics would eventually find a new equilibrium, but does that mean it was good tax?
5. the odd person gets dissuaded from moving up the ladder – I’ve provided a pretty good example that it is not just the odd person, which you’ve ignored. If you think it is a load, happy to hear you support it with something of actual substance. And i certainly have not admitted that MLTT isn’t a hinderance to moving. I think that’s just another example of your lack of compreshension showing (similar to what you exhibited with your concept of taxing car ownership = taxing driving. Clearly wrong). What i said is relative to the full amount of transaction costs, MLTT on a cheaper house can be viewed by some to be relatively small, but on an expensive house and combined with all the other costs, it adds more than enough friction to tip people against moving, explain why the number of building permits in many neighbourhood far exceeds the number of for sale signs and continues to grow.
Joe Q.
at 4:02 pm
Sorry you feel that I’m being petty, Kyle, but my comments are part of a refutation of Appraiser’s arguments about the MLTT. The claim that it is “totally arbitrary” is, to me, a silly one, and the suggestion that someone made a decision to double an existing tax to increase revenue is misleading, and also deserves challenge.
I personally don’t have a strong opinion on whether the MLTT is a “good tax” or not. To my mind it’s either existing property taxes plus MLTT or notably higher property taxes and no MLTT. Retail sales taxes (especially on very narrowly defined items) do not really form a viable alternative because of the complexity of implementing them. Yes, the MLTT is an additional burden to those buying a house, but raising property taxes impacts homeowners of limited means (retirees, etc.) in a way that the MLTT does not. Many of the criticisms of the MLTT that I have read here would also apply to increased property taxes.
To reach a reasonable conclusion we need a good quantitative analysis, which the Arius report does not provide.
Kyle
at 5:00 pm
“Retail sales taxes (especially on very narrowly defined items) do not really form a viable alternative because of the complexity of implementing them. Yes, the MLTT is an additional burden to those buying a house, but raising property taxes impacts homeowners of limited means (retirees, etc.) in a way that the MLTT does not. Many of the criticisms of the MLTT that I have read here would also apply to increased property taxes.”
Now that’s what i’m talking about, JoeQ. See if you expand on that, there’s a tonne of meaningful discussion to be had. Why are you nit picking at the parsely, when this is the meat of the issue right there: who is burdened? who’s getting a free ride? Should this be the case? do the benefits to the majority outweigh the substantial pain to the few? ease and cost of implementation and feasibility? Even if we don’t come to any conclusions, this is the intelligent stuff worth discussing. If you don’t feel the tax was arbitrary and was instead based on solid policy analysis, fine state that and back it up with substantive arguments. If you don’t think it’s a correct characterization to say that they just doubled the LTT and instead you think council put more thought into it, fine state that and back it up with substantive arguments too. But when your response seems to target “how” someone commented or their choice of words more than “what” that person actually said, then yeah it does make you look petty.
Anyhow I’ve noticed the degradation in the quality of the comments and it’s sad, because this is the one place were intelligent conversation about real estate happens day in and day out. Let’s increase the substance and decrease the banter about moot points.
Joe Q.
at 11:15 pm
You’ve read my comments here for many months (years?), Kyle, and hopefully they lean toward the substantive.
In this case you have to consider who I was responding to — someone with a reputation (stretching back to at least 2011) for mucking up the comment threads of Canadian real-estate blogs with pointless invective.
This visitor recently started prowling David’s blog again after a hiatus of many months. Our mistake was to take his bait.
Kyle
at 9:17 am
Years JoeQ, definitely years, since the early days of TRB 1.0.
As an outside observer i agree your posts are usually substantive, and whether you like him or not usually Appraisers are as well. Both sides bring data, logic and evidence to the table to raise great points. So it is disappointing whenever a response to either sides great points ends up being a knit pick about something that is ultimately not that material to the argument being made. Which ends up sidetracking and miring the intelligent stuff into some rabbit hole of mootness. It feels a bit like watching Federer do a blistering serve to Nadal, only to have Nadal lob the ball back and then vice versa.
ScottyP
at 1:10 pm
Wow. Trouble in paradise!
I wouldn’t worry too much about the quality of the comments, Kyle. The dip in quality will come once the likes of Joe Q., jeff316 and yourself stop commenting altogether.
