July 6, 2021 – Toronto City Council should reduce rather than increase the land transfer tax (LTT) on high-end homes, according to a new report from the C.D. Howe Institute.
In “The Economic Cost of Toronto’s Land Transfer Tax,” authors Benjamin Dachis, Bev Dahlby and Jack Mintz find any move to increase the tax would have a high economic cost.
“With Toronto City Council scheduled to discuss an increase in the land transfer tax on high-end homes at an upcoming meeting, the study is very timely and provides councillors with reason to pause,” notes Mintz.
Economic studies have generally found that a land transfer tax has a relatively high economic cost because the LTT discourages people from moving to more favourable locations or housing when they can do so.
When combined with the provincial LTT, the authors find that the current combined rate of 5 percent on homes in excess of $2 million is highly distortionary and is close to the rate that maximizes total LTT revenues for the city and province combined. Any further increase in the top LTT rate by Toronto, while increasing its own revenues, would reduce the government of Ontario’s LTT revenues by more than Toronto’s.
Recently, Toronto City Council passed a motion instructing the city manager and the chief financial officer and treasurer to provide the council with an estimate of the revenue that the city would obtain and a study of the economic impact of an (unspecified) increase in the municipal land transfer tax for homes valued at or over $2 million, $3 million, and $4 million, respectively.
The authors argue that council should instead reduce the top LTT rate because it is a costly source of revenue to the wider economy.
For more information contact: Benjamin Dachis, Director of Public Affairs, C.D. Howe Institute; Bev Dahlby, Fellow-in-Residence, C.D. Howe Institute, and Research Fellow, School of Public Policy, University of Calgary; Jack Mintz, President’s Fellow, School of Public Policy, University of Calgary, and Senior Fellow, C.D. Howe Institute; or David Blackwood, Communications Officer, C.D. Howe Institute, 416-873 6168, email@example.com.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.