It was a bleak time for the Vancouver middle class. Money was pouring into the red hot housing market from Asian investors and pricing everyday people out of the market.
The premier heard their cries. Flashing a trademark grin, the premier announced a major tax increase.
“Foreign investors, many speculatively, (are) driving up home prices beyond the reach of British Columbians,” the premier explained. “These people paid no tax and most (have) never paid a B.C. tax of any kind… these welcome newcomers should also contribute to the needs of the province and this should be done through some sort of ‘property transfer tax.’ ”
No, this wasn’t Christy Clark on July 25, 2016. This was 1987. And the smiling premier was Bill Vander Zalm.
Those quotes, pulled from Vander Zalm’s two books written long before the current real estate boom, remind us of how these problems keep coming back. The property transfer tax was originally created to apply only to the top five per cent of properties. But that luxury tax, under the watch of both NDP and Liberal governments, quickly became a tax on everyone.
Clark’s new foreign investor tax is riddled with loopholes. It doesn’t address the problem of the Quebec Immigrant Investor Program, which allows foreign millionaires to buy their way into Canadian permanent residency status. Any investor with a family member with permanent residence or citizenship could simply buy property through them. In Australia, a similar tax was hamstrung by numbered companies and other creative dodges.
Even if it does work, it could simply move these investors to Victoria, Nanaimo, Kelowna, Whistler or Fraser Valley estates, driving up home prices for people there.
Targeted taxes, as we saw with Vander Zalm’s 1980s property transfer tax, often become everyone’s taxes.
Moreover, you can bet wealthy investors will use their cadre of lawyers, accountants and tax experts to find ways around it. In response, government will try and close those loopholes. This will inevitably cause the tax to spread to other people. The bureaucracy will grow and the government will become dependent on whatever revenue it does manage to catch. And housing will still be out of reach for many families.
The B.C. Liberals’ housing plan ignores a major hurdle to making homes more affordable: supply. Last week’s announcement doesn’t speed up municipal bureaucracy, which is currently choking three-and-half years’ worth of construction starts. Nor does it force mayors and councils to look at their ridiculous housing tax regimes.
In fact, it makes it even worse. By going along with Mayor Gregor Robertson’s ill-conceived vacancy tax (another key piece of the plan announced by Clark), the B.C. Liberals have ensured Vancouver property taxpayers will be on the hook for collecting an expensive, unworkable tax.
Today, if you believe polls, these tax measures have public support. There’s no tax quite as popular as a tax on someone else. But will the people still be on board once the bills come in for collecting the Vancouver vacancy tax, or when the foreign investment tax has to morph to catch the money coming into the country? Or if housing prices are unaffected? Or if housing prices plunge and Canadian homeowners owe more than their home is worth?
No doubt, some years from now, some other smiling premier will try another tax to protect British Columbians from skyrocketing housing prices.
In B.C., the more things change, the more things stay the same.
Canadian Taxpayers Federation