I respectfully suggest you agree to disagree, then move on to a different topic.
jeff316
at 4:23 pm
I don’t disagree Kyle re: the quality of the comments and that’s why when Joe made a substantive post below I threw my hands up with joy compared with most of the crap that came up in this thread.
But you’re assessing the tax based on your own personal ideas of what *you* think a tax should do and pretending it is some sort of . That’s fine, you can have your preferences re: taxes, but to claim the tax is ineffective based on your own personal principles about what taxes are supposed to do, but you’re effectively arguing with your fingers in your ears.
1. yes
2. your opinion, not fact
2. not the same as flippers at all, no
3. Toronto isn’t taxing only homebuyers, it’s also taxing homeowners, hotel renters and a suite of other people through other measures.
4. so you’re agreeing the market impact is negligible (which is a big argument against the tax.) But even if you aren’t, by your own logic then it doesn’t make it a bad one either.
5. you provided an example that even you had to admit was kinda phoney and so subsequently have switched to another message about transaction costs in total, which it was proved the MLTT was a very small part.
re: car thing. Not wrong at all in the car example. In the car example, given existing infrastructure taxing ownership is the easiest way to tax usage. Not the best, or most reflective, or possibly efficient, but easiest yes.
re: explain why the number of building permits in many neighbourhood far exceeds the number of for sale signs and continues to grow — again, MLTT a tiny tiny tiny tiny part of the reason(if even one) that includes low interest rates, easy access to credit, demographic changes, changes in buyer preference and demand, a tired, a city-wide housing stock that is coming into it’s second or third generation and, of course, high house prices.
The reason why I take such issue with the characterization of arbitrary is that when you actually look at how this tax was implemented, who is targeted, and where the exemptions are it is anything but arbitrary.
Now I don’t care if you or anyone else supports the tax – like Joe I’m kind meh on it, I think it’s ok but tax policy doesn’t really get my blood runnin’ – but to claim something is arbitrary when it clearly isn’t degrades the discussion.
Now that’s what gets my blood going. It’s fun and easy to crap on politicians, city managers, etc for decisions that are poorly made, hastily made, or arbitrarily made. This wasn’t one of them.
Kyle
at 6:14 pm
@ jeff316 we’ll have to agree to disagree on a lot of things then. Cause you clearly are not comprehending what i’ve said or are simply choosing to twist whatever i’ve said into your own bizarre interpretation for the sake of argument.
Let me be absolutely crystal clear about one thing though:
“you provided an example that even you had to admit was kinda phoney” I have no idea what you’re referring to here, but make no mistake i did not admit anything i said to be phony. Nowhere did i even remotely in anyway shape or form even imply such. I have 100% always and still do maintain that the MLTT is absolutely an hindrance to moving. If you think it has a tiny, tiny tiny effect, good for you. You’re wrong, but good for you. I unequivocally disagree and think it has a very significant impact, especially when combined with all the other costs, it becomes more than enough of a hurdle for people to choose to stay put. See that’s how hurdles work, if you raise them incrementally, it doesn’t matter if the last increment is relatively smaller than the previous increments, you reach a certain point and people can’t jump over it. All the other factors you mentioned: “low interest rates, easy access to credit, demographic changes, changes in buyer preference and demand, a tired, a city-wide housing stock that is coming into it’s second or third generation and, of course, high house prices.” are pure bunk because they would have the same impact regardless of moving vs renovating.
appraiser 2
at 5:25 pm
Stick to selling houses and don’t ever give advice on what we pay for taxes lol….. My goodness 50%…. Love the blog though
ANoder
at 8:26 pm
Toronto needs the revenue. It may not necessarily be fair to keep taxing a property everytime it changes hands. But let’s face it, there are fewer buyers the last few years for two reasons: because the ratio of owners to renters and investors is 2.3:1 and because property prices have become unaffordable for many.
As someone else eluded to, would any in the real estate business point out that their (repetitive) fee which is arguably generally higher than the MLTT, should be discontinued?
Real estate associations lobby strongly for the repeal of that tax on the basis of making property more affordable. In truth it would increase the number of sales and inflate prices even more The consequences of which is even fewer buyers and a more dangerous climb toward a housing crash.
As a real estate broker I stand in stark opposition to a repeal of the tax. The market needs to cool and collect itself.
