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Kim G C Moody’s Musings – 1-1-1 Newsletter For July 10, 2024


One Comment About Taxation – A So-Called Think-Tank That is Friendly With the Canadian Federal Government Proposes a Home Equity Tax


Last week, there were a number of reports about the Prime Minister and Finance Minister meeting with a government funded “think-tank” to discuss a number of issues involving “generational fairness”.  One of the ideas discussed – not a new one but once again discussed – was the introduction of a home equity tax.


This particular “think-tank” seems to think that one of the solutions to enable the youth to afford a new home is to go after older people who have worked hard historically to save to buy a home and to pay off their mortgages.  Such older people’s homes have often benefited from decades of capital appreciation. Given these circumstances, this “think tank” has the following comments on its website:


“[the think tank] believes that it’s time to protect real shelters, not tax shelters. It’s unfair to sustain a system in which the hard work Canadians do every day in their jobs is taxed more than the wealth homeowners gain from rising prices while they sleep and watch TV. 


The first step is putting a price on housing inequity by adding a modest surtax on homes valued over $1 million. This surtax will apply only to the top 12% of high-value homes – the vast majority of Canadians won’t pay a penny more. But it will help slow down home prices so earnings have a chance to catch up, demonstrating allegiance to the Canadian dream that a good home should be in reach for what hard work can earn.”


The think-tank’s website is full of the usual left-wing victimhood messaging.  It’s quite clear that, from their perspective, older Canadians are the apparent problem.


Ignoring the offensive rhetoric, is a home equity tax a good idea?  The short answer is no.  Canadians already pay a long line of taxes on their homes such as municipal property taxes, carbon taxes, and GST / HST on new-builds, renovations and utilities. In addition, if the eventual disposition of their home or rental property does not qualify for the principal residence exemption, then they will also pay capital gains taxes to the extent the property has appreciated.


How a home equity tax will solve the problem of affordability is a mystery to me.  Proposing new taxes is easy.  Governments can literally charge a tax on pretty much anything if they think the policy aligns with its intended revenue targets.  What to do once the tax revenues are raised is the tough part.  And that’s where many left-leaning fiscal policies fail.


In the present case, if a home equity tax is imposed, the affected properties will presumably – as the above quote suggests – become more affordable for youngsters to purchase. Seems dubious to me.  Market value goes back to basic supply / demand economics.  If demand exceeds supply, then prices will increase. And, again, what exactly will the tax revenues be used for by the government?  To continue to fund largesse spending?


A home equity tax proposal is consistent with the bogeyman approach to housing issues that our current government, supported by left leaning think-tanks, has taken.  First, it was foreigners that were the problem.  Accordingly, Canada introduced a ban on foreigners purchasing Canadian real estate (this ban was recently extended to the end of 2026).  In addition, it was those damn foreigners who were “underutilizing” the real estate and thus many cities like Vancouver, Toronto and other municipalities introduced a form of empty homes tax and the federal government followed suit in 2022 with its Underused Housing Tax debacle.  The second bogeyman was those “flippers” of real estate so they introduced the ridiculous and duplicative “flipping tax” in 2023.  The third bogeyman was the evil short-term rental owners / operators who operate in an area that bans short-term rentals.  So, the federal government introduced a new ridiculous and dangerous rule to deny expense deductions to such people.  And, now, fourthly, it’s those darn older people who worked hard throughout their lives to acquire and pay off their homes and had the good fortune of capital appreciation.


The bogeyman approach to tax policy is simply poor.  Yes, one of the overall purposes of tax legislation is to try to stifle mischief.  Housing supply issues, however, are a multi-faceted and complex societal issue.  Continually introducing tax rules to go after people who are the perceived problem is simply politics – and poor politics at that – at the expense of good policy. For example, our country’s housing issues are directly tied to increased and uncontrolled immigration and thus our immigration policies need to be amended.


