Let’s start with one of the highest-voltage [third rails] in federal politics: Old Age Security.
OAS only begins to be clawed back once a senior’s income exceeds $91,000. And payments aren’t zeroed out until income hits $148,000 – or $154,000 for those 75 and older. Senior couples earning a quarter-million dollars a year, and living mortgage-free, are getting cheques from younger and (much) lower-income taxpayers.
That has to be fixed. The OAS threshold should be lowered – to, say, $60,000 – and the clawback sharpened, with benefits tapping out at $100,000.
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End the capital-gains exemption for principal residences. It’s even more untouchable than OAS. It’s also more economically harmful and inequitable.
It pumps up housing prices and pushes more and more national wealth into housing. It’s dumb economics, plus the tax break only goes to the two-thirds of families who own a home. And the richer you are, and the more home you own, the bigger the tax break. It adds up to a hyper-regressive policy to make Canada less productive.
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Let’s restore the two percentage points of Goods and Services Tax the Harper government cut. Our tax system is too tilted to income taxes, and away from taxes on consumption. And the cut to the GST costs Ottawa about $20-billion a year.
If the GST were raised, some of the proceeds could beef up the tax credit for low-income Canadians.
There’s some good stuff in there.
End the capital-gains exemption for principal residences. It’s even more untouchable than OAS. It’s also more economically harmful and inequitable.
It pumps up housing prices and pushes more and more national wealth into housing. It’s dumb economics, plus the tax break only goes to the two-thirds of families who own a home. And the richer you are, and the more home you own, the bigger the tax break. It adds up to a hyper-regressive policy to make Canada less productive.
Eh, I’m going to punt this one because it’s an asset that most people want to own, but housing is a necessity as well.*
I’m going to counter with:
- no non-human ownership of single family homes, no trusts, no corps, no foundations, etc.
- no interest cost deductions against rental income for landlords
- 50% of rental payments can be deducted against income for renters
That way one perk of personal, principal home ownership is still there, but at the same time fucking landlords can piss right off, and renters get a major tax-reducing benefit to boost net income for what are usually lower income earners too.
As policy it’s incomplete, but I think as ideas it at least will level the playing field a little bit.
*Edit: Okay how about this: a lifetime principal residence capital gains exemption of…I dunno, $500k? Just thinking about the regressive comment where wealthier folks own bigger and more expensive homes, and this would target those hogs and leave the vast majority of normal Canadians untouched. And maybe incentivize people to not own a goddamn ugly-ass cookie-cutter McMansion, leading to a teensy bit more densification. Or at least leave more greenspace on a standard lot.
The lifetime maximum seems pretty standard. A bunch of US states do it. Seems like we should.
nominal capital gains that are purely due to inflation seem like dubious tax targets (you didn’t earn anything, the canadian dollar was simply worth less)… pairing this with the end of the capital gains exemption for principal residences could be interesting
honestly, real capital gains should be taxed a lot higher but inflation wrecks the math (i’d wager the 50% exemption was an attempt to account for this)
As someone who gets moved for work every 2-3 years, fuck that very much on taking away primary residence capital gains exemption. Obviously I’m on the more extreme end of the scale; but the principal of increasing the cost of moving has impacts on reducing opportunities of families through first and second order effects.
Lifetime exemption cap is fine. Alternatively maximum percentage increase per year exemption (I don’t know, 10%?). If we go the lifetime exemption route, please include negative sales.
maybe incentivize people to not own a goddamn ugly-ass cookie-cutter McMansion, leading to a teensy bit more densification
Capital gains exemption or reduction if you increase the number of housing units AND floor space. (Chopping an existing build into two? No exemption. Replace that SF bungalow with a Plex? Total exemption).
Or at least leave more greenspace on a standard lot.
Disagree, fuck lawns. Some persons private micro park is less important than more housing per lot. Native species gardens are fine, but they still aren’t housing units.
You’re making over $250k in capital gains on each move every 2-3 years and complaining about a 12% tax increase? I mean, to be very rude, fuck you.
What makes you think I’m making over $250k each move?
Edit: because of the new $250k exemption. I misunderstood that they were requesting a wholesale removal, not aligning with the current proposal.
Last three moves: -50k (3 years) +100k (2 years) +20k (2 years) +30k (2 years)
So +100k over 11 years.
And that’s just the price differential, that ignores the thousands that go into fees to buy and sell. My employer covers those for me, but they are considerations that increase move inertia for those without.
So then you’re not affected by the tax. Why are you complaining about it?
The conversation diverted from the actual tax to the concept of a wholesale removal of capital gain exemption. I have thoughts about that.
Edit: and besides, land value tax would solve this
How would the removal of the primary residence exception disproportionately disadvantage someone who has to move every 2-3 years?
Would you not just have to include the capital gains or deduct the capital loss on the difference in home value from those 2-3 years alone? Meaning likely a rather small amount. In fact, wouldn’t you be less affected than most seeing as your gain would possibly be in a lower tax bracket given the lower amount and also under the new $250K threshold. Or…am I missing something?
Not that I think a blanket removal of the principal residence exception is even a good idea, I just don’t follow your argument here.
I missed the news on the new 250k exemption.
Some good points, putting a cap on the primary residence excemption seems more in spirit with the idea of wealth redistribution than simply removing it all together. We could also consider something like letting people claim their capital gains over multiple years which would lower the tax paid on those of lower income while it wouldn’t change anything for those that are consistently earning in the highest tax bracket.
Green space is tough because there’s definite benefits to urban green space. Like moderating urban temperatures, minimizing run-off of precipitation and its effect on the storm sewer system, providing habitat for native species(even if the green space isn’t completely native). Though that green space is probably more efficient if it’s managed by the municipality around denser housing rather than each individual homeowner.
I’m not so sure about the difference between adding units within existing square footage vs adding square footage. I think part of the problem is availability of reasonable quality housing within the budget of minimum wage earners. Having, smaller units available seems more cost effective in this context than larger ones. I think it’s particularly good for more people to be able to afford a smaller unit on their own rather than a splitting of a larger unit between roommates.
This is the best summary I could come up with:
In the run-up to the 2015 election, the federal Liberals touched an electrified third rail of Canadian politics: they promised to raise taxes.
On Tuesday, Finance Minister Chrystia Freeland touched another high-voltage wire, with a plan to raise the tax rate on capital gains.
Only some capital gains, and only over $250,000 a year, and with small business largely shielded by a $1.25-million lifetime exemption, and with Ottawa saying that only 0.13 per cent of taxpayers will be affected – but still: a politically impossible tax increase is, apparently, possible.
There are lots of other third rails in Canadian politics – long-standing and costly policies that governments will not touch, no matter their illogic or unfairness, for fear of electoral electrocution.
Senior couples earning a quarter-million dollars a year, and living mortgage-free, are getting cheques from younger and (much) lower-income taxpayers.
The Department of Finance projects that this year, the tax exemption of private health and dental plans will cost Ottawa $3.9-billion.
The original article contains 809 words, the summary contains 162 words. Saved 80%. I’m a bot and I’m open source!