For many Canadians, owning and eventually paying off their home represents the bulk of their retirement nest egg.
Usually a home will keep up or exceed the rate of inflation so that it may be two or three times its original value by the time the amortization period runs out in 25 or 30 years.
As the attached article points out, the decision to tax a portion of “capital gains” (asset appreciation) in Canada was made in 1981 when the Carter Commission declared that “a buck is a buck is a buck,” meaning that making a buck by way of asset appreciation (which was not taxable at that time) should in fact be taxed.
However, to encourage home ownership, people’s principal residences were exempt from capital gains tax in most circumstances, a situation which holds to this day.
There are two disturbing issues which may undermine this Canadian staple of wealth accumulation by ordinary citizens.
One is the position of Evan Siddall, the current head of CMHC (the Canada Mortgage and Housing Corporation), a federal entity which insures high ratio (80% Loan To Value or higher) mortgages.
“Our dream of home ownership is static and regressive…. We need to call out the glorification of home ownership for the regressive canard that it is.” (Siddall)
Home ownership is “regressive canard?” This is coming from the head of CMHC?
In my view, the man is not fit to hold that position and should be summarily fired.
The second issue is the matter of the ballooning federal debt.
It took 78 years to grow the federal deficit to $11B (1867 to 1945).
The following 25 years saw the debt grow to $20B (1970).
During the ensuing 50 years the debt grew to approximately $692B.
However, due to the government’s less than stellar handling of the COVID-19 pandemic, that deficit grew by almost $350B IN FOUR MONTHS of 2020!!
It now tops out at over $1T.
With Trudeau’s upcoming throne speech said to be hinting at turning Canada into a socialist, green Canadian utopia, you have to know that new taxes are on the way as sure as the sun will come up tomorrow.
With the top marginal tax rate in BC, Quebec, Nova Scotia and New Brunswick already topping out over 50%, there is not a lot of room for an increase on income taxes.
66% of Canadians own a home and that store of value may just be too good to pass up for the next Liberal tax grab.
©Pazder Law Corporation (2020)
Questions? Call Kenneth Pazder or Melissa Valana (604-682-1509) at Pazder Law Corporation anytime for a free consultation.