That doesn’t mean, however, that certain existing tax rules that impact housing, such as the principal residence exemption, shouldn’t be reviewed. I’ve long stated, including in a recent podcast episode of mine, that the Canadian principal residence exemption is very generous given the unlimited amount that can be claimed.  Other countries, like the United States, have limits to their principal residence exemption.  Perhaps, in the context of overall tax reform / review, the principal residence exemption could be reviewed and targeted better.  In today’s environment, however, that would be very difficult given the fact that the principal residence exemption is very cherished and enshrined.  Any government that took some of the existing benefits away would likely pay a high political price.


Sir Winston Churchill famously stated “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.  


That quote is very wise despite left leaning economists and think-tanks who think otherwise.  History is a good guide on that as well.  For example, despite the continuous chatter that wealth and income inequality could be solved with a wealth tax, the world history with the imposition of such is horrible and ineffective thus leaving only a handful of countries around the world that remain with such a tax.


In the present case, given how desperate our current government is for tax revenues to prop up its bloated spending and political fortunes, one shouldn’t be surprised at any new form of tax that is floated.


New taxes, however, are not the answer to our country’s issues.


Instead, good governance, leadership and economic policies would go a long way to uniting our divided country.


One Comment About Leadership – Leaders Are “Fair, Firm and Friendly” – “F3”


As regular readers of my newsletter will know, I’m a Forum Chair and a Regional Director for AB for the peer-to-peer coaching firm of MacKay CEO Forums. A group of us Chairs were on a call last week discussing various issues and one of the Chairs discussed a particularly challenging situation involving his group.  He shared with the participants that he proposed a solution, after carefully pondering the situation, that he felt was “fair, firm and friendly” or what I later referred to as “F3” (and others have too).


There is a lot written on F3 but it’s not something that comes up routinely.  This particular short article discusses it succinctly:


FIRM, FAIR, and FRIENDLY: a simple guide to communicating in an assertive manner.

  • FIRM
    Know exactly what you need, communicate it clearly, and have solid boundaries. 
  • FAIR
    Don’t ask someone to do something that we ourselves wouldn’t do. 
    Say it in a friendly manner – this includes your tone of voice and non-verbal behaviour.


Yep.  Bang on.  The situation that my colleague described certainly hit the above chords nicely.  Leaders, are you following F3 when needing to communicate in an assertive manner?


[Hat tip to Darcy M for the great discussion and lesson]


One Comment About Economics: The Online Harms Act – The Economic Cost to Canada


Have you heard of the proposed new Canadian law, the Online Harms Act?  It’s a wide-sweeping piece of proposed legislation that will go a long way towards censorship.  Of course, that is overly simplified and I’ve resisted commenting publicly on it since I am by no means an expert on this subject notwithstanding the fact I am not a believer in government censorship / meddling / propaganda.


A good description of the proposed Online Harms Act can be viewed here by a very respectable Atlantic Canada law firm.  It’s worth a review.


If passed as proposed, the new Act will create a whole new bureaucracy to administer it.  I call it a “censorship board”.  Perhaps that’s harsh, but I stand by it.  And how much will it cost Canadians to create this censorship board?  Well, the Parliamentary Budget Officer just released a Report on that very topic.


From the Report:

Preliminary estimates from the Department of Canadian Heritage indicate that the Digital Safety Commission, Ombudsperson and Office will have 330 full-time equivalent (FTE) employees at full capacity. The PBO estimates that from 2024-2025 to 2028-2029 the total operating costs will be $201 million, minus any possible administrative monetary penalties, fines and/or regulatory charges collected by the Commission, Ombudsperson and Office.


Absorb that for a second…330 full-time employees to censor your content and monitor online activities.  At a cost of $201M over 5 years.  And with government largesse, I fully expect this cost to be even larger.


Overall, I find this cost to Canadians to be highly offensive.  We need to bring back economic sanity to government spending.


Bonus Comment – Quote From Me About “Fair, Firm and Friendly”


“If your approach to a challenging leadership issue is “fair, firm and friendly”, you are displaying thoughtfulness, respect, compassion, and empathy to both the challenging issue and the people involved.  You should be able to look yourself in the mirror and tell yourself that you did the very best you could under challenging circumstances.”


Leaders, are you being “fair, firm and friendly” when dealing with deploying your leadership?


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