Can the Toronto Land Transfer Tax Be Slain?

I'm usually not one to mix politics with real estate. I'm not here to endorse any kind of political bent on who is better beit from the left, right, or centre. This week, however, I have seen quite a few pieces on how some candidates running in the next civic election would deal with the Toronto Land Transfer Tax, and I hope that this land transfer tax is seriously revised.

Now, before we get into this, let's look at a brief history of land transfer tax in our city:

Originally, the Ontario Land Transfer Tax started in 1974. Like many taxes, the government was looking for ways to increase revenues, and in turn, the Ontario Land Transfer Tax was created. The provincial tax has been around for a long time, and it won't be going anywhere soon.

Then in 2008 David Miller brought in the Toronto Land Transfer Tax – a city version to add to the provincial land transfer tax. It is understandable why someone would need to bring in more money at that point, especially since the previous Mike Harris provincial government downloaded many of its costs on to Toronto. Because of this, Toronto needed to find a new revenue stream fast. Of course, I don't think the Toronto Land Transfer Tax was the way to go about it.

In addition to the Ontario Land Transfer Tax that people were paying for years, the Toronto Land Transfer tax practically doubled the amount of taxes paid out. And these are not small sums of money. For a $750,000 house purchase, you are paying $22,200 in both taxes. It 's easy to understand why people are not thrilled about it.

With that said, let's not make this about moaning over having to pay taxes. I understand taxes are necessary, but this one stinks. Higher property taxes for everyone across the board? Sure. Road tolls in one of the few majors cities in the world without any? Makes sense. Taxing people after they've spent almost all their money on a new home and will require more money to move, renovate, and update any deficiencies in the house? That's not exactly considered good timing.

The funny thing is, Rob Ford had made it part of his last campaign to remove the Toronto Land Transfer Tax. It was the one thing where we agreed, though certainly not enough to have me vote for him. And as it turns out, he did not even deliver on it. Why? No, it has nothing to do with crack, or drunken stupors, or being too busy with Jimmy Kimmel. He did not deliver because he had come to realize that the city needs the money the land transfer tax generates. It would be far too unpopular among his core supporters to suggest a different revenue stream like higher property taxes or road tolls. Ford was a cutter of spending, and he really didn't cut the land transfer tax as promised.

So, this next election he claims he would like to reduce the Toronto Land Transfer Tax by 5%. Not quite the same impact or scale of his last election promise.

Many candidates have not weighed in on this tax yet since the election will not take place until the Fall. Still, Karen Stintz says she wants to change how the land transfer tax works by having it apply at a higher amount to make the tax less of a burden.  David Socknacki would like to tie it to the rate of inflation.

There are lots of ways to go about it. Reduce it, get rid of it, have a higher qualifying amount for first time buyer or have no one pay tax on a given amount, like the first $400,000.

The fact that changing the Toronto Land Transfer Tax has already shown up on the campaigns of those running for mayor suggests this is going to be an important issue for many of us in Toronto.

Toronto's Double Trouble: Why the City is Asking Too Much

We all know our city could use A LOT more love these days. And by love, I mean money. In other words, Toronto has been largely ignored in terms of its infrastructure - most painfully, it's transit system, but also its parks and libraries.  And now, reality is finding us under our comforter and mess of pillows to shake us out of our neglectful sleep, and say,"We really need to do something about this!"

And because of this reality check, those who make rules for the city of Toronto are considering new ways to generate revenue. Their latest consideration: Nearly doubling the development fees charged to developers before they build a new project. That means, for developers, the City would collect a much larger fee each time a new project is launched.

Instead of implementing a 10% or 20% increase, they have decided to go way beyond that. So, for example, the fee to build a large apartment with two or more bedroom would rise 86%  from $12, 412 today to $23, 036 next July, if this increase goes through. So what you say? Those developers make enough money?! Those greedy bastards! Well, you may be right, but the developers won't carry those costs. They will likely pass it on to the buyer who would pay more for a given property or unit.

In truth, Toronto does not have the highest development fees in the land. In fact, compared to other municipalities, it's one of the lowest in the GTA. So, there is room for increases. It's similar to our property taxer , lower than other parts of the GTA.

The thing is, development fees are low because Toronto is one of the few municipalities to charge municipal land transfer taxes in addition to the provincial one. In fact, David Miller cushioned the blow of the new municipal land transfer tax a few years ago by freezing development charges.

So, Toronto has essentially doubled the cost of land transfer taxes and now development fees leading to a city where buying and selling will cost way more than it used to. Now, that's what I call a double double! Sorry, couldn't resists...

