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Should Land Transfer Tax Become An Election Issue?
Jun 20, 2014
The land transfer tax is more than a policy issue, it has an effect on the local economy. As such, it should be an issue that voters can influence. In fact, some mayoral candidates running for the Toronto election of 2014 have included the issue as well as their position as part of their running platform.
The Basic Facts of The Land Transfer Tax
Actually there are two land transfer taxes – one at the municipal level and a provincial one. For homebuyers, they will need to pay these taxes, in addition to GST if the home is new or heavily renovated. The municipal land transfer tax tiers are as follows:
- For the first $55,000 spent on a home, the rate is 0.5%
- For anything above $55,000 up to $400,00, the rate is 1%
- For anything over $400,000, the rate is 2%
For example, a home costing $100,000 will incur $275 for the first tier plus $450 for the second tier for a total of $725. Also, first time home buyers have a rebate on the first $400,000 on the price of a home.
The Ontario land transfer tax rates are:
- 0.5% for the first $55,000
- 1% between $55,000 and $250,000
- 1.5% above $250,000
- The rate changes to 2% above $400,000 when the land has 1 or 2 single residence family homes
Two Ways of Seeing The Impact of Land Transfer Taxes
Many see the two transfer tax rates as double taxation. This financial burden on home buyers is seen to stifle the real estate market and reduce jobs available. Real estate agents, lawyers, and even furniture stores are industries that suffer from the taxation. In addition, homebuyers who have to compete to buy an affordable home are saddled with extra expenses not directly related to the purchase. This issue affects lawyers, real estate agents, and home buyers.
On the other hand, despite having two land transfer taxes, the city of Toronto has remarkably low property taxes. The difference between the yearly low property taxes offsets the transfer taxes, as long as ownership of the home doesn’t change hands in a short period of time. From the point of view of a citizen of Toronto, Toronto has to raise funds to pay for public goods enjoyed by everyone.
For more on the issue, click here.