Next Premier of Ontario?

[Whoaccio]

But there's no value added. That's the whole point. You're taxing people on value added. Maybe you could figure out some complicated way that you could get the tax you pay on renovating your house refunded if you can show that it increased the value of the house after you sell it, but that seems pretty needlessly complicated.

No value added? If I buy a house for 250,000 and sell it for 300,000, that is 50k of value realized which I would be effectively taxed on. It shouldn't matter how I add that value so long as someone else perceives it to exist.

 

[Riverdale Rink Rat]

How do you know McGuinty?/VAT versus GST/PST/HST

While I almost dislike McGuinty as a person

How do you hate someone 'as a person' unless you've spent a fair amount of time in his company? You can hate him as a politician, but as a person?

No value added? If I buy a house for 250,000 and sell it for 300,000, that is 50k of value realized which I would be effectively taxed on. It shouldn't matter how I add that value so long as someone else perceives it to exist.

A VAT is trying to tax the amount of added value due to production/labour. That's why they're complicated, ideological, and tend to get messy.

Your example house's price appreciation is just that -- asset price appreciation (which may or may not be deserved). Not value-added. And, as you point out, the GST doesn't care about whether you've added value -- the GST doesn't try to make judgement calls.

But I think all of that is beside the point on HST. The point of HST is to spread the tax across those 'carve-outs' the politicians had made to the PST for political reasons. It broadens the tax base, theoretically allowing for a lower overall tax rate (it also makes it easier to collect, but I'm sure those savings will get eaten up somehow by the dual government bureaucracies.)

Now that BC is also going to HST, I think this whole thing will go through with a minimum of grumbling.

 

[Whoaccio]

A VAT is trying to tax the amount of added value due to production/labour. That's why they're complicated, ideological, and tend to get messy.

VATs are not complicated. It is just a tax on the difference of input and output costs. Value has no direct relation with labor/productivity and neither does a tax on added value.

Your example house's price appreciation is just that -- asset price appreciation (which may or may not be deserved). Not value-added. And, as you point out, the GST doesn't care about whether you've added value -- the GST doesn't try to make judgement calls.

You are making distinction where there are none. If I bought a trading card for x dollars and stored it for a period only to sell it for >x, I would have realized value and be tax liable. By virtue of exchanging it for an amount greater than my costs alone, value is realized.

Though I can accept some items should be exempt for social reasons (unprocessed food), the distinction between new build and resale houses is totally arbitrary and provides a disincentive to create new housing supply. Physically and logically, there is no difference between a 'new build' and resale house. Hell, all resale houses were at some point new build anyways.

 

[unimaginative2]

You are making distinction where there are none. If I bought a trading card for x dollars and stored it for a period only to sell it for >x, I would have realized value and be tax liable. By virtue of exchanging it for an amount greater than my costs alone, value is realized.

Perhaps, if your business were trading playing cards and you were contributing to the economy. If you're just an individual holding an asset while it appreciates, you can't really be said to be adding value.

 

[kEiThZ]

Perhaps, if your business were trading playing cards and you were contributing to the economy. If you're just an individual holding an asset while it appreciates, you can't really be said to be adding value.

Exactly. That's called capital gains.

 

[Whoaccio]

Perhaps, if your business were trading playing cards and you were contributing to the economy. If you're just an individual holding an asset while it appreciates, you can't really be said to be adding value.

So if Smucker's makes a jar of jam and sells it then that adds value, but if I recreationaly make a jar of jam and sell it to a neighbour that doesn't? "Value" occurs regardless of motives or conditions, it is just revenue less input costs. Conceptually, the economy is the sum of all transactions. So long as a transaction occurs it adds to this sum.

Consider a developer wishes to build a house and sell it and a VAT rate of 13%. The developer pays 113k for materials and labor (100k*1.13%) of which 13k would go to the government. The developer eventually sells the property and David pays 169.5 (150*1.13) of which 6.5k would go to the government (19.5k-13k). In a few years, David decides to sell and Chris pays 250k but is exempted from VAT. Throughout this period assume no major renovations were made. The developer would pay 6.5k on his profit of 50k, but David would pay no VAT on his profit of 80.5k. Both of them carried out exactly the same transaction on exactly the same product, yet one is taxed while the other is not. How is that fair? Note the developer doesn't pay tax on the materials and labor used to build the house, he pays taxes on the difference between what it cost to build the house and what he sells it for.

 

[unimaginative2]

Okay, of course you added value. You created a jar of jam. That's still adding value whether you're a large company or just selling a few jars of jam.

Now if you just bought a jar of jam, kept it for a few years, and then sold it because the price of jam was higher than when you bought it, that would be investing, but not adding value.

In your example above, David does pay tax on his capital gains assuming it's not a principal residence, and the rate is higher than the HST.

 

[Whoaccio]

^
Assume it his principle residence. Why does David not pay taxes doing the exact same thing as the developer who does pay VATs?

 

[kEiThZ]

^
Assume it his principle residence. Why does David not pay taxes doing the exact same thing as the developer who does pay VATs?

Correct me if I am wrong here but the developer added value (developed the property) which is what the VAT is being assessed on. David just lived in the house while it appreciated and pocketed the capital gains. If it's his principal residence he does not pay tax on it. If it isn't he does. I am not sure I understand your disagreement. Do you feel that capital appreciation of a property is exactly the same as work under taken to add value to the property?

 

[unimaginative2]

Because he's not adding value. He's not owning the property to make a profit. If anything, it's the principal residence exemption that's the loophole.

 

[afransen]

And really, don't consider the capital gains exemption for principle residences. It's a distortionary exemption.

 

[Dan416]

I think it'll be a good long while until Dalton McGuinty decides to retire. I believe the next premier will be McGuinty's successor as the leader of the Liberal Party of Ontario.

 

[Basshats]

Dalton likely will win a slim majority next time. I doubt he will lose many of the Toronto seats and he should keep his hometown of Ottawa.

He will however get hurt badly up North and in the London-Windsor area perhaps.

However until the Tories can win seats in like Brampton, Mississauga, Richmond Hill they will not win.

If he loses any seats up north or in the London-Windsor corridor, it would likely be to the NDP (with perhaps the exception of London itself.) Unless a major scandal comes along, he will probably hold steady in the GTA and Ottawa area.

 

[salvius]

I think it'll be a good long while until Dalton McGuinty decides to retire. I believe the next premier will be McGuinty's successor as the leader of the Liberal Party of Ontario.

Unless there's a major scandal, or unless PC decide to field a candidate who isn't inept.

 

[Dan416]

Unless there's a major scandal, or unless PC decide to field a candidate who isn't inept.

Neither of those things you can predict, especially the second one.

So right now, Dalton is sitting pretty.