Indications that the federal government is considering introducing a potential capital gains tax on the sale of primary residences should be of great concern to Canadians, says the B.C. director of a taxpayers’ advocacy group.
“We think people really need to pay attention to the potential for either a capital gains tax or a form of a home equity tax on the sale of your primary residence,” Kris Sims, British Columbia director for the Canadian Taxpayers Federation (CTF), told The Epoch Times.
“So what that means is the house you’re living in right now, if it’s your only house, when you sell that the federal government is seriously thinking about nailing you with a brand-new tax.”
Sims points to research paid for by the government, through the Canada Mortgage and Housing Corporation (CHMC), to the tune of $250,000 to examine a possible tax on principal residences, first reported by Blacklock’s Reporter last July.
“The objective is to identify solutions that could level the playing field between renters and owners,” the article quoted CMHC spokeswoman Audrey-Anne Coulombe as saying.
The research was conducted by Generation Squeeze, a group founded by Paul Kershaw, a professor at the University of British Columbia’s School of Population and Public Health. A self-described lobby group for younger Canadians, Generation Squeeze released a report on housing affordability in 2019 titled “Straddling the Gap” that described the non-taxation of capital gains from principal residences as “tax shelters [that] have encouraged the commodification of housing in Canada.”
In the wake of Blacklock’s article, then-CMHC chief executive officer Evan Siddall denied the claim that the national housing agency was funding a study looking at a home equity tax.
However, Sims said the CTF obtained documents under the Freedom of Information Act that support the claim, including emails between CMHC and Generation Squeeze. The Epoch Times has seen the email records.
“Policy adaptations that will receive attention include opportunities to shift from some current or future taxation of earnings toward more taxation of housing wealth,” reads an email from Generation Squeeze founder Paul Kershaw to Siddall on June 19, 2019.
The project’s charter, which was signed by Generation Squeeze and the CMHC in March 2020, also directly refers to an examination of tax policy.
“So we do have evidence that [the Liberals] are seriously thinking about it,” Sims says.
“We think that Canadians should be very concerned about this, because the federal government [is] spending money left, right, and centre with no regard to the fact that they’re deepening us into debt and deficit spending, and so they’re going to be sniffing around for money.”
In an email response to The Epoch Times, a CMHC spokesperson referred to a Twitter post dated July 17, 2020, about “ongoing misinformation” that the corporation was funding research on a home equity tax. “A home equity tax is NOT the focus of the upcoming #housing research,” the post said.
The post included a statement noting that the CHMC had contributed $250,000 to Generation Squeeze for an 18-month project “that will examine issues relating to housing, wealth, and inequality.”
The CMHC didn’t directly respond to questions regarding the emails between Sidall and Generation Squeeze, nor did it comment on whether the federal government is considering a capital gains tax on principal homes.
Philip Cross, an economic analyst and senior fellow at the Fraser Institute who noted in a recent Financial Post commentary that property tax is a form of wealth tax, says a capital gains tax on primary homes is difficult to carry out in practice.
“It sounds very tempting, but just like with a wealth tax, when you come down to actually designing it in a way that raises revenue, governments have found that in practice it’s very difficult to design something that raises significant revenue,” Cross said in an interview.
An example he gave was France scrapping its wealth tax after concluding that it would only force the wealthy to flee the country. Germany ruled a wealth tax to be unconstitutional, while Austria abolished its wealth tax due to high administrative costs and the burden it put on small businesses.
Cross says he’s “not surprised” Ottawa is looking at ways to increase revenue.
“I bet they’re thinking about an awful lot of taxes because they’ve got quite the deficit problem to solve and they don’t seem very interested in solving it through spending restraint, so automatically there’s going to be tax increases,” he said.
“There’s a lot of challenges with government spending and we should be looking at ways to slow down. Instead, we seem to be going in the opposite direction.”
Proceeds from the sale of a primary residence have always been exempt from federal taxes. Sims said if a home equity tax is in fact introduced, it could lead to more housing affordability problems.
A capital gains tax on principal residences could take away thousands of dollars from Canadian families—money that could be used to support the livelihoods of seniors after retirement, or help younger generations pay for post-secondary tuition, she noted in a recent Toronto Sun commentary.
“If homeowners know they’re going to get nailed with a big tax if they sell, they could stay put and not sell, taking that starter home off the market. Or they could just tack that new tax cost on to the listing price, making the home more expensive,” Sims wrote.
“Lower supply and higher prices doesn’t make housing more affordable.”
The CTF has launched a petition calling on the federal government to drop plans for a home equity tax, and Sims encourages Canadians to sign it.
“We can fight back. We live in a democracy. Politicians are responsive, especially if their jobs are on the line.”