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New Land Transfer Tax

unimaginative2

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That's not true. The big losers will be investors who flip condos for a quick profit. An extra 2% on a house for a family will likely not make it unaffordable, and if a 2% increase in price is unaffordable, they probably shouldn't be buying that house in the first place. If this takes some of the froth out of the speculative market, that seems like a good thing to me.
 

allabootmatt

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"As I mentioned this is almost exclusively a tax on families with children."


How do you figure? We're talking about something that can be easily amortized over a mortgage--probably working out to what, one extra payment on average? For that, those families with children will get to enjoy things like libraries, community centres, good transit, parks, and so on. I would argue that families with children in fact come out further ahead on this than anyone. Particularly since this will help keep property tax increases closer to the rate of inflation, since a bigger property tax bill really does impact those families, and everyone else, and cannot be amortized.

This isn't a tax on families with children. It's a tax on flipping. That's why the estate agents are so hysterical. It tells you a lot when the city's mainstream business advocacy group, the Board of Trade, is on side along with almost all of the developers leaving just TREB and the Taxpayers' Federation opposed. One of those groups opposes everything, and the other is made up of people who make huge amounts of money on spec purchases and flipping. Activities which, by the by, are driving up the price of a home in Toronto much, much faster than a tax ever could.
 

unimaginative2

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'The votes are there' for mayor's tax plan

JENNIFER LEWINGTON

CITY HALL BUREAU CHIEF with a report from Jeff Gray

October 22, 2007

In what would be a watershed moment for the city and Mayor David Miller, a majority of Toronto councillors appear set to approve two new taxes today.

"We have turned the corner and the votes are there," deputy mayor Joe Pantalone declared yesterday.

His optimism stems from a series of signals that momentum is building for the mayor - the latest coming yesterday as a key councillor moved to endorse a compromise tax package that on Friday won crucial backing from the Toronto Board of Trade and 10 prominent developers.

"It isn't an easy decision, but it appears reasonable to me," said Councillor Suzan Hall of the package circulated late Friday after intense negotiations between the board, the developers and Mr. Miller.

Ms. Hall's declaration that she plans to vote in favour of a new land transfer tax and a motor vehicle registration fee is a turning point. In July, Ms. Hall (Ward 1, Etobicoke North) led a successful charge to defer, by a one-vote margin, any decision on the contentious tax measures until today. The rebuff stunned the mayor, and led to increasing questions about his leadership.

Despite the building momentum in favour of the mayor's position, council insiders expect a dramatic session today, with a crammed public gallery at city hall.

The stakes for the city, mired in a divisive debate on taxes since the summer and faced with a $414-million budget shortfall in 2008, are high.

If approved, a land transfer tax of up to 2 per cent and a $60 fee for motor vehicle registration would mark Toronto's first use of "revenue tools" under self-government powers granted by the province earlier this year.

But even if adopted, the new taxes might only initially raise $180-million to $200-million for 2008, less than earlier annual estimates of $356-million, because of revisions to the original proposal and a slower than expected timetable for implementation.

Even with the new taxes, city finance officials say they still need a property tax hike next year (Mr. Miller says he wants to keep it close to 3 per cent) and a pledge of transit operating funds from the province.

Today's vote - no matter what the result - will also mark a turning point for the mayor, as he tries to shore up his leadership and re-establish his political clout for a term that lasts to 2010.

"He could not survive a defeat," said Councillor Adam Vaughan (Ward 20, Trinity-Spadina), who supports Mr. Miller's tax plan. "It is a confidence vote, essentially."

Mr. Miller's staunchest critics on council refused to concede defeat yesterday.

"I hope it will be close," said Councillor Denzil Minnan-Wong (Ward 34, Don Valley East), who charges that the mayor "deceived" voters by making no explicit mention of new taxes in his 2006 re-election campaign platform.

But even some of the mayor's opponents were quietly conceding that the tax plan appeared ready to win approval, particularly after the 11th-hour support from the Toronto Board of Trade and prominent city developers last Friday.

Key to that compromise was an amendment to the land transfer tax, providing full rebates to first-time buyers of homes up to $400,000 in value and a 1-per-cent cap (down from 1.5 per cent) on the tax on homes and commercial property valued between $55,000 and $400,000. As well, the tax will not apply to existing agreements of purchase and sale made before Dec. 31.

