King of Kensington
Senior Member
You mean middle income right? Pretty much everybody in Canada thinks they're middle class, whether they're making 40K or 200K.
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Income Polarization in Toronto - The Three Cities study
- Thread starter SP!RE
- Start date
Memph
Active Member
ah um.. yes.
It's the middle 40% of the income distribution. For what it's worth I did call the 2nd and 3rd deciles and 8th and 9th deciles upper-middle and lower-middle class respectively. I guess that technically makes the middle 40% middle-middle class.
howl
Active Member
Poverty and poverty distribution are two different things. Poverty is a social issue that needs to be dealt with irrespective of geography. Poverty distribution is a geographic issue that will exist as long as there are differences in people's wealth (which is always - except in a true communist state). Therefore we can remove the "what is poverty?" question from the geographic distribution debate, because that is an issue which must be dealt with on a provincial or national level, not at a neighbourhood level. The poverty distribution issue is about how much we mix people of different incomes or how much do we allow them to separate.
In a completely free real estate market, as exists in some parts of the world, the tendency is for everyone to separate. The rich get the best locations, the middle class get the next best areas, and the poor live wherever the rich and middle class don't want to. The process of gentrification is an aspect of this - it's where the area occupied by the poor becomes attractive to the rich or middle classes, for whatever reason, so they take over and force the poor to move elsewhere.
For social and economic reasons it makes sense to mix people up. Poorer families get the benefits of living in a more well-to-do neighbourhoods (parks, schools, shopping, access to transit etc.) and wealthier families are more aware of the social issues in their city and will be more likely to spend some of their disposable income helping to solve those issues. There is also a concept that communication is key to the evolution of a city so the more different kinds of people you can get living in the same area and interacting with each other the more the city will be economically and socially successful. The question becomes - how much should the government be involved in forcing people of different incomes to mix? That is a question I don't have an answer for but that is the question implicit in the Three Cities report.
In a completely free real estate market, as exists in some parts of the world, the tendency is for everyone to separate. The rich get the best locations, the middle class get the next best areas, and the poor live wherever the rich and middle class don't want to. The process of gentrification is an aspect of this - it's where the area occupied by the poor becomes attractive to the rich or middle classes, for whatever reason, so they take over and force the poor to move elsewhere.
For social and economic reasons it makes sense to mix people up. Poorer families get the benefits of living in a more well-to-do neighbourhoods (parks, schools, shopping, access to transit etc.) and wealthier families are more aware of the social issues in their city and will be more likely to spend some of their disposable income helping to solve those issues. There is also a concept that communication is key to the evolution of a city so the more different kinds of people you can get living in the same area and interacting with each other the more the city will be economically and socially successful. The question becomes - how much should the government be involved in forcing people of different incomes to mix? That is a question I don't have an answer for but that is the question implicit in the Three Cities report.
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urbandreamer
recession proof
^Except that's nonsense. I've read countless articles saying poor people are happier living amongst the poor because they don't feel miserable trying to compete with someone wealthier. I know I certainly felt miserable living in Forest Hill.
Social engineering doesn't work.
People here will cite the new Regent Park as an example of social engineering that works. But it's too early to really judge that 'hood. Check back in 2050 perhaps?
Social engineering doesn't work.
People here will cite the new Regent Park as an example of social engineering that works. But it's too early to really judge that 'hood. Check back in 2050 perhaps?
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howl
Active Member
Hummm? Countless articles you say? Maybe you can cite a few?
Admiral Beez
Superstar
That's not been my experience. I'm probably the one of the poorest folks on my street, but I love it when the professional and upper classes move into my neighbourhood. With my middle mgmt career and 15 year old rusty car, I'm not competing with these lawyers, doctors, biz owners, etc. There's no chance I could afford my house today. No, I'm gratefully watching them restore rundown houses and plant beautiful gardens.