To be honest here, I'm a little conflicted. I know the city needs to raise more money. I can see how much improvement our city needs in terms of infrastructure, but a double blow of the land transfer tax and the development fees dump a lot on the individuals buying and selling their homes. Not only does it strike me as unfair, but financially shortsighted.

A large increase in both the land transfer tax and the development fees, by nature, work against raising money. They will make both buyers and sellers think twice about a purchase or a sale because of the extra money it will costs them. So, if fewer people sell because land transfer taxes are so high, and there are less buys because the development fees are so high, then the city makes less money because no one will pay for their fees. Not to mention that developers will not develop if their fees are high. In fact, if the market were to slow down, then the city will not collect the money it needs because the revenue stream won't produce as much revenue. And, in the end, our city doesn't have a reliable revenue stream.

It's simply not a good way to make money. I do agree, the city does need to create new revenue streams, but one that consistently delivers a predictable amount of funds seems wiser. Why not try road tolls? That would be consistent. A regular influx of cash. How about raising property taxes? Sure, I don't want to pay more, but at least the burden of the city's taxes won't be on the shoulders of buyers and sellers, but all Torontonians would pay for the improvement to their city.

I Support Rob Ford! This One Time...

I didn't vote for Rob Ford. I don't think he has the chops to run a big, complicated city that's in a constant state of transformation. I do, however, believe many voters in Toronto had grown so cynical and hopeless about municipal politics around the time of his election that they decided to drop a bomb on the status quo, and go for some thing completely different. Sure, there wasn't much thought about what that "something different" may turn out to be, or how Rob Ford would run the city. Regardless, people wanted change in Toronto City Hall, and they got it.

Of course, the success of Ford's job as mayor has proven to be fairly disasterous so far, though entertaining at times. Who didn't enjoy the story of Ford's 911 calls when the fictional TV comic character, Marge Delunty, came knocking at his door? But I'm not here to talk about his gaffs or his inability to stop a gravy train, or if there is even one coming into the station.  But I do support one of Ford's election promises, and that's to ditch the land transfer tax here in Toronto.

The Toronto Star recently published an article expressing that Rob Ford is wrong in wanting to ditch the land transfer tax. The writer argues that land transfer tax has been a golden goose. It has injected hundreds of millions of dollars into the city's anemic accounts allowing for Toronto to grow a little autonomy. I certainly don't disagree with that. I believe Toronto should have a lot more power that it currently does. The Feds and the Province  have downloaded a lot of their costs on to us, and quite frankly, we really need to fix our infrastructure for this city, if we want to make this a livable place. Simply put, we don't have the funds to pay for them, even if some of the gravy can be cut.

So, let's get some perspective here. I agree, the city needs more money and a revenue stream and more autonomy. After all, it is the 6th largest government in Canada, but it doesn't have the kind of power you would expect considering its size.

When the Toronto land transfer tax came in, it almost doubled the amount a buyer would pay in land transfer taxes.  So, if you bought a property worth $500,000, you would pay $6475 in land transfer taxes for Ontario. With the Toronto land transfer tax, that is only 5 years old, you would pay an additional $5725. So, before 2008, a buyer would pay a total of $6475 in land transfer tax. After 2008, a buyer would get a total bill of $12,200. That's almost twice as much, nearly a 47% increase in this one time tax.

In addition, the land transfer tax places the burden of raising funds for the city on the backs of buyers.  I don't believe this benefits the city of Toronto. It is a inconsistent tax that is disproportionately thrown at buyers at a time when they are paying lawyers, and home inspectors, and renovators and movers.  Also, if the economy ever goes south in this city or if there is a steep fall-off of in real estate transactions, then this revenue stream will slow to a trickle and  the city will make a lot less money. It does not provide a consistent level of revenue for a city to build budgets around.

I think, if the city of Toronto wants to keep the golden goose and keep the money coming in, they need to increase their property taxes. I know that won't be popular, but if we do need the money, and the revenue stream, then raising property taxes would spread out the burden more widely with all of the city's property owners. Plus, if there is a problem with the economy, the city still gets their taxes. It's a consistent way of generating money for the city. After all, according to a Toronto Star survey, Toronto pays some of the lowest property taxes in Ontario.

Now,  I don't think any of this is going to happen. There will be no raising of the property tax rates, and Rob Ford will not get rid of the land transfer tax as promised. But I do think he's on to some thing here. I don't agree with this guy very often, but in this case, I support Rob Ford!