He owns a million-dollar house outside of Vancouver, but Professor Paul Kershaw at the University of British Columbia believes Canadians like him should pay a new additional tax to help “disrupt a root cause.” of the growing gap between house prices and people’s earnings.
Kershaw is the author of a new report that will surely arouse controversy. Entitled “Wealth and the Problem of Inequality Across Generations,” the 67-page report recommends a property tax to “stop” the prices of homes costing more than $ 1 million.
“We can start this way by putting a price on housing inequality by adding a modest excess tax (starting at 0.2 percent and peaking at 1 percent a year) on homes worth more than $ 1 million to curb housing prices. so earnings have a chance to catch up, Kershaw said in a statement Wednesday.
Under the deferred tax, the owner of a $ 1.2 million house would owe $ 400 a year; the owner of a $ 1.5 million house owes $ 1,000 a year.
The tax would only be applied to a value over $ 1 million. Under the plan, a home worth $ 1 million to $ 1.5 million would see 0.2 percent tax levied; a home worth $ 1.5 to $ 2 million would have a tax rate of 0.5 percent. And houses over $ 2 million would have a tax of 1 percent.
The report says that apart from curbing the hot housing market in Canada, the billions earned on the new additional tax – between $ 4.5 and $ 6 billion could be raised, according to the study – can be used to provide housing benefits to tenants in Canada, together with other initiatives such as investments in new custom-built rental units and environmentally friendly cooperatives.
The new report argues that the proposed overtax will “reduce the tax haven that encourages Canadians to rely more on rising house prices as a strategy for savings and wealth accumulation than they otherwise would.”
The report goes on to say that a reduction in tax havens will “disrupt feedback loops that are burning for rising housing costs. This would slow down the escalation of housing prices and improve affordability; reduce inequalities, including between tenants / owners and younger / older Canadians, ”Notes the report.
The report says that federal and / or provincial governments should implement the “annual (deferred) progressive additional tax” – deferred because it will only be applied when these high-priced homes are sold or inherited.
According to the report, a competitive interest rate would be charged on any deferred tax payment. “This deferral practice is already common across provinces when it comes to collecting annual property taxes from seniors,” the report said.
The study goes on to say that only 9 percent of households in Canada would be affected by such an additional tax – homes in the “most valuable main homes” in the country – including 13 percent of Ontario homes and 21 percent of those in BC.
The study noted that a recent poll by Angus Reid found that while 40 percent of Canadians want house prices to continue to rise, 60 percent want to see prices stagnate or fall.
The additional tax report was funded with support from the federal National Housing Strategy’s Solutions Labs program, administered by Canada Mortgage and Housing Corp.
With input from more than 80 experts, the Generation Squeeze Lab at UBC’s School of Population and Public Health published the report. Kershaw is the founder of the laboratory and conducts research through the public health school.
The professor says the supplement proposal will no doubt create controversy. But he is willing to put his money where his mouth is, he says.
His house, a single-family property he bought in 2004 for $ 540,000, was valued by the province of BC on Tuesday at $ 2.2 million, up from an earlier valuation of $ 1.7 million.
“I’m now in the top two percent of households in terms of the most prosperous we have in housing wealth (in Canada). And I certainly suggest taxing people like me more.
“The reality is, literally, that over the last year or so, I’ve earned half a million dollars in fortune. I’m a hard-working professor, but that’s three times my income, wealth that I get while I sleep. .
“Yet someone as smart as me and just as hard-working now can not afford to live where I do. It’s something we should no longer think of as positive,” says Kershaw.