When I hear of the ills of gentification I often note that we rarely comment on the opposite, slumification and consequent white (or monied) flight. One need only look at the big Victorian houses on Sherbourne, Jarvis and anywhere near Seton House to see evidence of this.
I don't see how one can prevent income polarization. The obvious choice is to tax the hell out of the rich in a massive income redistribution scheme, but that's essentially already done.
Admiral Beez
Superstar
Memph
Active Member
There's a difference between living next to people a bit wealthier than you and the difference between the average Torontonian and average Forest Hill resident though.
There's one point that was made in an article from someone in DC that because land is more expensive in wealthier neighbourhoods, it makes more sense to build subsidized housing in less wealthy neighbourhoods since you can build more for the same price. It's a little more complicated than that though, some wealthy neighbourhoods are wealthy not just because of land values but also because of zoning and whether there is subsidized housing there already. Although land in Jane-Finch, Downsview, Rexdale or Malton is less expensive than in Yorkville, I don't think it's any less expensive than in Milton. I would say the main reason Milton is wealthier is a relative lack of subsidized housing, zoning that allows less apartments, and newer housing stock. You also have to take into account transportation costs and cost to provide services to the poor, which are often lower in more centrally located neighbourhoods with higher land costs.
It might also make sense to try to build subsidized housing, and also have private sector middle class housing built in neighbourhoods that are on the cusp of gentrifying. Places where you can still build at a reasonable cost, but which a decade from now might be too expensive for building more affordable housing and where the existing less wealthy residents will be priced out. I do think zoning helps contribute to the exclusiveness of some neighbourhoods though, and I'll try to do some rough calculations on that. While it's unlikely that the most expensive parts of Toronto will be affordable to the poor, they could still be more affordable to the middle or upper-middle class which in some cases they are not (and similarly middle-middle class neighbourhoods more affordable to the lower-middle class, etc).
(by the way comparing Toronto to DC, DC is generally a bit less expensive, especially outside the core, and the least desirable areas outside the core are significantly less expensive, so I would say the temptation there to build affordable housing in SE/NE DC or in some of the less desirably Prince George County suburbs)
There's one point that was made in an article from someone in DC that because land is more expensive in wealthier neighbourhoods, it makes more sense to build subsidized housing in less wealthy neighbourhoods since you can build more for the same price. It's a little more complicated than that though, some wealthy neighbourhoods are wealthy not just because of land values but also because of zoning and whether there is subsidized housing there already. Although land in Jane-Finch, Downsview, Rexdale or Malton is less expensive than in Yorkville, I don't think it's any less expensive than in Milton. I would say the main reason Milton is wealthier is a relative lack of subsidized housing, zoning that allows less apartments, and newer housing stock. You also have to take into account transportation costs and cost to provide services to the poor, which are often lower in more centrally located neighbourhoods with higher land costs.
It might also make sense to try to build subsidized housing, and also have private sector middle class housing built in neighbourhoods that are on the cusp of gentrifying. Places where you can still build at a reasonable cost, but which a decade from now might be too expensive for building more affordable housing and where the existing less wealthy residents will be priced out. I do think zoning helps contribute to the exclusiveness of some neighbourhoods though, and I'll try to do some rough calculations on that. While it's unlikely that the most expensive parts of Toronto will be affordable to the poor, they could still be more affordable to the middle or upper-middle class which in some cases they are not (and similarly middle-middle class neighbourhoods more affordable to the lower-middle class, etc).
(by the way comparing Toronto to DC, DC is generally a bit less expensive, especially outside the core, and the least desirable areas outside the core are significantly less expensive, so I would say the temptation there to build affordable housing in SE/NE DC or in some of the less desirably Prince George County suburbs)
Memph
Active Member
So I think even in Forest Hill you could build housing affordable to the middle class. By my rough estimates, even if your development site was one of the $3-4m homes you could build housing for about $3.50-$4.00/sf (land+development costs incl parking) with the optimal density being essentially the max density you can get with wood construction (FSI 2-3). That's not as cheap as in the outer 905, but there's less of a need for multiple cars per household so it should still be affordable to the middle class especially if the units are smaller than the 3000sf homes being built in the 905, partly by having less of the space going towards under-utilized basements.