The fast-breaking developments won over Ms. Hall, but as of yesterday had not convinced another undecided councillor. Peter Milczyn (Ward 5, Etobicoke-Lakeshore) said he plans to vote for the motor vehicle tax but would have "difficulty supporting" the land transfer tax. His beef is that the city did too little to rein in spending, such as cutting merit pay for non-union staff, before imposing new taxes.

The councillor said yesterday he was still talking to the mayor about specific commitments to cut costs. At best, these measures would go to the city's budget committee for consideration in 2008, without being tied to today's vote.

Understanding the debate

City Council is debating two controversial taxes proposed by Mayor David Miller. One is a land transfer tax of up to 2 per cent of the price of the property, charged to home buyers, similar to the existing provincial tax. The other is an added $60 fee on motor vehicle registrations.

Why would they do

such a thing?

The mayor says the city, which cannot run a deficit, faces a projected $414-million shortfall in 2008.

Mr. Miller says all of the reserve funds the city has raided in the past to make ends meet have been exhausted.

After lengthy negotiations with city hall, the province gave the city the power to raise some of its own taxes in the City of Toronto Act, which came into effect last January.

Why are the city's books

so hard to balance?

Even the mayor's staunchest opponents agree that the city's financial problems are largely driven by the $729-million in social services and other shared costs that the province forces Toronto's property taxpayers to pick up. A provincial panel is due to report on that problem in February - likely too late to help the 2008 budget.

But opposition councillors claim Mr. Miller has refused to look at serious efforts to reduce costs or to contract out more city services. The mayor has appointed a blue-ribbon panel of local business and community leaders to look for savings.What effect will the

taxes have?

The Toronto Real Estate Board, which plans to pack the council chamber today with real estate agents, says the land transfer tax will damage the city's real estate market. It would prompt buyers to look for homes outside the city, where they would not have to pay the tax, the board says, and it could hasten the bursting of the real estate bubble, especially if the currently hot market begins to cool for other reasons.

What's the bottom line?

According to the latest version of the land transfer tax, modified last week, buyers of a $400,000 house would pay $3,725, on top of the current provincial land transfer tax of $4,475. First-time buyers of properties worth $400,000 and under would be exempt.

The vehicle-registration tax would add $60 to the province's current $74 annual bill for renewals, for drivers with Toronto addresses.Why not just raise

property taxes?

To fill the entire $414-million gap with a property-tax increase would require an increase of 20 per cent, or a $437 added cost for an average Toronto home, valued at $369,000.

The mayor argues that hiking property taxes is regressive.

Even if the mayor's new taxes pass, rough math suggests the city could still be looking at a 5.6-per-cent residential property tax hike.

Jeff Gray
 

TrickyRicky

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"As I mentioned this is almost exclusively a tax on families with children."

Actually this is not exactly what I meant. What I meant was that this tax will have the most impact on the choices made by middle-class families providing them further incentive to vacate the city as a demographic.

"How do you figure? We're talking about something that can be easily amortized over a mortgage--probably working out to what, one extra payment on average? For that, those families with children will get to enjoy things like libraries, community centres, good transit, parks, and so on. I would argue that families with children in fact come out further ahead on this than anyone."

I'm not sure I understand? This tax does not add 2 percent to the purchase price it is a tax on the total purchase price up front. So say I'm a typical buyer who puts 25 percent down on a $499,999 house. I have to pony up $125,000 for the house down payment and around $6500 for provincial land transfer tax and say $1500 for lawyer fees and title insurance etc. The city is now asking for an additional $10,000. This is an up front cost not one amortized over 25 years like the balance of the $375,000 mortgage. So this $10,000 represents 8 percent of my down payment savings. That might not sound huge but keep in mind that the problem with most buyers is not income, but savings. So just say you are a young family with small children or a baby looking to move to a larger place. For the average middle class buyer this could delay their capacity to buy for 1 or 2 years or more. So I ask why buy in Toronto if you can buy elsewhere in the suburbs? For the poor they can't afford to buy anyways while the rich are less sensative to up front capital outlays in making their decisions.

With regard to property taxes, they are going up anyway on top of this land transfer tax just to maintain the status quo. So what is at question is not better parks and libraries and services, it is the same parks and libraries and services.

