Oh Robert, you always seem to surprise me!
Two years ago, I was sitting in a room full of Realtors listening to the mayoral hopefuls “ouuu and ahhh” the crowd. It was politics as usual with outlandish promises and stops to gravy trains. Admittedly, I was more interested in my twitter feed than what was being spoken on stage… until, the golden question was asked: “If elected, will you remove the land transfer tax”
Now before I go further with the story, I want to pause and let you know where I stand on the tax. For starters, it should have never been introduced in first place. The tax penalizes the very poeple who not only support the City but also the Country. You see, when you buy a home it’s not only the seller (and their Realtor) who make money…but the entire economy. Tons of people are employed simply because of our strong housing market. Trades people, contractors, furniture manufactures etc etc. The way I see it is anything that slows that process down, slows the whole economy.
Unfortunately, the politicians of the time didn’t see it the same way and passed the tax in 2008. The result of this was an additional sum of money that purchasers had to pay the City of Toronto at time of closing. Now some may argue that the effects of the tax haven’t really slowed down the economy and that the market is still strong. We can thank the low interest rates for helping many first timers get into the market. These same first timers also have the incentive of a reduced Land Transfer Tax. Many purchasers haven’t felt the true effects of the tax on their purchase… it won’t be until many of these first timers purchase their second home that the pinch is felt!
Exactly how much is this Land Transfer Tax costing Torontonians? On a $500,000 purchase, buyers must shell out an additional $5,725 on their purchase! Keep in mind that this cost must be paid on closing and can not be mortgaged!
Now back to the story…
Ford was the first candidate on stage to quickly promise and end to the Land Transfer tax… this sent the crowd wild!!! I too supported the idea by proudly taking to twitter and letting everyone know that finally a candidate had stepped up to save the day!
Being naive, I never asked my self how the heck the City would function without the revenue it’s become accustomed to receiving each year. That was until George Smitherman pointed out that cutting the Land Transfer Tax and delivering the same services Torontonians were used to was practically impossible.
Unfortunately Smithermans logic wasn’t imbraced my the masses and as we all know, Ford went on to win the the race… though I think the outcome may have been different had the candidates SAID WHAT THEY WOULD HAVE DONE WITH THE MONEY INSTEAD OF SIMPLY CUTTING IT OUT! And by this I mean giving more disclosure of where the $300,000,000 is being used. Communication is key, if they promised to be more transparent with how it was being spent, I’m sure more support would have been had. Instead the candidates tried keeping up with Fords cost cutting promises.
It’s been almost a year since Rob Ford has been elected and talks of removing the Land Transfer Tax have been sparse. On Thursday, Ford surprised us all again by bringing the topic back up. He said “I campaigned we’d get rid of it by the end of my term and if we do it in pieces, we’ll do it in pieces, but I’m going to keep my promise.”
So what’s my take on this supposed “good news”… it’s worth as much as the paper it’s written on – NOTHING! I don’t buy it for a single second!
Let’s put ourselves in the shoes of our Cities councillors for a minute… You know, the one’s that would have to vote on such a thing! Let’s say you already have a shortfall in your budget. Would you promise to give back roughly $300,000,000 of it putting you further in the hole? Honestly, I wouldn’t…but Ford wants to! But wasn’t his campaign all about “balancing the books”? He’ll have to get that $300,000,000 from somewhere else, right? hint hint, wink wink – higher property taxes or more service cuts!
Another surprise came in the form of a press release Toronto Real Estate Board. Part of it read: ““Mayor Ford deserves to be applauded for sticking to his convictions and delivering on campaign commitments. That is what Torontonians elected him to do. The Land Transfer Tax is not good for Torontonians or the City. We look forward to working with the Mayor and Council to get rid of this unfair tax,” said Richard Silver, President of the Toronto Real Estate Board (TREB).
I belong to TREB, and truly do like the work Richard Silver has done as our president… BUT I totally disagree with how quick he was to applaud him. We have nothing on paper except for a blank promise during a TV interview. Which brings me to another point:
If in some small way the Tax is removed (partially or whole), the announcement would have to be almost instant, with it’s removal coming just as fast! When the tax was introduced in 2008 there was a rush from home buyers to purchase before the tax came into effect. The removal of the tax would have the opposite effect… a drastic slowdown as purchasers will wait for the tax to be removed.
These “drip promises” just don’t cut it. The removal of such a tax is a HUUUGE move. To only mention it during a TV interview is a little suspicious… and just before the holidays?
In my opinion, this announcement was nothing more than political comment, to boost his ratings with Toronto’s citizens. Remember, It was almost a year ago that Ford was voted in. At my families Holiday gatherings, his name came up quite a bit as each side made points on whether Ford was going to stick to his promises. The timing of his latest promise is a tactic to gain sympathy from Toronto’s tax payers and to boost his approval ratings over the holidays.
But wait… wasn’t I all for the removal of the tax in paragraphs 2, 3, and 4?
Yes, but kinda no! In 2008, I was totally against it. We should have tighten the budget then and never introduced the Tax in the first place. But we did, and we got comfortable with it…and we rely on that $300,000,000 of extra income each year! I don’t think we should have brought it in then, but I also don’t think we can do without it now…then what should we do?
I have a few suggestions:
Keep the tax, but allow it to be financed by the homes mortgage. Yes, people will need to qualify for an extra $5000 (on average) but the pay out can be spread over time… like the CMHC Insurance fee purchasers pay on high ratio mortgages.Can’t finance a tax you say? Then change the name of it – Toronto Investment Fund sounds good to me. The City benefits from the “tax” today and the purchaser get’s to pay it over time leaving them with more money to reinvest the spin-off economy created by way purchases of furniture, appliances, home improvements etc.
Oh, and the difference in monthly payments on a $500,000 house as opposed to a $505,000 home – $21 per month (assuming a 20% down payment, 25 year mortgage and a 4% mortgage rate).
If Rob Ford is confident the City can function without the $300,000,000… let’s take it out of our budget and put it directly back into improving our City’s infrastructure and make Toronto even better! In order for our City to grow, we must rely on strong immigration patterns. Better infrastructure and a more commutable system are just two of the areas that the money can be used for.
Or even better… Go after the Provincial government and get them to cut out or at least reduce the Ontario Land Transfer tax that we’re ALSO subject to. Plus the rate of the Provinces land transfer tax is higher than Toronto’s!