Olivia Chow's Vote Getting Land Transfer Tax

By Penny Elizabeth Dutkowski, Broker

What does a political candidate do to gain votes when they're seriously falling behind in the polls? Why, they promise to tax the rich. 

It seems in an effort to boost voter support, Toronto Mayoral candidate Olivia

Chow proposes to fund a $2 million breakfast program for 36,000 students and increase bus services by adding another tier to Toronto's land transfer tax for properties purchased for more than $2 million dollars. 

By Ms. Chow's estimate the tax would affect only 600 buyers and raise $20 million. On average that would mean an additional $33,333 per property.

Firstly, the $2 million breakfast fund is only one-tenth the extra revenue she intends to raise and is the carrot waived in front of voters rather than the extra $18 million earmarked for already heavily subsidized, over-priced TTC.

Secondly, her arithmetic is terrible. Technically speaking, for all of 2013, the number of $2 million plus properties sold via TREB's Multiple Listings Service® came in just a tad shy of 750. This of course does not include new builds sold directly by builders. 

If the real estate market remains as it is, the total revenue raised at an average $33,333 would amount to $25 million or $5 million more than Ms. Chow's number so what's the extra $5 million for, a buffer?

Ms. Chow hasn't thought this through.

Should the real estate market correct and let's face it, we're due for one sooner rather than later, the multi-million dollar properties will take the biggest value hit, they'll be fewer sales and the $20 million, $25 million may not be achievable thus the breakfast program and the bus service will suffer and a new revenue raising scheme will have to be devised.

Let's take a close look at the numbers:

The plan to raise $2 million to provide breakfast for 36,000 translates into a cost of $56 per student and $25 million in total via the added cost of $33,333 to purchasers of multi-million dollar homes which many may be inclined to say is a drop in the bucket for anyone wealthy enough to afford such digs, but relatively speaking, $33,333 is to $2 million what $8,333 is to $500,000 - no longer a drop in the bucket when considered in terms of the average home buyer, is it?

Why that particular proposal Ms. Chow?

According to the City of Toronto's 2013 ward summary there were 1,047,880 occupied private dwellings. $25 million shared equally among them is an extra $23.86 per year on their property tax bill - that's one less can of pop a month for all property owners and 4 months of breakfasts for a student; it will be a static revenue stream in the number of existing properties as it will never be reduced in a market downturn so city hall won't have to think up some other scheme for any shortfall. Plus, all property owners will be sharing the bill for bus service which is far fairer than having the chauffeur driven rich 1% subsidize the other 99%.

Realistically speaking, if voters take no issue with Ms. Chow's $33,333 tax on a single property purchase, they shouldn't have any issue parting with an additional homeowner levy of $23.86 a year.

And if they do there's something terribly wrong.

By Penny Elizabeth Dutkowski, Broker with HomeLife/Bayview Realty Inc., Brokerage*

*Independently Owned and Operated

All posts are the express opinion of Penny Elizabeth Dutkowski and should not be construed as that of the Brokerage.