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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

April 25, 2018 | The Man

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

Fifty years ago free-lovin’, bell-bottomed, stop-da-war Boomer-hippies railed at The Man. Authority was suspect. The Establishment was probably corrupt. Government was not the answer.

These days, big change. A recent survey among US Millennials found a shocking number think democratic capitalism has failed and are willing to experiment with other structures, including totalitarianism or a benevolent dictatorship. This new love for statism is in Canada, too. Moisters now see government as the good guy, a motherly presence to take the sting out of a crappy jobs market ($15 minimum wage) or unaffordable housing (spec taxes). Hence, Canadian socialism.

As a result, we have government cheques for having babies, free pharmacare and daycare plans, subsidized or waived tuition, free money for getting old and a big experiment with a guaranteed annual income. All this is being financed with debt. Of course. Mothering ain’t cheap.

Nowhere is The Man more respected or depended upon than in YVR and the province which surrounds it, fast becoming the most heavily taxed jurisdiction in Canada. Days ago this pathetic, paleo, crusty blog ragged on the BC specker tax levied against fellow Canadans – which so many posters defended in their quaint tribal fashion. Today, let’s remind citizens once again of why it is they cannot really trust what politicians are telling them.

Two years ago came the disturbing news that 25,000 housing units in Vancouver were ‘empty.’ That was based on a deeply flawed census number which also included places leased to students plus a big whack of rental suites in occupied homes. It was just as dumb, meaningless and weak as the ‘evidence’ collected by people who stood on the street at night and counted condo units where the lights were shut.

Nonetheless, that number became the rallying point for creation of a tax on the evil people who own empty houses in a city with a low vacancy rate and rising rents. The moisters, in other words, wished to live in affordable units and wanted The Man to fix it.

So was born the tax, equal to 1% of the value of a property unless it was occupied as a principal residence or rented out. That was such a penalty ($1,000 per month on a $1.2 million place) that politicians promised it would flood the market with more rentals. The city did a big study of electricity use (an invasion of privacy) and found the 25,000 number was actually 10,800. Some of those could not be rented, of course, like places in condos that disallow rentals, or which were being sold. So the number was reduced to 8,500.

All homeowners were contacted and  forced to self-declare occupancy status, on the pain of massive fines. After that exercise, city staff realized the number of under-inhabited properties was roughly 3,500.  Of those, about a thousand belong to people who could not or did not respond to the city’s canvass. So, this week, came the announcement – the tax will be levied initially on just 1,200 properties. It will raise $30 million, but cost $7.5 million to start and will take $2.5 million per year to run, plus there will be a thousand or more audits to pay for since many dispute the levy.

The number of new rental units released to the market this far, for all the millions spent: 0.

The mayor (who’s not running again) pretty much concedes that this is just a tax, to generate revenue for an ‘affordability fund’ that may be used to fund homeless shelters or pay the rent of people about to be evicted (for not paying rent). So, it’s another tax on wealth the purpose for which (more rental units) has already been abandoned and the justification (25,000 ‘empty’ houses) has been proven a myth.

Alarmingly, Toronto is considering imposition of a similar tax, more evidence of a shift in government focus from income to assets. Also running in this lane is Ottawa’s gathering of  information on the sale prices of principal residences on tax returns, plus rumblings Bill Morneau wants to up the inclusion rate for capital gains tax. Tax, tax & more tax – in a country where the top marginal rate on income already tops 50%, and cannot travel much higher.

Just as houses don’t get cheaper with greater taxes, punishing property owners doesn’t lower rents. The politicians made that up. We were right.

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April 25th, 2018

Posted In: The Greater Fool

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