Saturday, September 22, 2007

Taxation and Real Estate

Just watched Carol Taylor talking about the budget consultations that are happening around the province. Interesting question about the property transfer tax.

A while back Ms. HHV unfortunately owned a property she never lived in. We now no longer qualify for the property transfer tax exemption. That tax is fairly unique in BC. It doesn't exist in Alberta.

It works like this: you sell your home and buy a new one. The buyer pays the transfer tax. The tax is 1% on the first $200,000 and then 2% on the rest. What does that look like for us?

Condo max purchase would be around $225K = $2500 in property transfer tax. Lot of money sure. But is it going to keep us out of the market? Not likely.

House max purchase would be around $425K = $6500 in property transfer tax. Lot of money, more than our car is worth. Is it going to keep us from buying? No.

The tax goes to the province. It's worth about $1 billion per year in revenue. The province is running a surplus right now. Should we get rid of the tax and try to make housing a bit more affordable? ABSOLUTELY NOT.

I'm not a fan of lowering consumption taxes. Why? Because usually what happens, especially on big ticket items, is that the tax discount just gets priced into the actual product offering.

Say the province drops the tax. You go to a Realtor to list your house. She says to you, great timing, they just dropped the transfer tax, now is a great time to take advantage of some new buyers in the pool. Price the discount in: you were going to list for $425K, list it for $435K and see what happens.

If they want to lower taxes, they should pick areas of the economy that need incentive, like education, research and technological innovation. Education, to me, is an investment. If you can write off the interest on a loan for your RRSP or non-registered investments, why can you only write down 17% of the interest you pay on a student loan? Seems to me that would be better tax policy than giving home sellers more on their end of the real estate transaction. It would also have positive impact on the budget long-term, not negative.

I believe we are over taxed. But I also believe we need to support certain fundamental government-only businesses like health care and education. We can allow some privatization in these spheres; we can also allow some value-added, paid in cash options. But unlike the real estate market, I believe our society should guarantee that no one ever finds themselves priced out forever when it comes to medical care and education.

5 comments:

Roger said...

HHV

Eligibility for property tax exemption is individual-based. If your wife has previously owned a property and you have not you are still eligible for the exemption. If you purchase the home in your name 100% exemption; joint ownership 50% reduction.

You still have to meet the financial requirements (price limit and mortgage)

Anonymous said...

Medical,

This is very off topic but I wish a journalist would right about this. A friends mother needed a hip replacement . She showed up at the hip doctors office with an envelope of $2,000 and was booked in 2 months.

This is worse. Another friend's has just been diagnosed with uterine cancer. She showed up at the onctologists office with an envelope of $4,000 or more. She said it was the good will envelope. Anyway, she is getting her CT scans and MIRs quicker than if she would have waited.

This is in Montreal.

When I had a couple of my kids in Toronto even though I wanted a private room after the birth (I was very sick) I never received one. I was told later I should have brought a few hundred bucks to give to a nurse.

My mother needed an operation for arthritis (joint replacement) . She died before she received the operation because she had to wait over 12 months. Anyway, the doctor (this is Winnipeg) kept saying I am very busy I do work "over seas" for my charity and don't know if I can fit you in. My mom and dad did not figure it out but after I spoke to one of his clients they should have given "a good will envelope" for his chairty and maybe she could have had the operation earlier. Apparently they book time.

I need an operation and I have had to wait 9 months. I am sure I could have gotten it earlier because I asked can we do the privately and the doctor said "we can talk about it". I did not want to waste the money.

There is corruption in the medical profession. I wish this would come out in the open.

Anonymous said...

Sorry write about this. screaming kids.

Roger said...

HHV Here is a suggestion for a new topic. What is happening on the Victoria Real Estate Market?

Readers can post comments on their neighbourhoods - price reductions, selling time, flippers taking a haircut etc. Those with Private Client Services (PCS)accounts can post MLS numbers of properties having big reductions and accepting lowball bids.

What do you think?

I will be happy to post the URLs of various sites with more detailed MLS info to get things rolling.

Anonymous said...

I can get info.! I am on the private client listing service for most of Victoria and outside. $500,000 to $5,000,000.

Sounds like a great idea.

PS: I posted the article about the medical. Sorry for the rambling sentences and typos but I wanted to get it out. I am very shocked at what is going on - apparently rampant back east. I am thinking of sending something to Andre Picard at the Globe and someone at the Post.