Sunday afternoon. The uppity part of town. Two provincial politicians, opposites, face a daunting crowd to debate a polarizing issue. To wit – should some people pay extra tax because they own more, regardless of what they paid, or earn?
In BC, and especially Vancouver’s Westside, this is burning issue of fairness. The people who own houses pushed absurdly higher by a delusional real estate market says it’s grossly unfair they should now pay more property tax, just ‘cause. Those who wish they had houses say it’s only fair ‘multi-millionaires’ cough up as much as possible, to bridge the wealth divide.
These days the Dipper government is 100% on the side of the have-nots, wannabes, envious and angry. After all, this is politics. There are way more votes on one side of the ledger than the other. Odds are overwhelming the extra property tax that people living in $3 and $4 million properties now face ($2,000 more a year) will stay. The protest that surrounded Sunday’s event is a lost cause. This is class warfare – the first inklings of a progressive wealth tax in Canada, based on real estate.
The new BC levy is an asset tax. It matters not what someone who owns it paid to acquire it, or what they earn (they could be retired and on a fixed income). For that reason the provincial Libs label it a dangerous precedent and some warn such a surtax will migrate down to include $1 million houses (over 90% of all detacheds in YVR would be captured). The radical moister organization ‘Generation Squeeze’ is calling for more – a new 1% surtax on all houses valued at more than seven figures, adding $10,000 a year to the average homeowner’s overhead and essentially doubling their property tax. Because, of course, real estate now = wealth. And the wealthy (mostly Boomers) should hand it over.
Witness some comments in the local media this weekend:
Awww is mean and nasty (NDP cab minister David) Eby going to take some of your precious money if you have a house worth more than $3,000,000. Good for Eby, he should be taxing the wealthy home owners to help fund affordable housing for average people. Working people can no longer afford to live in Vancouver any more, unless steps like this are taken, there will be no one to provide services. Go get them David. I love hearing the wealthy squeal. HaHaHaHa.
Of course, all the money collected in the tony hood wouldn’t build a single six-plex and won’t put anybody into an affordable house but, as you know, that ain’t the point. It’s revenge. This is what happens when wealth inequality builds, then amplified by a phemon like the Canadian real estate bubble. When the masses think of life’s economic unfairness, they have a most visible symbol. Houses.
There is no wealth tax in Canada, yet. Property tax – a levy based on the market value of land and buildings – is the closest cousin. The inherent unfairness of taxing an asset divorced from its acquisition cost of the financial means of its owner, has been recognized by government. That’s why seniors or folks of modest incomes in BC can defer their property tax bills until they sell – when the accumulated amount is deducted from the sale proceeds.
What the provincial NDP is doing is new. The property tax surtax, payable when a property rises to a certain valuation (determined by a government agency), is just a penalty for an event the owner had nothing to do with. Unlike regular property tax – which funds schools, garbage collection, cops and area first responders – the Westside Wallop will go into general government coffers. So it’s existence as a wealth tax is confirmed.
Now that we have a new uber tax bracket in Canada, thanks to T2, and the marginal rate on incomes has drifted up to the 53% mark, there’s not a lot of room left to Hoover up what higher-income people earn. Despite that, the Ontario NDP (if elected) are proposing to boost the top rate to a withering 55%. (We may be 11 days from a fateful night in Toronto.)
So, like the Gen Squeeze people insist, wealth taxes are coming as the Canadian political landscape leans left. As stated, that will target real estate.
And here’s the irony – that’s not where the wealthy actually keep their riches. Check out this chart from New York University’s Edward Wolff. While the data is American, the results would be even more skewed in Canada, where house lust is unbridled.
The conclusion? Real estate ownership is a middle-class obsession. The top 1% of society have just 10% of their net worth in property. The bottom 90%, in contrast, are obsessed with houses – with almost 60% of wealth tied up there. It’s no coincidence, either, that the amount of debt carried by the rabble (74%) is crushing, as people over-reach, over-leverage and over-pay for assets they could rent and use for a fraction of the cost.
Tax the wealth? Be careful what you wish for, kids.