Mortgage Logic

Annual Surtax on High Value Houses…A Really Bad Idea for the Canadian Housing Market & Economy

Taxes have never achieved anything good for an Economy or a Society and certainly have never achieved the objective that they were originally dreamt up for.  They are punitive and negative and discourage raising the overall standard of living for all.

A new report backed by Canada’s national housing agency is calling for a home equity tax on houses valued at $1 million and more.  On Wednesday, advocacy group Generation Squeeze released a report entitled Housing Wealth and Generational Inequity, which explored policy incentives to solve Canada’s “housing unaffordability crisis.

Among the recommendations was the call for a tax that would range from 0.2% for homes valued between $1 million to $1.5 million, and up to 1% on homes valued over $2 million.

The annual tax would be deferrable, meaning the accumulated total would not have to be paid until the home is sold or inherited. According to the report, a home valued at between $1-1.5 million would incur an average annual surtax of $408, while a home valued at over $2 million would average an annual tax payment of $14,710.”

The issue is simple: the supply in the housing market is not meeting demand.  The solution is also simple: Create incentives for builders to build more houses.  Don’t, for crying out loud, create another tax in Canada, one of the most taxed societies in history.  Of course, leave it to a University professor (Dr. Paul Kershaw, founder of Generation Squeeze and a University of B.C. professor) to dream up a half baked idea like this.

Income tax, sales tax, GST, property tax, carbon tax and all of the other hidden taxes in fuel, liquor and tobacco…and now a surtax on housing – and where would the tax creep for this end.  Add up all of the taxes paid by Canadians and the percentage of real take-home income likely averages out to 30% of gross income.

To read the complete article from Canadian Mortgage Trends click here.

To read the full report by “Generation Squeeze” click here.