Abolish the Land Transfer Tax, Says Researcher
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Abolish the Land Transfer Tax, Says Researcher

A new study says the lucrative tax isn't the best way for Toronto to raise revenue.

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Here’s something that should cheer Mayor Rob Ford amid his many political troubles: a researcher from the C.D. Howe Institute agrees with him that Toronto’s Municipal Land Transfer Tax should be abolished. Though it has to be said that the researcher makes a much more sophisticated case for doing so than the mayor ever has.

The report, released earlier today, is the work of Benjamin Dachis, a senior policy analyst at C.D. Howe. After looking at detailed data on the sales of single-family homes in Toronto and surrounding municipalities, he estimates that the Land Transfer Tax has reduced home resales by about 16 per cent each year since it was instituted in 2008. That means the tax has prevented about 3,500 homes per year from going on the market when they otherwise would have. The study excluded condos and newly built homes.

The Land Transfer Tax works sort of like a sales tax: the City takes a percentage of the amount paid for a property when it sells. For homes over $400,000, the fee is two per cent. Also, the province has its own Land Transfer Tax, which adds as much as another two per cent to the net price of a home sale. Mayor Ford vowed to repeal the City’s version of the tax during his mayoral campaign, and has recently said he still intends to do so, but in phases. The tax is expected to generate about $330 million for the City this year.

Dachis argues that by slowing down Toronto’s real estate market, the Land Transfer Tax is keeping people in homes they don’t want, and preventing them from moving in order to take better jobs. He also believes it’s driving up the prices of homes.

But while the tax-averse mayor may love that part of the argument, he won’t be as big a fan of Dachis’s recommended solution: raise property taxes across the board to spread the financial pain. Dachis thinks this would help the markets return to something close to normal.

Read the full report here: [PDF]