Appraiser
at 8:45 pm
@ ANoder:
Conflating a fee for service with an arbitrary tax for nothing directly in return is specious.
In addition, you further obfuscate the issue by contrasting the apparent need to “cool the market” by raising taxes, which was never the intention of the MLTT.
Peter
at 9:26 pm
Correct, nor are any of the policy makers at all qualified to purport to manage capital markets.
MUCH more importantly is the revolting notion that the public sector, particularly a local and idiotic one, has any business in the realm of private markets.
A mental exercise is to imagine in a fantasy world that (Toronto) tax “revenues” were 300% higher overnight and going forward. What do you think would be the result of this annual “revenue” increase? I guarantee you that within 15 years the government would once again be running a deficit. Any new tax will result in new spending, and each marginal dollar of tax will provide less service at the aggregate level.
For instance, imagine a fledgling nation. They install a tax, and now can install the most basic f services to its populace: defence. All of a sudden the group is protected from their nasty neighbours. The value of each dollar spent is very high because the problem of dying is pretty relevant to the electorate. Next comes other major safety items: justice, law, and services like fire. Again, each of these dollars affects EACH member of the national substantially and will attract more tax payers. Then we get into things like infrastructure, schools and the such. Very important for developing a real economy, but each dollar provides slightly less benefit than at the beginning (dying is worse than being your house being burned down). This goes on and on. Eventually you get to things that have almost zero practical marginal value to the aggregate population, BUT more importantly do a few other things unintentionally”
– create an opportunity cost for business. Each dollar of tax required to pay for something of little real value whatsoever is a dollar that is not allocated to a private sector project more useful to society
– reset the value “arrangement” that producers (individuals/companies) have with the state. This can encourage less entrepreneurship, discourage foreign investment, immigration of talented workers, etc.
It’s a slippery slope, folks.
David Fleming
at 11:34 pm
@ Peter
Way, way too advanced for a lot of folks.
And the sad part is – there’s no way anybody on city council would understand this.
How come we elect people dumber than us to represent us and make decisions on our collective behalves?
Peter
at 7:56 am
So I should therefore dumb down my thoughts when I post on your blog?
Because the public sphere attracts this sort of person. Winners of popularity contests typically have very little between the ears, they are often the loudest person in the room, and usually would not be able to cut it in the private sector. Look at the US House. Half of those people are borderline literate.
jeff316
at 9:11 am
Why would you think that no-one on city council would understand his post?
I’d wager that a larger percentage of city councillors have a good background in economics than real estate agents. It takes a lot more work and a lot more brains to get elected and stay elected than it does to sell 3-4 houses a year.
I’m no city councillor but it’s comments like this that are completely useless and unhelpful in a discourse about public policy, and are no different than the “lazy corrupt stupid moron agents are inflating prices” comments that get whisked away quickly on this blog.
ScottyP
at 10:41 am
Normally I’d agree with you Jeff, but this crop of city councillors is indeed a special breed.
Actually, what am I saying? Toronto city councillors have been “special” since time immortal….
Alex
at 10:24 am
I agree partially with what you said, about diminishing returns on government investment, but it sounds strongly like the stereotypical circular argument for lowering more taxes: elect a party to cut taxes because it seems like you pay too much and don’t get enough back. Then the government starts running a deficit because they don’t have enough money, so they cut services to pay for it. Now services that used to be done not-for-profit by the government with the cost spread around everyone now cost a lot more and you pay for them directly (e.g. US healthcare vs. Canadian healthcare). So now you need more money and you decide you must be paying too much in taxes, so you elect them again…and it goes on and on.
I also strongly disagree with this point:
“create an opportunity cost for business. Each dollar of tax required to pay for something of little real value whatsoever is a dollar that is not allocated to a private sector project more useful to society”
This is proven to be a lie. Businesses invest when it makes economic sense to do so, not because they get tax breaks. Both the federal and provincial governments have lowered corporate tax rates for decades, and now what we have are huge deficits and hundreds of billions of dollars (I think the actual value was around $500 Billion) sitting in corporate accounts doing nothing for our economy. Higher corporate tax rates are the best thing any of our governments could do for the economy. Instead of sitting in an account it could be invested in our country on much needed infrastructure investment (anyone driven on the gardiner lately?)
