Taxes. I don’t like them. Yes, I know they are necessary in order to make our city better, and yes, I know many feel they pay too many taxes. Often taxes can feel too complicated and time-consuming, like income taxes. Other times, they are targeted to certain behaviours like carbon tax for drivers and HST for consumers. Personally, I believe there is a certain art in taxing. I am fine with taxes if it’s going to make our city better and as long as it does not mess things up. I think some taxes generated around real estate are messing things up.

Most recently, I have seen a bad blunder get worse. On February 1st 2008, the City of Toronto introduced its own land transfer tax alongside of the Ontario land transfer tax, essentially doubling this tax over night. This is a tax paid out by buyers in Toronto when they purchase a property. Now the government has decide to increase this tax as if the cost of buying properties is not enough. One benefit: They will kindly reduce that amount for first time buyers, but still the amount paid out is quite large.

As of March 1st, 2017, the Toronto land transfer taxes will have the following changes:

• Added an additional LTT of 0.5% of the value of a residential property above $2 million

• Added an additional LTT of 0.5% of the value above $400,000 of a non-residential property

• Increasing the maximum allowed First-Time Home Buyer Rebate to $4,475, up from $3,725

• Amended the first-time home buyer rebate program eligibility rules to restrict rebate eligibility to Canadian citizens or permanent residents of Canada

I suppose the taxes do raise money for Toronto, a city that could really use some revenue streams. Toronto does need money for many things like infrastructure, better transit and social housing. The problem with the land transfer tax is that it leads to higher real estate prices in Toronto. How you ask? Well, many homeowners who want to sell their homes, will buy another home that better suits their needs; whether they have an expanding family, they simply want more space, or they are downsizing. With land transfer taxes so high, many sellers are not selling their properties and are staying where they are simply because it costs too much to change properties. So, sellers don’t sell in Toronto. Subsequently, there are fewer properties on the market. The low inventory of properties leads to fewer properties for the large number of buyers, and the cost of houses moves up faster than they would have if there were no land transfer taxes.

There is another problem with the land transfer tax. It’s not consistent as a revenue stream. For awhile, as Toronto prices rise and properties are worth more, the land transfer tax is a booming business. The problem with this tax is that it only works when the market it hot and when a lot of properties are selling. Also, as fewer people sell because of the land transfer tax, it also leads to fewer sales and less revenue. The very existence of this tax slows down the number of sales in Toronto and leads to less sales and revenue for the City.

Again, I’m not against creating new revenue streams. The GTA is the sixth largest economy in Canada in similar size to Quebec and Alberta, but without the provincial money. Toronto needs to its own revenue streams considering its size and its costs. If you need to increase your revenue through taxation, it would be smarter to raise property taxes. It looks like the Toronto government will be raising property taxes again this year as well. As I see it, it is a better way to raise revenue. Comparatively, our tax rate is fairly low next to most Ontario towns and cities. So, an increase would not be out of step. A property tax also spreads out the burden with all homeowners, not just buyers. It would also supply a more steady, consistent tax stream to the city. It’s likely not politically popular, and that’s why we don’t see it.

There are smarter taxes we could use that don’t already exist. I thought the road toll for transit was a great tax for Toronto. Too bad the Ontario government doesn’t agree. As far as I can tell, if you are going to use the roads of Toronto from the outside areas, you should pay for them. As a Torontonian, why should I pay to upkeep a road used by some guy from Oakville who commutes into Toronto each day on highways I pay to maintain? If you use it, then pay for it. It only makes sense.

And here’s another good tax that we should consider: a vacancy tax. This is a new tax in Vancouver, and I think Toronto should consider it as well. As of January 2017, Vancouver now charges a 1%vacancy tax on the value of a home each year. So for one year a $1,000,000 property would be charged $10,000 if it is not used by a tenant or an owner for 6 months or more out of the year. From a commercial perspective, this would put some pressure on store fronts to be used instead of sitting vacant waiting for price appreciation to roll on. It would also discourage the practice of buying a condo to park your money and leave empty. We don’t have the problem Vancouver has with a lot of condos sitting empty, killing communities, but I’m sure we have a few. I think this tax encourages a healthier city and collects money at the same time.

So that’s my two cents on taxes in Toronto. I think we could tax a lot better than we currently do. Right now, we are discouraging people from selling their home and buying another one because of the enormous land transfer tax involved. It drives up prices because of the low inventory the land transfer tax creates. So for me, land transfer taxes are bad and road tolls, property taxes and vacancy taxes raise money for the right things and foster reliable revenue streams for Toronto.