For the record I am against this tax on principle, not because I stand to lose personally. I'm under 30 unmarried and already own downtown. Infact I would prefer higher property taxes and service charges to this land transfer tax. I would even use stronger language and say that it is a cold calculated politically guttless initiative that taxes the few while preserving Miller's political base instead of spreading the tax to everyone so that we can all share the burden and be forced to become engaged in the solution.
 

unimaginative2

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New Toronto tax plan passes

JEFF GRAY AND JENNIFER LEWINGTON

Globe and Mail Update

October 22, 2007 at 7:54 PM EDT

TORONTO — Toronto city council yesterday voted to endorse Mayor David Miller's two controversial new taxes – one on land transfers and the other on vehicle registrations – drawing to a close a months-long political drama at city hall.

After a daylong debate and weeks of intense lobbying by opponents and supporters of the two taxes, councillors narrowly voted for a compromise package, endorsed by prominent developers and the Board of Trade. The deal lessened the impact of the up-to-2-per-cent land-transfer tax, the more controversial of the two measures.

The mayor, who in a move designed to appeal to fence-sitting councillors agreed last week to convene a blue-ribbon panel to look for ways to reduce the city's costs, said the vote was show of confidence in his leadership.

After the vote, as people cheered, Mayor Miller shook hands with his supporters.

About 300 people packed the public gallery in the morning as debate began. But unlike in July, when the mayor suffered a surprise defeat on the taxes before a council chamber packed with opponents, most of the audience appeared to be supporters of the tax proposals organized by a coalition of labour unions and arts groups. Many, including the city's union leaders, wore yellow scarves to show their support.

Lobbyists for the Toronto Real Estate Board, as well as some real estate agents and citizens opposed to the taxes, were on hand to watch the debate as well. But the crowd dwindled to less than 100 as the daylong debate wore on.

Shortly after Mr. Miller began his opening remarks, he was loudly heckled by realtor Gary MacRae.

“You spend like New York, but you aren't New York!” Mr. MacRae shouted as he was escorted from the packed public gallery by a security guard.

Mr. MacRae later told reporters that “everyone is going to hurt” from a city-imposed land transfer tax, although he acknowledged he was unaware of the details of the compromise proposal before council.

Mr. Miller kicked off the debate that split the badly divided council by acknowledging "it is a very difficult decision." He said the vote poses a "fundamental question" for the city.

"Is this city government going to have the resources and the ability to invest, not just to maintain services, but to invest [in new services]," he said.

Grilled for more than an hour by councillors opposed to the new taxes, Mr. Miller said "these taxes are fair and reasonable," convinced that a "yes" vote will help the city push even harder for the province to upload social services now partly paid by local property taxpayers.

Moments before the debate, councillor Denzil Minnan-Wong (Ward 33 Don Valley East) scoffed at the public gallery packed with the mayor's supporters.

"I don't think you see the silent majority here today," he told reporters. "The real majority, the residents from Scarborough and Etobicoke, who are against these taxes."

The stakes for the city, mired in a divisive debate on taxes since the summer and faced with a $414-million budget shortfall in 2008, were high.

The land transfer tax of up to 2 per cent and a $60 fee for motor vehicle registration marks Toronto's first use of “revenue tools” under self-government powers granted by the province earlier this year.

But, the new taxes might only initially raise $180-million to $200-million for 2008, less than earlier annual estimates of $356-million, because of revisions to the original proposal and a slower than expected timetable for implementation.

Even with the new taxes, city finance officials say they still need a property tax hike next year (Mr. Miller says he wants to keep it close to 3 per cent) and a pledge of transit operating funds from the province.

Mondays vote also marksa turning point for the mayor, as he tries to shore up his leadership and re-establish his political clout for a term that lasts to 2010.

“He could not survive a defeat,” said Councillor Adam Vaughan (Ward 20, Trinity-Spadina), who supported Mr. Miller's tax plan. “It is a confidence vote, essentially.”

Key to the compromise Monday was an amendment to the land transfer tax, providing full rebates to first-time buyers of homes up to $400,000 in value and a 1-per-cent cap (down from 1.5 per cent) on the tax on homes and commercial property valued between $55,000 and $400,000. As well, the tax will not apply to existing agreements of purchase and sale made before Dec. 31.


Good news!

...and there's a tie for the stupidest comment award! That real estate agent was winning, but he was soon matched by Adam Vaughan, who will never pass up an opportunity for a stupid comment that will get his name in the paper. The mayor couldn't survive a defeat? What is Miller going to do? Resign?
 

