Matthew Lau: Toronto should ditch its land transfer tax
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After turfing its left-wing mayor, Calgary is rolling back tax hikes. Toronto should, too, starting with its unfair land transfer taxYou can save this article by registering for free here. Or sign-in if you have an account.In Calgary, the benefits of turfing a left-wing mayor, which voters did in October’s election, are already being felt: a 3.6 per cent property tax hike planned for 2026, which would have been on top of significant increases in previous years, has been reduced to 1.64 per cent.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Compare this to Toronto, where in her first two years as mayor former NDP MP Olivia Chow whacked residents with a cumulative 17.1 per cent property tax hike and last week announced she will push taxes even higher in 2026. She said her tax hike would be at a reduced pace after the record increases of the past two years, but declined to say how much it would be. Wherever her tax hike lands, however, it will be in addition to an increased municipal land transfer tax on homes above $3 million.In true NDP form, Chow claimed the land transfer tax hike on the rich has no downside and “doesn’t impact” 98 per cent of homebuyers. That is not true. A tax on home sales above $3 million encourages some people who would have bought such homes to buy below that threshold instead, thus bidding up the prices of cheaper houses. The tax, as the Toronto Region Real Estate Board (TRREB) points out, “leaves higher-income buyers with a greater incentive to compete with first-time home buyers and younger residents for more affordable homes.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.There are other downsides to the tax. A higher land transfer tax, even if only on a small proportion of homes, discourages homebuilding. The tax on home sales above $3 million also incentivizes some high-income buyers who work in Toronto to buy just outside the city and commute to work instead. How does that benefit Toronto?Thankfully, there are indications Torontonians are fed up with being over-taxed. An Ipsos poll commissioned by TRREB found 88 per cent of Torontonians believe housing taxes are too high, 81 per cent agree high development fees and housing taxes contribute to the affordability crisis, and 56 per cent think the municipal government relies too heavily on the municipal land transfer tax.Among those pushing back against the heavy burden of the land transfer tax is non-profit group ABC Toronto, which proposes allowing first-time homebuyers to at least roll the tax into their annual property tax bills, paying it over the course of a decade without interest. That is a solid proposal to reduce the harms of the tax, but does not go far enough, and by applying only to first-time buyers, is uneven in its incidence. Really, the municipal land transfer tax — a horrendous tax — should be scrapped altogether.As economists Benjamin Dachis, Bev Dahlby, and Jack Mintz wrote in a C.D. Howe Institute report in 2021, “Economic studies have generally found that a land transfer tax has a relatively high economic cost because the LTT discourages people from moving to more favourable locations or housing when they can do so.” The tax keeps people from moving to homes that are closer to work or school, or otherwise better suited to their needs.The C.D. Howe report also concluded the combined provincial and municipal tax rate on homes over $2 million “is highly distortionary” and that any increase in the land transfer tax would actually reduce revenue by discouraging home sales.In addition to its high cost in economic inefficiency, the land transfer tax is intrinsically unfair and is imposed unevenly. People who move houses do not consume more in municipal services than people who stay in the same house. Why should they be singled out for tens of thousands of dollars in extra taxes? The only sense it could possibly make is political: an unfair and uneven tax that hits a smaller percentage of the population might be less widely opposed than an evenly applied tax that everyone pays. After all, most people’s favourite tax is the one they think only other people pay.So, Chow’s plan to make the tax even more inefficient and uneven could benefit her politically, particularly because her “tax the rich” message could help shore up her NDP base in advance of the 2026 mayoral election. But, like her 17 per cent property tax hike over two years, her land transfer tax hike will harm all Torontonians.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.