The adoption of a municipal land transfer tax in other Ontario communities carries a huge economic cost, a new report suggests.

In a study commissioned the Ontario Real Estate Association (OREA), the groups warns that the implementation of the tax in Mississauga, Hamilton, Ottawa, London and Thunder Bay would cut economic activity in those communities by nearly a billion dollars over five years. The municipal tax would also result in the loss of tens of thousands of home sales and the loss of hundreds of jobs in the construction and renovation industries.

Impact of implementing a municipal land transfer tax (MLTT) on home resales over five years:

  • Mississauga would lose 8,093 in home resales
  • Hamilton would lose 5,741
  • Ottawa would lose 9,118
  • London would lose 4,540
  • Thunder Bay would lose 1,005

Impact of implementing a MLTT on employment over five years:

  • Mississauga would lose 3,157 jobs
  • Hamilton would lose 2,240
  • Ottawa would lose 3,558
  • London would lose 1,117
  • Thunder Bay would lose 392

Despite the potential economic impact, however, many municipalities are considering asking the Ontario government to charge home buyers the additional land tax in addition to the provincial one already in place to generate additional income. For example, if it is introduced in Mississauga, the city would rake in an additional $74 million in revenue a year.

"Toronto's not the only municipality that has fiscal challenges across Ontario," Pat Vanini, executive director of the Association of Municipalities of Ontario, told CTV Toronto.

The tax is currently in place in Toronto and has been a lucrative source of revenue for the city. Last year, it generated more than $350 million for the city. The tax is applied to purchases on all properties in the City of Toronto, and amounts to approximately $4,000 for the average home.

The tax, however, has dashed the dreams of many potential homeowners in Toronto, and also carries a huge cost for the city when it comes to economic activity and jobs, the OREA said. In a recent report, the OREA said if the municipal tax was eliminated, Toronto would see a $2.3 billion economic boost and the creation of 15,000 jobs.

How the municipal land transfer tax works:

  • .5 per cent applied to homes under $55,000
  • 1 per cent applied to homes between $55,000 to $400,000
  • 2 per cent for homes over $400,000

First-time home buyers in Toronto are exempt from paying $400,000 of the tax.

Election issue

The tax has previously been a hot topic during municipal election years.

In 2010, Rob Ford promised voters he would scrap the tax if he was elected mayor. Ford, however, has failed to put a dent in the tax, blaming the lack of support from his fellow colleagues at city hall for being able to fulfill his election promise. That has not stopped him from making the same promise again.

Ford says if he is re-elected this fall, he vows to eliminate the tax.

"This is not the way to run the city. So why should we put the burden of a double tax on the homeowners for buying homes in the city," Ford told CTV Toronto on Tuesday.

Ford is the only candidate to make that promise so far. The other front-running mayoral hopefuls say it's just not financially realistic to cut the tax.

According to John Tory, the revenue generated from the MLTT is needed to balance the books.

"I'm not going to talk about putting away with it until I can find someone to replace that money," Tory said.

Olivia Chow says eliminating the tax may result in an increase in property taxes.

"I don't think there should be any changes because we don't want property taxes to go above too much the rate of inflation and also we need to invest in the our community," she said.

Meanwhile, both David Soknacki and Karen Stintz say they would be in favour of reforming the tax.

"We need to make the tax fair by raising the minimum for where the tax begins to apply and we also need to better explain where that money is going so that people feel that it is being spent wisely," she told CTV Toronto.

Soknacki said he would modify the tax to favour first-time home buyers.

"What I would do is move the brackets up with inflation so people buying their first home or (homes) that are less expensive won't be hit nearly as much," he said.

In a recent Ipsos Reid poll, 58 per cent of Torontonians said they would support a reduction in the land transfer tax. The online poll is considered accurate plus or minus 4.9 percentage points, 19 times out of 20.

Municpal Land Transfer Tax Report

 

With a report from CTV Toronto's Paul Bliss and Natalie Johnson