School tax is concerning, but speculation tax remains bigger problem

Last week, an extraordinary amount of attention was given to a protest by West Side residents concerned about the B.C. government’s so-called “school tax.”

Vancouver millennials were aghast that these people, the majority of whom owned multi-million-dollar homes, would dare to protest a tax that would cost many only a few thousand dollars. 

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However, others, including many who did not own expensive homes, fully understood the protest. After all, in Canada, we have historically used income tax and consumption taxes, such as the GST and provincial sales taxes, to transfer wealth from rich to poor.

They saw the school tax as an attempt by the NDP government to start taxing wealth.

In a CBC Early Edition debate, former Attorney General Suzanne Anton raised this concern with former NDP cabinet minister Moe Sihota. As expected, Sihota dismissed Anton’s concern out of hand.

However, she was right to raise this concern. After all, this tax doesn’t apply when someone sells their property. It applies while they own their property.

Around the world, governments tax assets of the well-to-do to fund programs for those who do not have assets. An example is Switzerland.

There, a proportional property tax of around 0.3 to 0.5 per cent is levied on the total net worth of individuals. The tax applies to all assets, not just real estate, including investments, shares and savings accounts, less any debts.

While Finance Minister Carole James has never suggested her government might one day extend the school tax into an even broader wealth tax, many B.C residents fear this could happen. After all, by telling elderly homeowners to defer their taxes, this effectively becomes an inheritance tax.

While I too have concerns about the school tax, my bigger concern is the so-called “speculation tax.”

In the budget speech, James said her government is targeting property speculators to help make housing in overheated markets more affordable and available. She went on to say, “With this new tax, we’re targeting speculation in the housing market and freeing up vacant housing to be homes for British Columbians.”

While this sounds admirable, this is not at all what the tax will do.

Firstly, while the university academics who first proposed this tax tell me 80 per cent of the $200 million will come from foreign speculators, I see no evidence of this.

Instead, I see this tax impacting a former NDP cabinet minister who lives up north and a B.C. interior mayor, both of whom keep second homes in Vancouver. Neither is a speculator; neither will be freeing up a vacant home.

Ironically, they will struggle to pay the tax because they are too honest to cleverly avoid it. I cannot say the same for many others.

This tax will also burden other B.C. residents and out-of-province Canadians owning second homes in B.C.

This brings me to enforcement. The government’s current proposal is to administer the tax outside of the normal property tax system and property tax cycle.

The administration cost of Vancouver’s Empty Homes Tax more than doubled from the initial estimate, while the number of empty units converted to occupied homes remains uncertain. How much will it cost the province to set up a separate administration system?

If, as SFU academic Josh Gordon says, 80 per cent of the so-called speculation tax will be paid by foreign speculators, then the government should exclude all Canadians from having to pay the tax.

Currently properties awaiting development approvals are also subject to the tax. The government should exclude these properties as well. After all, how can the government claim this tax will produce more affordable housing when it adds to the cost of housing?

***

In 1991, the federal government introduced the GST. At the time I was president of the Urban Development Institute of Canada and warned former Conservative MP Michael Wilson and his officials about unintended negative consequences of the tax.

On Thursday May 10, at an SFU lecture at Harbour Centre titled “Looking back, Looking forward: Reflections on Housing Metro Vancouver,” I will be discussing how the GST has inadvertently reduced the supply of rental housing across Canada in the subsequent 27 years.

You can attend by reserving a seat on the SFU Continuing Studies website sfu.ca/continuing-studies/events.

Since the lecture is free, no tax is applicable.

@michaelgeller

geller@sfu.ca

 

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