Toronto is the only municipality in Ontario that charges a land transfer tax. Mayoral candidate Anthony Furey (pictured, right) wants to change that by phasing out the additional tax in the years ahead. Photo credit: Twitter/Anthony Furey
Here’s a novel idea: if you want to bring the price of housing down, try taxing less.
Toronto mayoral candidate Anthony Furey is out with a bold new plan to lower taxes and help striving home buyers.
His pitch? Put an end to the municipal land transfer tax.
Toronto is the only municipality in Ontario that charges a land transfer tax.
Potential homebuyers in Toronto have to pay the land transfer tax twice: first to the province of Ontario and then to the city of Toronto.
Because the city of Toronto is the only municipality that imposes a land transfer tax on homebuyers, it makes the city a much less attractive place for buyers to move to and start a family.
Everyone has to pay the provincial tax, but only those who buy a home in Toronto city proper face a taxpayer double punch.
A family buying a $750,000 home in Mississauga, just next door to Toronto, would be forced to pay $11,475 in land transfer taxes to the province. But if that same family bought a $750,000 property in Toronto, their tax bill would double to $22,950.
That $11,475 tax gap is nothing to scoff at.
Under Canadian housing rules, the minimum down payment on a $750,000 home is $50,000. Even if a family manages to finally hit that $50,000 savings bar, buying a home in Toronto is still out of reach due to closing costs, which would include $22,950 in land transfer taxes. Closing costs in neighbouring Mississauga would be at least $11,475 less. Closing costs might get factored into the mortgage, but they push up the down payment needed.
Even that $750,000 home example underestimates the price gap, as most Toronto homes are more expensive than similar properties in other parts of the General Toronto Area. That means that the $11,475 tax gap is a conservative estimate and the price gap could be thousands of dollars more.
Furey is rightly recognizing that the land transfer tax is a barrier for new homebuyers.
Furey’s opponents may argue that the city cannot afford to lose the revenue associated with the land transfer tax. But the city did without it before. Toronto didn’t have a land transfer tax until 2008, when the McGunity government caved into demands from former mayor David Miller to allow the city to impose one.
All 443 other Ontario municipalities manage to get by without charging such as tax. Toronto can too.
Furey’s plan is to phase the tax out over a period of four years. Such a plan is more than reasonable.
How could the city make up for the revenue?
The land transfer tax brought in about $948 million for the city in 2022. But in budget 2023, former mayor John Tory increased city spending by $1.1 billion. Eliminating the land transfer tax could be compensated for entirely by bringing city spending levels back to where they were less than five months ago.
An election is time for candidates to present bold ideas. Unfortunately, most of the so-called bold ideas we’ve seen from candidates thus far is to raise property taxes and send city spending soaring even higher. A commitment from Furey to do the opposite – lowering taxes and asking city politicians to do with less – is more than refreshing.
Thus far, we’ve seen proposals to raise taxes and make life less affordable. In this time of high inflation and soaring living costs, it’s time for every candidate to come forward with plans to keep more money in taxpayers’ wallets and ask government, not taxpayers, to tighten its belt.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.