In an April 5 opinion piece published in this paper, SFU assistant professor Josh Gordon argued that the NDP government’s revised Speculation Tax was “essential for housing affordability” in B.C.’s main urban centres.
He went on to write: “If critics of the Speculation Tax want to keep up their opposition, they must now defend the status quo. And the status quo is hard to defend.”
According to Gordon, the changes made by the government on March 26 to the original proposal cleared up what critics saw as its only two flaws. Vacation areas such as the Gulf Islands and Parksville were now excluded and B.C. owners of second homes who were undergoing medical care would be exempt from the tax.
With these changes (plus a $2,000 credit for low-income B.C. owners of second homes), the new improved tax was “fixed”, in Gordon’s expert opinion.
Gordon then went on to proclaim that only this amended version of the NDP government’s Speculation Tax could prevent Vancouver and Victoria from becoming clones of Monte Carlo, resort playgrounds for the “global elites.”
For Gordon, at least, the choice on this issue is pretty stark: Either you stand with the global “elites” and their developer/real estate agent cronies or you stand with defenders of the NDP Speculation Tax. There is no middle ground. There are no better alternatives. End of debate.
This is totally illogical and a bit insulting. If graduate student Gordon had used this kind of argument to defend his PhD thesis a few years ago at the University of Toronto, he wouldn’t be teaching today at Simon Fraser University. Gordon knows perfectly well that he is trying to force readers to choose between two options and close the debate without allowing British Columbians to consider better alternatives.
I call this the “Butch Cassidy and the Sundance Kid” choice between two bad alternatives. Either you surrender to the status quo posse tracking you down (probably Albertans) or you jump with Professor Gordon off the cliff into “Speculation Tax Creek”.
So why is the amended Speculation Tax still bad policy?
Gordon focuses his article exclusively on foreign owners of property in Vancouver and Victoria who pay no income taxes in Canada. He adds that only one per cent of B.C. resident owners in the designated areas will now have to pay any Speculation Tax.
Nowhere in his sales pitch does Gordon mention that 100 per cent of out-of-province Canadians, thousands of families, have been caught in the Speculation Tax net. These people pay plenty of federal and provincial tax in Canada for which they will receive no credit. Many of these part-time residents of B.C. purchased properties years and even decades ago. They use these houses and condos regularly. They spend a lot of time and money in their communities.
It’s difficult to qualify these owners as parasites. These Canadians pay full municipal taxes in B.C. Since they are not resident in B.C., they get no reduction for the Homeowners Grant. They pay for education, but don’t use the system. They are not able to use Medicare in B.C. They don’t even qualify for B.C. Senior discounts on the ferry system. They pay for roads through their municipal property taxes and gas tax. They pay for policing the same way. They pay plenty of sales tax.
So, exactly what provincial services do these eastern invaders consume for free? Perhaps beautiful views of the Olympic Mountains or Mount Baker? No, those are in Washington State, aren’t they?
Professor Gordon did also mention these Canadians don’t pay for B.C.’s “legal system”. Perhaps they should. Their lawyers will soon be big users of that system if the Speculation Tax goes ahead in its current form.
The biggest flaw in the application of the Speculation Tax to Canadian owners is that it is, in effect, retroactive. The Horgan Government is preparing to say to thousands of owners: “Thank you for buying your property in B.C. years ago when we were looking for buyers. Thank you for spending lots of money in our province over the years. Thank you for maintaining your property so well. Now, give us back the use of your home or condo. If you can’t afford the 200 per cent annual property surtax (the equivalent of one per cent of evaluation), tough luck. You will have to surrender the use of your property. Either you sell, you rent, or you move to B.C. very fast. And please vote for us.”
This is, in effect, expropriation, without any compensation. The tax is retroactive, because it won’t just apply to future buyers. It applies to all owners, whenever they bought. This will be the basis for the multiple legal challenges the Speculation Tax will face. The class action lawyers are already lining up for this business.
So, what are the alternatives to the current proposal?
There are at least four alternatives. All would be better than the NDP’s Proposal:
1) Eliminate the tax for all Canadian residents who pay income tax in a Canadian Jurisdiction. This is by far the cleanest and best alternative.
2) Apply the tax only to properties which are truly vacant (ie: not regularly used). This would require self-reporting and some audits. This is how Canadians declare their income taxes. It seems to work.
3) Apply a 10 per cent refundable tax to purchases made by out-of-province buyers after Jan. 1, 2019 (or a date set by the Legislature). The tax would be 100 per cent refundable (without interest) if the buyer moved to B.C. within three years and refunded on a declining scale reaching zero after six years;
4) Apply a “Provincial Services Surtax” to second properties owned by out-of-province Canadians purchased after Jan. 1, 2019 (or a date set by the Legislature). Similar to a levy used in Prince Edward Island, the surtax would be set at 0.20-0.25 per cent of evaluation. This would increase average property taxes by 30-40 per cent. The surtax would cease if the owners moved to B.C. The tax would be significant but bearable for most owners.
Options 1 and 2 are clearly the best. However, Options 3 and 4 might help cool demand. More important, they are not retroactive, unlike the current NDP proposal.
Gordon and his academic colleagues have a right to their opinions. But, when they go into full salesman mode, they should be honest enough to admit their arguments are aimed at stampeding their audience towards a preferred ideological solution. There are other, better choices.
Stephen Bigsby is a third generation Victorian. He served as Director of Economic Development for Metropolitan Montreal from 1980 to 1995. He is a resident of Toronto. Since 2008, his family has owned a 1,000 sq. ft condo in Esquimalt. Depending on which lawyer or accountant he talks to, he may or may not be a “speculator.”