To check if my rough calculations are reasonable, I also tried to calculate estimates for the cost of housing in Downtown where land values are higher ($50-100m/acre) and got an optimal density roughly comparable to the downtown condos - 8-15 FSI, 40-60 stories. It more or less checks out for the less expensive suburbs like Brampton or Milton too, where the optimal density would be low rise, and SFH would not be much more expensive than low rise apartments (per sf), both a little under $2/sf. I think SFH is about that price, especially if you count basements, the low-rise apartments are usually a bit more expensive but maybe that's because there's an undersupply of them. A good way to check is to see if there's ever development that built significantly below the max density allowed by zoning (I'm not aware of any?).
To check if my rough calculations are reasonable, I also tried to calculate estimates for the cost of housing in Downtown where land values are higher ($50-100m/acre) and got an optimal density roughly comparable to the downtown condos - 8-15 FSI, 40-60 stories. It more or less checks out for the less expensive suburbs like Brampton or Milton too, where the optimal density would be low rise, and SFH would not be much more expensive than low rise apartments (per sf), both a little under $2/sf. I think SFH is about that price, especially if you count basements, the low-rise apartments are usually a bit more expensive but maybe that's because there's an undersupply of them. A good way to check is to see if there's ever development that built significantly below the max density allowed by zoning (I'm not aware of any?).
urbandreamer
recession proof
So when I make my first 10 million I'm buying a large home in FH then redeveloping it with stacked towns. If I buy next door to Freed will he become a nimby? 
cornflakes
New Member
Has there ever been a time in history where the rich and poor and were equal? No.
There will always be rich and poor, and the gap will always exist. In our real world,
rich people only get rich because there are "poorer" people who pay them. I don't believe
you can have a society or world where everyone is equally rich and on the top of the food
chain. I think some of us, even if we earn 60k a year or more, are still "poor" compared to the
guys who make millions a year. They need us "bottom feeders" to keep them rich.
It's like this, in order for a business to exist, there must always be employees. There will always
be people serving someone else. I don't think everyone can be owners and have no employees exist
in this world, and everyone knows that owners always make more money/profit than employees.
There will always be rich and poor, and the gap will always exist. In our real world,
rich people only get rich because there are "poorer" people who pay them. I don't believe
you can have a society or world where everyone is equally rich and on the top of the food
chain. I think some of us, even if we earn 60k a year or more, are still "poor" compared to the
guys who make millions a year. They need us "bottom feeders" to keep them rich.
It's like this, in order for a business to exist, there must always be employees. There will always
be people serving someone else. I don't think everyone can be owners and have no employees exist
in this world, and everyone knows that owners always make more money/profit than employees.
cornflakes
New Member
But don't get me wrong, I'd love to have a Star Trek Utopian society where everyone is equal
but only differ by rank/position, and not resources/finances.
but only differ by rank/position, and not resources/finances.
Riverdale Rink Rat
Senior Member
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Hulchanski is definitely a classic Faculty of Social Work leftist, but you march a long way down the opposite path. Your definitions of 'steeply progressive' must be different from mine:
Federal: 15.00% Up to $44,701 Ontario: 5.05% Up to $40,922
22.00 44,702–89,401 9.15 40,923–81,847
26.00 89,402–138,586 11.16 81,848–150,000
29.00 138,587 and over 12.16 150,001–220,000
13.16 220,001 and over
For a combined:
first $40,922 20.05%
over $40,922 up to $44,701 24.15%
over $44,701 up to $72,064 31.15%
over $72,064 up to $81,847 32.98%
over $81,847 up to $84,902 35.39%
over $84,902 up to $89,401 39.41%
over $89,401 up to $138,586 43.41%
over $138,586 up to $150,000 46.41%
over $150,000 up to $220,000 47.97%
over $220,000 49.53%
By my eye, that looks 'steeply progressive' only up to $138k or so. I'd say there's probably room for another Federal tax bracket for incomes higher than $138k, don't you? Maybe at $500k or $5M or what have you? You could use the proceeds for a 'middle class tax break' to clean up all the ticky-tacky brackets from $72k-$89k, or re-fund Waterfront Toronto. Whatever you wish.