Joe Q.
at 11:06 am
Actually, I think among the current crop of City Councillors there are a good number who could understand what Peter is saying perfectly well.
Some of them would also subscribe to the “starve-the-beast” approach Peter is advocating, including the Fords and their circle.
In the end, though, that is probably too idealistic and not well-suited to the real world; it seems to me that that approach has been tried and given up on even by the current municipal administration, who realized that even though the City spends a lot on what are arguably “frills”, it spends much more on things that are required to make the city work, and that are in many cases near the breaking point already (TTC comes to mind — biggest line item in the City budget IIRC), or that are mandated by provincial or federal law.
ANoder
at 11:46 pm
What is specious Appraiser is for a body whose vested interested rests in the same turnover of a product to argue for the rescinding of a graduated tax on each property sale that maxes out at 2%. It may not be a popular opinion but it is mathematically sound.
I am not arguing those from the POV of a discount broker/brokerage either as such is not my model, but rather from practicalities.
The city needs the revenue Appraiser and Peter. Whether or not her government can manage the budget with less is irrelevant – there is no such and never has been such government in any tier of politics! But, they must have determined that the best and fastest way to raise it is via taxation on a high value product that has a high turnover rate.
Nor am I suggesting or obfuscating and conflating, as you surmise, a correlation between the purpose of the tax and the cooling of the market. It makes basic sense that should associated cash costs on closing decrease significantly for any reason, more marginal buyers would now have funds to slow toward a downpayment they didn’t initially have, available for the purchase of a property.
Reducing associated costs to make property more affordable is after all, the entire purpose of the campaign against Toronto’s land transfer tax.
Appraiser
at 7:13 am
Your argument is weak. Suggesting that your specious point of view is justified because the other side’s argument is also specious just doesn’t cut it.
Further suggesting that the all-powerful, all-knowing “they” must have determined that doubling the MLTT must have been a sound and just and proper decision is just laughable.
P.S. And you are still confusing outcome with intent.
Joe Q.
at 10:53 am
Can you please explain when the MLTT was doubled? Who made that decision, and when?
Peter
at 9:14 pm
The City does not “need” the revenue. This is a concept that liberal biased MSM has brainwashed us into believing. David’s references as to how hard it is to repeal any tax is related to the idea that democracy, large government and public debt are entwined in a sinister helix. The city “needs” the proceeds because such policies that generate tax “revenue” are as hard to repeal as the taxes that are installed to “pay for stuff”. The way the public sphere frames “stuff” is a actually a careful manipulation of human social values, and the head of the beast is the politician.
Paully
at 10:38 pm
40 comments already! MLTT is obviously a hot-button topic.
Appraiser
at 8:03 am
For those who believe that any report regarding the MLTT produced by a real estate organization is too biased to consider, might I recommend another report from the C.D. Howe Institute entitled “Stuck in Place” that raises many of the same issues.
http://www.cdhowe.org/pdf/Commentary_364.pdf
Joe Q.
at 9:10 am
The current report by Arius Group, commissioned and subsequently touted by OREA, is basically a re-hash of the CD Howe report.
Appraiser
at 10:46 am
@Joe Q.: What’s your point?
The C.D. Howe report is independant of any Realtor influence.
Do you have any valid criticisms of the C.D. Howe report? Or are you content to just highlight irrelevant details and semantics?
ScottyP
at 11:33 am
Appreciate the link, Appraiser.
I have a bit of a problem with the methodology used by the author of this report. Essentially, he’s established comparables between the FSAs that lie directly within the border of the city of Toronto, and the FSAs that lie directly outside the border of the city of Toronto (namely Mississauga, Vaughan, Markham, and Pickering). His findings are that the MLTT directly resulted in a decrease of four sales per month per FSA within the city of Toronto, meaning an overall decrease in sales city-wide of 3,500 per year, or 16% (!).
Assuming all things being equal (aside from the implementation of the tax in question), his methodology is sound. But Rexdale does not equal Woodbridge. Milliken does not equal Unionville. North Koreatown does not equal Thornhill.
Too many variables, in other words, to solely blame the MLTT for the variance in sales between Toronto and suburban border communities. Interesting read, but….
Joe Q.
at 11:37 am
Yes, I identified this issue as well — see my post below. To my mind it’s a major stretch.
