By Jeff Bonner, special to the News
Our government affects our lives in many ways through policy, including what they tax and how. It is a price to pay for living in a great democratic society, but something we must keep an eye on so that negatives do not outweigh benefits.
In particular, taxes affect the real estate market and home ownership. One obvious tax that home buyers and owners regularly consider is property tax, by which the city pays for many important services. And of course, we’re especially sensitive to property tax rates in an election year.
Hamilton gets criticized for having high tax rates. Without going into a detailed analysis, I would suggest that there are always opportunities for improvement in a budget, but a direct comparison of one city’s tax rates to another’s is not always “apples to apples” – there are many things to take into consideration such as property values and differences in the tax base.
There are other taxes that impact the real estate market, too, affecting people’s buying ability.
New homes are subject to HST and all real estate transactions in Ontario require payment of the provincial Land Transfer Tax (LTT). There are limited relief programs for first-time buyers, but if you are paying these taxes they are upfront expenses on top of your down payment.
While these taxes are all well-established, there is also a new threat on the horizon: the municipal land transfer tax (MLTT). An MLTT is in addition to the provincial LTT, adding to the expense of purchasing your next home. Currently, Toronto is the only city allowed an MLTT, but politicians from other areas are lobbying for this tax power as well.
The problem with MLTTs is that they reduce homebuyers’ purchasing power, sometimes forcing them to delay buying indefinitely. This impacts on local economies, where every home purchase leads to an average of $53,000 in economic spin-off, from professional fees, renovations, appliances and so on. Where houses are not bought, this doesn’t happen.
It is estimated that Toronto’s MLTT cost its economy $2.3 billion in the short time it has existed, while only raising $1.6 billion in revenue.
There are other negative consequences of an MLTT and I would urge you to visit the Ontario Real Estate Association’s informative website at donttaxmydream.ca. Learn about it and ask your provincial candidates what their stance is on the MLTT for other municipalities.
Jeff Bonner (jeffsellshomes.ca) is a Hamilton real estate sales representative with Jag Realty Inc.
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