Forum > Provincial and Local Politics

Why are we subsidizing property taxes of millionaires?

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kimmy:
Here in BC we have rapidly rising home prices, and we have a homeowners grant to that gives you a $570 (or higher, depending where you live) discount on the property taxes of your primary residence, provided it's valued at $1.2 million dollars or less.  Those two phenomena collided recently, as many homeowners discovered they were no longer eligible for the grant and proceeded to howl loudly.

http://www.news1130.com/2017/01/18/bcs-housing-market-pitting-one-generation/

No problemo, declared BC Finance Minister Mike deJong. We'll raise that threshold to $1.6 million, so you can keep your grant.

The government of BC spends about $820 million per year on the homeowners grant, according to the article I linked. We should ask: is that a wise use of provincial funds?  Is it an equitable use of provincial funds? My view is that the answers are "probably not" and "definitely not".

What is the actual point of this grant?  If the goal is to promote home ownership, maybe this policy is exactly the wrong way to achieve that objective. This policy rewards people who have already got into the home ownership game, at the expense of people who can't get into the home ownership game.  That $820 million worth of grants to homeowners has to come from somewhere else in the revenue stream.  They're collecting $820 million in taxes from British Columbians in general, and gifting it to just home owners.  They're robbing Peter to pay Paul.  As a home owner myself, I certainly appreciate receiving a property tax grant.  But just because it works out well for me personally doesn't make it a good policy.

Giving people a tax break because they made a bunch of money is contrary to how taxation is supposed to work.  Skyrocketing housing prices have created legions of new millionaires in BC. My own modest home, far from the housing boom areas in the lower mainland, has increased in value by about $20k in the past couple of years... typical properties in the Vancouver region are worth 10 times as much and have grown at a faster percentage rate. Property owners have seen their assets increase by the equivalent of several years of income, just by being in the right place at the right time.  They don't deserve a tax break for receiving a windfall.

Property values and resulting taxes have gone up rapidly. Then again, so have rents.  When I was a renter I don't ever recall getting a government subsidy to cover rapidly growing rent... I don't recall the Finance Minister ever tinkering with tax policy to make sure I could afford to stay in my home.

And... why is it "good" to help people stay in homes they can no longer afford the taxes on?   When these kinds of stories are in the news we always get a sob-story about some sad old widow who is afraid she will lose her home because the property taxes have gone up.  Well, maybe she should sell her home and move some place she can afford. She's got a million-dollar asset that she can cash out... why does she need help from the general public? She's a millionaire.

Why have her property taxes gone up so much?  Because housing prices have gone up so much. Why have housing prices gone up so much? Because there is extremely high demand for homes in her area. Why is the demand so high? Because people like her are clinging to their homes instead of selling them and moving someplace more affordable.  Ultimately, getting the sad old widow to sell her home and move someplace more affordable is one of the keys to addressing housing prices in the Lower Mainland.   Vancouver needs workers, workers need homes, and the sad old widow could make a nice profit by moving someplace else.  If she's too attached to her neighbors or her home to consider moving, I guess that's her decision, but I don't see that other British Columbians should support her nostalgia with their taxes.



 -k

wilber:
My mother in law was one of those. A single parent mom who lived her whole life in the same house that had belonged to her parents since 1914. She had a small pension and kept an illegal suite in the basement so she could pay her taxes. The place (lot, it was a teardown) was worth over two million when she died but she was determined to die in that house no matter what it took and no matter how much better she could have lived materially if she sold, and that is what she did. There are more important things than money to many people and I don't think people should be taxed out of homes they have spent most of their lives in.

kimmy:
If that's her choice, that's her right, but I don't see why others should be required to subsidize her decision. Especially renters who didn't get to benefit from the housing market windfall, and young workers who might never be able to afford home ownership in BC at the rate real estate prices are growing.

It might be unfair that property taxes could potentially force seniors to sell their homes and move, but there are a lot of unfair things going on in the housing market, and I'm not sure that millionaires having to pay taxes even cracks the top 10.  The phrase "asset rich, cash poor" is often heard among retired people who have solid assets, like a paid-for home, but lack funds to pay their expenses, such as property taxes.  Well, there are financial strategies designed to resolve this dilemma by borrowing against the value of their home.   She gets to keep her home, the rest of us don't have to subsidize her taxes, and everybody wins... except for maybe her heirs who inherit a slightly smaller estate once her loan is paid off.

But it's slightly annoying that we always have to talk about the sad old widow as if she's the representative for everybody whose property taxes are going up.  I think the truth is that she's actually not typical at all, I think she's actually a pretty rare exception. What if instead of talking about her, we talk about a well-off double-income couple who bought their home before real estate prices exploded and are laughing all the way to the bank?  Why should they get a subsidy?  They do, after all. These subsidies aren't means-tested.

It seems to me that this whole concept is tremendously unfair-- the government is providing over $800 million in financial assistance to the wealthiest British Columbians, money that's coming, in many cases, from people who will never accumulate the amount of wealth as the people whose property taxes they're subsidizing.

It's disgusting and perverse.

 -k

Blueblood:
I think a lot of people in bc are going to have to start asking themselves the is it worth it question if they want to keep being House poor.  It is an unsustainable runaway freight train and if interest rates rise, a lot of people are in trouble. 

I would wonder if in the future with new tech jobs would people be able to work more and more at home and if in the future the continuation of the upgrade of rural internet services.  There are places in the prairies in small villages where houses cost less than a car and in the east coast where home prices are very reasonable.  That's how I think the problem gets solved as people are now slaves to their houses.

msj:
But seniors can defer the payment property taxes to stay in your home: http://vancouver.ca/home-property-development/defer-your-taxes.aspx

I'm with Kimmy on this: tired of homeowners getting so many breaks.

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