Appraiser
at 8:25 am
This just in. TREB data for the month of April:
Sales relatively flat year over year (up 1.8%). Active listings down 8.4%! Average price up 10.1% !!
Joe Q.
at 10:46 am
Last night I had a quick read of both the Arius report commissioned by OREA as well as the C.D. Howe report referenced therein (recently mentioned by Appraiser). The Arius report is very short and draws heavily on the earlier C.D. Howe study — it basically takes the form of an appendix or addendum to that study.
What follows is my opinion based on this quick read.
The methodology of the C.D. Howe report involves comparing specific small geographic areas — postal codes beginning with the same three letters — on either side of the border between Toronto and surrounding cities (Mississauga, Vaughan, Markham, Pickering). The author compares home sales in these areas before and after the introduction of the MLTT, attempting to correct for some demographic and structural differences, and making some explicit (and to my mind, reasonable) assumptions about the seasonality of the housing market in the GTA.
He then extrapolates the changes he sees to the whole city of Toronto and arrives at a number of home sales “lost” due to the MLTT. In my opinion, this approach makes some pretty stretched assumptions about home-buyer preference for particular neighbourhoods, in that it tacitly assumes that, for example, a buyer’s quantitative preference for living in the Bayview / Steeles area in Thornhill vs. the Bayview / Steeles area in Toronto is representative of an average buyer’s quantitative preference for living in Markham as a whole vs. Toronto as a whole.
In the end, among the C.D. Howe report’s conclusions are that the MLTT is a net negative for Toronto, that Toronto has plenty of room to increase property taxes, and that the City should do this instead.
The Arius report ignores this conclusion, steps back to use the all-city home sales “lost” as calculated in the C.D. Howe study, and multiplies it by estimates of the economic impact of one home sale (essentially, of one family moving) to Toronto’s economy. Note that this economic impact consists mostly of money spent on costs associated with selling one house and buying another, namely Realtor commissions, lawyer’s fees, moving expenses, and the like. The Arius report also folds in condo sales, which are explicitly omitted from the C.D. Howe study. The result of this multiplication is the $1.9B number quoted in the press release.
What underlies the whole Arius study is the concept that the alternative to the MLTT is nothing, when in fact the alternative, as suggested and recommended by C.D. Howe, is an increase in property taxes to compensate. For this reason, in my opinion, the conclusion of the Arius report only holds if one believes that increased property taxes do not affect the ability of a buyer to afford a particular home, or that adding increased property taxes onto a mortgage payment does not affect the ability of a potential buyer to qualify for a mortgage.
Note that in writing this I am not defending the MLTT, but rather pointing out that the Arius report’s conclusions are based on assumptions that are extremely flimsy.
The “TL;DR” Version
The numbers cited in the Arius report commissioned by OREA should be taken with a big lump of salt, because:
(1) They assume that home-owner preference for buying in specific small neighbourhoods on either side of the Toronto-Peel / -York / -Durham border is quantitatively representative of home-owner preference for buying in Toronto as a whole vs. Peel, York, or Durham as a whole.
(2) They assume that the alternative to the MLTT is to repeal it without any increase in property tax to make up the resulting shortfall.
Joe Q.
at 10:50 am
I should add:
(3) The figure cited ($1.9B) for lost economic activity consists, to a great extent, of Realtor commissions, lawyer’s fees, and related moving expenses.
Clearly
at 2:34 pm
As Alex says below:
“If the argument is that too many are choosing to renovate instead of upgrading then removing the tax doesn’t help the economy at all, it just transfers the economic activity from renovators to real estate agents. Which is obviously why the real estate board commissioned the study.”
Don’t forget about the transfer of wealth happening here. Instead of flippers (many of whom are real estate agents themselves) capturing the reno gains, homeowners who are now deciding to plant roots and renovate themselves are the ones capturing these gains…
I’m sure we learned something about the effects of barriers to entry, competition, etc in economics…
The economy does not suffer simply because real estate agents suffer through declining turnover.
