Two Ideas to Curb Real Estate Price Growth in Canada Without Undue Impact on the Inflation Rate of Other Products

Presumptions

1. Taxes are no longer just a way for governments to pay for projects and nations to create assets. Fiat currencies are about the public’s trust in current and future good governance & about supply and demand. This means that taxation today can effectively remove money from circulation thus increasing the value of the currency and counteracting inflation.
2. for the economy to function there has to be a movement of capital & money. Unused properties, unused machines & large amounts of cash in corporate bank accounts are all examples of economic spillage
3. Economic & tax policies should serve the broader political and social agendas of the country while remaining fair to individuals
4. There are (from societies point of view) productive & unproductive assets/investments. A factory producing a widget for which there is demand is a productive asset. A $19,000,000 four bedroom home or an I rented apartment/building/office is an unproductive asset.

Idea No. 1

Put a cap on the primary residence exemption. Housing is not, and should not be a retirement plan. The goal of housing policy should be to make affordable and adequate shelter attainable by all at reasonable rates.

If we were to cap the principle residence exemption at $500,000 or $1,000,000 it would have two effects:

People wouldn’t buy and hold housing they no longer require, to take advantage of capital growth that is not adding to the economy.

Additionally, individuals in homes that are considered more upmarket or luxurious would pay taxes effectively removing surplus dollars stored in (from a social point of view) under utilized housing and removing them from general circulation (thus lowering inflation).

Idea No. 2

When purchasing a property make the effective value of that property for property tax calculations the higher of the MPAC assessed price or the purchase price.

If the purchase price is greater this should be used as a baseline from which to calculate taxes for the following 3, 5 or 10 years.

If we believe the market determines the value of a property then it should be taxed at that rate, not an artificially lower one.

Effectively by increasing the carrying cost of a property it helps bring the value in line with more productive investments.