Also, your last three points are vague hand-waving. IMHO, only, of course.
DarnDirtyApe
Active Member
I must have a spidey sense for when I'm quoted in a post...
The "ticky-tacky" brackets are due to the Ontario surtax which is the cause of the rapid escalation of marginal tax rates at that income level. To me it seems "steeply progressive" and unfair that the marginal rate jumps from 31.1% at $72K to 43.4% at $89K, as I would hardly call someone making $89K+ a high income earner in a city like Toronto. If you also factor in tax credits and subsidies (like day care subsidies for example) you will see that upper-middle income earners are basically stuck in the middle; not poor enough to qualify for help but not wealthy enough to comfortably afford to own a house and raise a family.
Would you like me to expand upon the other three points? I didn't want to get into an mdrejhon level of verbosity, but I could write a hefty tome on the economic impact of globalization and technological change.
I will try to keep it short... Knowledge workers are becoming more and more productive over time thanks to improvements in technology, and their compensation is rising accordingly. Among other things, this leads to to rising house prices in desirable neighbourhoods. At the same time, rising incomes spur demand for low-skill service jobs (think food preparation and service, retail, etc.) that are limited in the extent that they can be automated or make use of technology to improve worker productivity. As a result of these limitations, there are many jobs available but they are low paying because an individual worker does not create much value. At the same time, we are taking in thousands of immigrants who are generally not suited for high productivity knowledge worker jobs, and as a result there is a surplus of low-skilled workers and this keeps a lid on wages for low-skill jobs. The end result? You have a relatively small number of knowledge workers who are reaping the rewards of globalization and technological change, and a large number of people who face stagnant incomes and a poor job market.
The "ticky-tacky" brackets are due to the Ontario surtax which is the cause of the rapid escalation of marginal tax rates at that income level. To me it seems "steeply progressive" and unfair that the marginal rate jumps from 31.1% at $72K to 43.4% at $89K, as I would hardly call someone making $89K+ a high income earner in a city like Toronto. If you also factor in tax credits and subsidies (like day care subsidies for example) you will see that upper-middle income earners are basically stuck in the middle; not poor enough to qualify for help but not wealthy enough to comfortably afford to own a house and raise a family.
Would you like me to expand upon the other three points? I didn't want to get into an mdrejhon level of verbosity, but I could write a hefty tome on the economic impact of globalization and technological change.
I will try to keep it short... Knowledge workers are becoming more and more productive over time thanks to improvements in technology, and their compensation is rising accordingly. Among other things, this leads to to rising house prices in desirable neighbourhoods. At the same time, rising incomes spur demand for low-skill service jobs (think food preparation and service, retail, etc.) that are limited in the extent that they can be automated or make use of technology to improve worker productivity. As a result of these limitations, there are many jobs available but they are low paying because an individual worker does not create much value. At the same time, we are taking in thousands of immigrants who are generally not suited for high productivity knowledge worker jobs, and as a result there is a surplus of low-skilled workers and this keeps a lid on wages for low-skill jobs. The end result? You have a relatively small number of knowledge workers who are reaping the rewards of globalization and technological change, and a large number of people who face stagnant incomes and a poor job market.
Northern Light
Superstar
The tax brackets are reasonably progressive....IF you take them at face value.
I would suggest, however, they are not what they seem intuitively.
I might suggest that a 'typical' middle-aged, upper-middle income earner, lets' say making $82,000 in wages, plus investment income, is not paying the advertised rate.
You might think they were at 35% and change or even more with investment income......