ScottyP
at 12:00 pm
Well said again, Joe Q.
jeff316
at 1:26 pm
Thank you. This is what this discussion needs, less of the other crap
Alex
at 11:05 am
I don’t see any problem with this tax. It targets those that can afford hundreds of thousands of dollars, and most importantly it targets flippers who should be taxed as heavily as possible. If the tax was repealed and a lot more SFH suddenly came on the market do you think the seller/buyer ratio would suddenly tilt in the favour of buyers? Because oddly enough Vancouver doesn’t have a municipal land transfer tax (just the BC one) and yet they still continue to have a red-hot market. They have mountains and ocean blocking them from building more houses, we have terrible traffic and infrastructure making only small areas of the city so desirable. So I would argue that if the tax is used to improve transportation infrastructure then it would increase the supply of SFH a lot more than removing the tax altogether. Vancouver can’t build on the ocean or mountains (yet) but we can make the less desirable parts of our city more desirable by investing in them.
If the argument is that too many are choosing to renovate instead of upgrading then removing the tax doesn’t help the economy at all, it just transfers the economic activity from renovators to real estate agents. Which is obviously why the real estate board commissioned the study.
Potato
at 11:15 am
62 comments and yet no one has pointed out that the bloody thing just gets priced in. Aside from FTBs and minor issues of closing costs vs costs that can be capitalized, it’s a total non-issue and a great tax (assuming you’re a “socialist” and accept that taxes in some form are needed). On the implementation side it might have been better to charge the seller than the buyer, but that’s the way the province did it so it saved a lot of administrative work to piggypack on the provincial system.
Long Time Realtor
at 2:29 pm
@ Joe Q. / ScottyP / jeff123
The obvious sockpuppetry is a little juvenile.
P.S. Hey there Joe Q. et. al., you said previously that you had Ben Rabidoux’s old blog (The Economic Analyst) open in another window whilst perusing this one. Care to provide a link ?
Joe Q.
at 3:19 pm
Sock-puppetry is an accusation that can easily be refuted by our host, David. He can see our e-mail addresses and posting IPs, he knows who many of us are. Why don’t you take it to him?
Ben Rabidoux’ blog is at http://theeconomicanalyst.com/ but there appears to be a database corruption issue (have to add www. to the beginning of some URLs to make it render correctly)
ScottyP
at 3:09 pm
Thank goodness you’re merely a realtor and not, say, a criminal profiler or forensic specialist. One Charles Randal Smith was more than enough.
ScottyP
at 3:10 pm
^^ That was for “Long Time Realtor”, by the way. David, keep up the good work.
joel
at 4:30 pm
I was reading an article a while back about the taxation in Toronto and in the comments someone had mentioned that a large portion of tax money is/needs to be spent on infrastructure for this city. ie the Gardiner. Yet, many/most of the people that drive on the Gardiner each day are those who live outside of the Toronto Tax collection area. A solution to help alleviate the taxes in this situation would be to build a new highway system in Toronto that is toll based. This would ease our demand for money towards rebuilding the roads and provide money to the City by those who are using the services most.I thought that this was an interesting idea of Toronto.
I also would be in favour of increasing property tax and potentially eliminating the MLTT for anyone purchasing a home for personal use.
Kyle
at 4:48 pm
If you ran for Mayor you’d get my vote.
JC
at 4:54 pm
It’s not the LTT that is riling me up today, but this idea that we have “free healthcare” in Canada. No we don’t. Well, if your taxable income is less than 20,000 you do. Otherwise, you pay for it through your income tax.
And then, like many Canadians (especially in Ontario) have discovered, some of your chemo drugs aren’t covered, in this province anyway – so you’re on your own – or left trying to crowd fund money for your chemo treatments because the Government that gives us “free healthcare” won’t pay for it.
As far as the LTT goes, it’s yet another poorly thought out cash grab that will probably never be done away with. This city is too busy funding idiotic, expensive projects (in and out bike lanes anyone?) putting off improving infrastructure that they’ll need all the cash they can get – and also increase property taxes as well – to pay for it.
Yeah, having a lousy day.
Dave4252
at 9:58 pm
moving is good. it means spending money in a new neighbourhood, on new things for a new house, often means moving to be closer to work.
flipping is also good as it renews housing stock.
house price appreciation has been one of the few ways that the middle class has seen net worth rise – the more house you have, the more your net worth rises – and vice-versa.
the land transfer tax makes it harder for the middle class to move up and to make as much money as the wealthy – for whom the tax does not matter. not everyone who buys a 800k house is rich. high taxes show that governments have run out of ideas to improve labour productivity – education for example.