8 Comments

First off, Max, my apologies for my delayed comment.

For many Canadians, our home is our principal amount of wealth. I know, I know, that is the point that you are making but please hear me out.

I am now retired (I was a CPA in public practice for about 40 years). I always worked for myself, not a large entity with the result that I do not have an employer pension. I always worked for clients who interested me and I made enough to eat and do modestly well but my savings are, commensurately modest. If I include my house, my wife and I have savings of just over 1MM. Sounds like a lot when you say it fast but when I think of having to live for the next, say, 20 years (if we are lucky) then we need that equity and, if one of us gets sick, we will have to sell the house to pay for long term care. I knew that going in 40 years ago and I remain okay with that.

The problem is that you now want to tax me. About 3 years ago the government brought in home sale reporting rules (I had not retired at that time) and it was clear that those rules would allow the government a) catch people who were "optimistic" about their eligibility for the tax free sale of their home (read: those folks who abused the rules) and b) would be a real good start for the government to start taxing as you suggest.

Now, you make fine noises about taxing only the "ultra wealthy." I don't know what your definition is but I do know that the government really does have this whole thin edge of the wedge thingy; put differently, give them an inch, etc., etc., etc

So, all in all, perhaps a great theoretical concept but it stinks in practice. Please also understand that such a tax would generate a LOT of new business for my former confreres in the accounting profession, with a lot of tax planning to minimize the tax bite. In other words, any grandiose plans for a revenue bonanza would be over stated dramatically.

Why not deal instead with some of the things that drive up the costs of housing. If you look at housing codes now as compared to, say, thirty years ago, you will see that they require much, much more of so many things, all of which cost money up front; if you look at the cost of land you will see that a lot of the cost is due to the time involved in getting approvals for development, difficulties arising from the "protections" against urban sprawl, etc., etc., etc. Eliminate or moderate many of those things and that would also help with the cost of housing.

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My definition is right in there -- the first $500K in capital gains would be exempt.

I'm all for increasing density in our most overpriced markets, and I think NIMBYism is a scourge. But defeating NIMBYism requires winning a hundred different battles. This would require only one.

I appreciate the thoughtful and respectful comment.

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Just curious why not just increase property taxes?

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That's an option. But it would punish house-rich seniors and others who can't afford to pay property taxes commensurate with the value of their properties.

The City of Vancouver allows seniors to defer property taxes, but I think a capital gains tax would send a more effective signal.

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I might not understand entirely, but wouldn't cap gains tax discourage selling to a certain extent?

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Market forces are the universe telling you to reconsider your options.

Prices in Toronto and Vancouver are unaffordable because lots of people CAN afford them.

If you're not one of those people, you might need to ask Jen Gerson for a few lifestyle hints.

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BC already has a property transfer tax - 1% on the first $140,000, and 2% on the balance (when established, that was the line that defined “luxury” properties.). I guess you could argue for a higher level, but BC isn’t exactly a case study in affordability.

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Although I generally agree with points made, you should also note that the very high mortgage rates in the 1980s also led to a massive crash in home values, with many people losing their homes and savings.

And of course, these things are cyclical....

http://mjperry.blogspot.com/2009/01/housing-market-1982-vs-2009.html?m=1

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