Chalk it up as another of Ford’s broken election promises. In this case, it’s a welcome failure. Eliminating the land transfer tax would open a $340-million hole in the city’s accounts. That’s what the fee earned last year. Put in perspective, covering this amount would require hiking Toronto’s property tax by close to 15 per cent. Just try convincing the city to accept that.
Simply put, balancing the books without a drastic property tax increase, or draconian service cuts, requires keeping the land transfer tax. Despite this reality, Ford now says he’ll try trimming the tax by 10 per cent next year as a step toward eventually getting rid of it.
Rather than persist in trying to kill this golden goose, Ford should thank his predecessor, David Miller, for hatching it in the first place. The land transfer tax has been a boon to Toronto. Indeed Ford’s progress so far in balancing the books would have been impossible without it.
In any given year, most residents don’t pay the tax at all. It kicks in only when people buy homes or other property in the city. There are various rates and rebates but, in general, purchase of a residence worth more than $400,000 is taxed at 2 per cent. That’s the municipal share; the province takes another 2 per cent.
Toronto’s bite has been steadfastly resisted by the real estate industry, builders and condo developers. Indeed, before the tax took effect in 2008 they issued predictions of doom that seem almost laughable now. The policy would deal “a death blow to the condominium market,” warned one prominent realtor. It would “have a chilling and negative impact” on getting people to live in the city, intoned a major homebuilder.
On the contrary, a recent TD Economics report showed downtown Toronto’s population growth rate tripling in just five years. And it found a condo boom had resulted in almost 50,000 units built, sold and occupied south of Bloor St. just since 2000. Thousands more units are now under construction.
Some “death blow.”
Of course, the real estate industry argues business would have been even better without Toronto’s land transfer tax. And it warns that revenue generated from this source will shrink, especially when interest rates rise and home sales drop. In this, at least, critics of the fee are right. But fluctuations inevitably occur with any tax tightly linked to the economy.
In fact, urban advocates have long called for more such revenue tools, arguing that cities are hampered by an over-reliance on property taxes that are stagnant because they don’t grow as the economy surges. In capitalizing on a building boom, the land transfer fee has managed to pump well over $1 billion into Toronto’s coffers since its inception. It won’t always produce at that rate. But that’s all the more reason not to cut it now, not even by 10 per cent.
It’s too much to expect Ford to grasp any of this. It isn’t high school football, it’s municipal finance, and it doesn’t fit Ford’s simplistic taxes-are-evil world view. That’s why — when a showdown comes — far-sighted city councillors will need to rally to preserve the land transfer tax and maintain the city’s financial health.
Original Article
Source: thestar.com
Author: Editorial
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