In fact, let's assume $500,000 in NET assets, and an annual 7% return, or $35,000 in investment income.
So a total of $117,000.
That's a sticker or marginal tax rate of just over 43%.
But that's not what is paid.
First....at the most basic level, a reminder that the marginal tax rate is the rate on the last dollar earned, or more particularly on those earnings that fall within the highest bracket.
So someone making $117,000
pays $0 on their first $11,327
Then 20.05% on their next $40,922 and so on.
So that the weighted % is rather lower than the 43% marginal rate (I'm too lazy to do the math right now)
***
But then, let's consider than investment income of $35,000, if its primarily derived from capital gains, let's say 70%, or $28,000, it is only 50% taxable. so it counts as only
$14,000 in income, assuming its not already in a tax shelter of some kinda.
Chances are than most interest-bearing investments would be sheltered inside TFSAs or the like, meaning their tax is zero or close to it.
Leaving us with taxes applying to only $117-21-11, so, about $85,000.
However, that is before an RRSP deductions which will likely reduce that amount by at least another $10,000 (yes some will show up as taxable income at the RRIF stage, but presumably in a lower bracket)
So now we're down to taxing $75,000
That's before any 'boutique' tax credits, or child benefit payments, etc.
In reality, a 'typical' person at that income level is likely paying a total tax rate under 20%
While a typical lower-middle income earner, with $37,500 in wages, earning negligible investment income with negligible deductions will likely pay a marginal rate of 20% and an overall rate of
14%
**********
We need honesty in taxation. All forms of income equally taxable. We don't care how you earn it, just turn over society's cut. Then, have a basic exemption that says
no one pays on the any earnings below a low-income cut off (you could use the Stats Can number, or another), but let's say on the first $25,000
Then simplify to 3 brackets, everything from exemption to 100k, 100k to 500k, and over 500k, or something like that.
I would suggest, however, they are not what they seem intuitively.
I might suggest that a 'typical' middle-aged, upper-middle income earner, lets' say making $82,000 in wages, plus investment income, is not paying the advertised rate.
You might think they were at 35% and change or even more with investment income......
In fact, let's assume $500,000 in NET assets, and an annual 7% return, or $35,000 in investment income.
So a total of $117,000.
That's a sticker or marginal tax rate of just over 43%.
But that's not what is paid.
First....at the most basic level, a reminder that the marginal tax rate is the rate on the last dollar earned, or more particularly on those earnings that fall within the highest bracket.
So someone making $117,000
pays $0 on their first $11,327
Then 20.05% on their next $40,922 and so on.
So that the weighted % is rather lower than the 43% marginal rate (I'm too lazy to do the math right now)
***
But then, let's consider than investment income of $35,000, if its primarily derived from capital gains, let's say 70%, or $28,000, it is only 50% taxable. so it counts as only
$14,000 in income, assuming its not already in a tax shelter of some kinda.
Chances are than most interest-bearing investments would be sheltered inside TFSAs or the like, meaning their tax is zero or close to it.
Leaving us with taxes applying to only $117-21-11, so, about $85,000.
However, that is before an RRSP deductions which will likely reduce that amount by at least another $10,000 (yes some will show up as taxable income at the RRIF stage, but presumably in a lower bracket)
So now we're down to taxing $75,000
That's before any 'boutique' tax credits, or child benefit payments, etc.
In reality, a 'typical' person at that income level is likely paying a total tax rate under 20%
While a typical lower-middle income earner, with $37,500 in wages, earning negligible investment income with negligible deductions will likely pay a marginal rate of 20% and an overall rate of
14%
**********
We need honesty in taxation. All forms of income equally taxable. We don't care how you earn it, just turn over society's cut. Then, have a basic exemption that says
no one pays on the any earnings below a low-income cut off (you could use the Stats Can number, or another), but let's say on the first $25,000
Then simplify to 3 brackets, everything from exemption to 100k, 100k to 500k, and over 500k, or something like that.