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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

April 11, 2021 | Sheepless

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.

There will be no capital gains tax inclusion rate increase in the budget next Monday. No creeping tax on realized home equity, either. And no wealth or inheritance tax.

That’s the will of the Liberal grassroots, as expressed in the policy conference just completed. Add to that comments by the federal housing minister (‘no capital gains on residential real estate) plus a major TV interview by Ontario MP and housing policy dude Adam Vaughan (‘we can’t penalize homeowners counting on their houses for retirement’) and the conclusion is inescapable….

The feds intend to let the market run hot. They’re also scared about whacking investment capital or the TSX during a nascent post-bug recovery. So accountants everywhere can stop fretting.

But, but, but. The odds are large for a new tax bracket Hoovering off more from the high-income crowd, boosting the top marginal to 55%. Maybe a tad more. Just listen to that giant sucking sound. By the way, no hike slated for overall corporate tax rates, as the Third Wave crashes hard into employers. However, count on a lot more spending, continued deficits and a relentless increase in public debt (not that anyone cares any more).

The Liberal rabble wants a UBI, which is doubtful. They also want a free drug plan for everybody (more likely) and universal cheap child care (a certainty). Our finance minister has declared this a ‘shecession’, called the loss of female jobs because of Covid ‘dangerous’ and pledged to have the state far more involved in kiddie welfare.

In short, the budget on Monday next will raise little in new revenue, commit to a huge amount of new spending, kick the can of debt/deficit down the road so Gen Z can deal with it when they stop watching TikToks, probably guarantee a nice house in a decent hood slides further from reach and sets the stage for a federal election in the autumn, right after herd immunity arrives.

Oh, one more thing…

“I’m an irritating millennial living in Vancouver,” writes Allison. “I earn well above the median household income in this self-important village of a city. I’ve been looking at buying a condo for the last 3 years and haven’t pulled the trigger because (1) everything I can afford as a single person sucks; and (2) my rent-and-invest strategy is working out pretty well.

But – I live in a crappy rental apartment that is hundreds of dollars below market. If I want to move I will pay at least $700 more per month in rent. That’s a big dent in what I can invest each month. So why do rents feel like they are increasing so much faster than income is? How is the grotesque real estate situation influencing or not influencing that? How can rents possibly be limited by local incomes when median household income is around $75k? I would love for you to write a post that digs into how rents are or aren’t related to real estate craziness and local incomes and what it means for the finances of the average person.

Actually, Ali, renters are subsidized, coddled, supported and made special by politicians who suppress rents, ban evictions and hassle landlords. The costs of home ownership far exceed those faced by tenants, even in an age of cheap mortgages. If it were not for emotional market gains and tax-free profits, renting would be the totally valid choice. There’s no other compelling reason a young, single female (or male) would accept hundreds of thousands in debt, plus monthly fees and expenses to live in a place they could rent without care or obligation, investing the difference.

But we’ve lost our way. Real estate’s a cult now. Governments have fostered and helped create that. Prices are extreme and homeowners have become the elite. The maiden Chrystia budget will not have the stones to tax windfall capital gains, but it might just throw a bone to rising voters like Allison in the form of a rental tax credit.

The logic: if people buying real estate get a massive wealth advantage by completely avoiding taxation on gains which were handed to them by Mr. Market, renters should not be penalized just because they cannot afford to buy. So it’s only ‘fair’ the government levels the paying field by allowing a portion of rent to be deducted from taxable income.

Yeah, more government dependence and debt through reduced revenue. The T2 hole deepens.

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As of this week the word ‘master’ will no longer be allowed in Toronto. At least not as part of real estate listings. Toronto realtors have decided to follow the lead of CREA, the national organization, and cancel the word forever. From now on no master bedroom. No master ensuite, either. The politically-correct word is ‘primary.’

Why?

Master is “largely associated with terminology rooted in slavery and/or sexism,” the realtors say. It has “offensive undertones”, is an “outdated term” and inhibits “productive communication between real estate professionals and their communities.”

Of course, if there is a ‘primary’ room in a house it means the others must be ‘secondary’ or worse. That seems a bit hurtful, exclusionary, elitist and smacks of privilege. How will the people sleeping in those diminished places feel? Perhaps they need compensation.

Anyway, it’s progress. The Mills love it. And this jibes with the loss of other innocuous but banned words many grew up with, like “Dominion” or “fisherman.” Could there be a master plan?

Oops.

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April 11th, 2021

Posted In: The Greater Fool

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