ShonTron

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I know you're big on defending Liberals and bashing Adam Vaughan, but I really disagree with at least the meaning of the statement. The tax vote was the municipal equivalent to a confidence vote in terms of its importance to the city and to Miller. Had Miller lost it, it would be a massive blow to his agenda of centralizing the mayor's powers and putting through the new taxes. He would have been much weaker, and in a strong likelihood, would have become little more than a lame duck mayor.

I'll agree that Realtor was a complete idiot. To all the flippers and real estate agents - Ha ha! Even the BoT and the developers were supporting the taxes.
 

unimaginative2

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I know you're big on defending Liberals and bashing Adam Vaughan, but I really disagree. The tax vote was the municipal equivalent to a confidence vote in terms of its importance to the city and to Miller. Had Miller lost it, it would be a massive blow to his agenda of centralizing the mayor's powers and putting through the new taxes. He would have been much weaker, and in a strong liklihood, would have become little more than a lame duck mayor.
Haha...Adam Vaughan is a Liberal. Or at least he is as long as he thinks it'll get him elected.

Don't you think that's a bit exaggerated, Sean? Sure, the media has built this way up and it would have been a defeat -- the first big defeat of his mayoralty -- but he's barely a year into a four-year term. He would have had to make some tough decisions and he would have lost a lot of face, but I don't think the city would be effectively without a mayor for the next three years. He would have had to make some real cuts and probably hike the property tax pretty dramatically (though no more dramatically than they do routinely in the 905), but he would have soldiered on.
 

lordmandeep

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pure stupidity....


its gets them nowhere near solving the problem next year....

must cut costs....
 

Hydrogen

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^But before that you can be sure that the mayor will check what else lies in his revenue tool cabinet. I'm sure there is more to come.
 

yyzer

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As well, the tax will not apply to existing agreements of purchase and sale made before Dec. 31.
This is a key point for all the wide-eyed optimists who have purchased units in the projects we discuss in the forum....what it means is that anyone who has already bought, or who buys before Dec 31, won't have to pay the tax, even if the closing is 3 years from now....expect a flurry of activity between now and yearend...

I suppose the compromise is good, but it is still an additional tax - and in my books, that is bad. As for all the debate about who will be affected the most, it will most definitely not be investor/flippers...most of them are pretty well funded, and, in an investment, they can write off expenses against their capital gain....the ones hurt will be the regular people, who are not first time buyers...

But of course, if they can't get the cash together, they can always buy in the 905....I am sure all real estate agents will be aware of that, and will broaden their search, accordingly.
 

unimaginative2

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It's clear that the impact on the market will be quite marginal, but like anything it will at least have some impact. Nobody's going to settle in Mississauga when they wanted the Annex, but there will potentially be a small disincentive for development in places like Morningside Heights when compared with Markham.

Here's a list of how councillors voted.
 

TrickyRicky

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Looking more closely at the tax I noticed that my previous post is incorrect in that only the portion above $400,000 would be taxed at 2% not the full amount. So in that instance the tax on the sale of a home $499,999 would be $5725.

Unimaginative, I agree it will impact the markets but not fundamentally once it becomes the new reality. It is the spirit of the tax that bothers me because it impacts middle-class buyers the most. The wealthy are not going to choose to buy or not buy in the Annex or north toronto on the basis of an addition $15,000 in tax. In the end I don't mind a land transfer tax addition (although I would argue they set the rate too high in the current policy) as part of a broad based tax package that hits everyone home owners and renters included. I would also argue that any tax increase package must be accompanied by meaningful cost savings and higher userfees for city services as well that match any new tax revenue intake to gain legitimacy with the public. If Miller refuses to budge on this he will cast himself as a hard line ideologue.
 

AndreaPalladio

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I would also argue that any tax increase package must be accompanied by meaningful cost savings and higher userfees for city services as well that match any new tax revenue intake to gain legitimacy with the public.
Excellent idea. Bring on the congestion charge for anyone driving South of Bloor, West of Broadview or east of Royal York. Double the charge for all SUVs. Triple the charge for a Hummer or stretch anything.
 

Ahab

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Looks like Miller will have to raise property taxes now since the LTT won't come close to covering the deficit. I'm not optimistic that the provincial uploading is going to happen fast enough. Both higher property taxes and the LTT could solve the deficit for 2008, but it would seem there would be quite a surplus for 2009. Would this mean a tax freeze for 2009? With Miller, somehow I doubt that. . .
 

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