With the mayoral race heating up in Toronto, and the candidates trying to convince voters that they are best for the job, Toronto mayoralty candidate Olivia Chow recently proclaimed that if elected, she will raise the city’s land transfer tax by one per cent to fund a school nutrition program.
Now, before everyone in Toronto gasps, according to Ms. Chow, the proposed increase will only apply to transactions that exceed $2 million. She added that Chow said the tax would apply to only a fraction of annual real-estate transactions in Toronto. Since September 2013, 473 homes and 56 condos sold for more than $2 million. According to Chow, her plan will make the system “more progressive.” She said people paying more than $2 million for a home can afford an increase in the land transfer tax. Chow says the increase will raise about $20 million a year.
For those that aren’t familiar, click here for more information about Land Transfer Tax. A quick refresher, Toronto’s Municipal Land Transfer Tax (MLTT) is paid by a purchaser of a home or business in the city. Toronto is the only municipality in Canada with a MLTT and it’s paid in addition to the provincial land transfer tax, which is slightly higher.
As it stands today, the purchaser of a house with a $2,000,000 sale price would pay $72,200 in land transfer taxes, specifically, $35,725.00 for the Toronto Land Transfer Tax and $36,475.00 for the Ontario Land Transfer Tax.
EDIT: Her plan is actually for a 1 percentage point hike, not just a 1 per cent hike — which is a substantial difference.
People buying a $2,000,000 home would pay 56 per cent more than they do now, $55,725 instead of $35,725. Which would bring the total Land Transfer Tax to $92,740.00 compared to the $72,200 they would currently be paying.
My prediction is that if this (or something like it) were to pass, it would hurt the just over $2,000,000.00 (namely the $2-2.2 million) real estate market, as people in that market would likely try to only spend $1,999,999.00 to avoid the extra $20,000.00 in closing costs. Or it would drive people out of the city into often larger, more luxurious homes for the same 2 million dollar plus price tag, but likely with more land and/or home.
The Oct. 27 election is now less than two months away. Some of you may recall my previous blog post regarding the possibility of eliminating or reducing the MLTT (click here).
One thing is certain, this remains a hot button election issue. Do you think Toronto should increase or decrease the municipal land transfer tax? Or, should they keep it the way it is?
Whatever your opinion on the issue, for those that live in Toronto, let your voice be heard, and vote on October 27th.