Christy Clark is the new Premier Designate

[msj]

Being able to buy any home in the lower mainland of BC is the most expensive home you can afford. Same goes for the Okanagan.

Yes, and people can choose to rent.

Oh, and there is no HST charged on residential rent.

In fact, my wife and I are renting a nice condo right now because we think people are crazy.

The place we are renting is costing us 25% what it would cost to pay for a mortgage on it (assuming 20% down), strata fees, and property taxes.

In fact, the price these units are selling at is 32 times the annual rent (i.e. higher than in places in NY).

And this isn't even in the lower mainland - it's across on the Island where prices appear to be better (emphasis on "appear.").

[msj]

Gross or after tax? Based on my own industry it has been downhill since the late eighties.

Then change industries.

[msj]

There is a lot to say when you are shifting the tax burden from one part of the economy to another. That is the essence of this debate.

So, why is it okay for the auto mechanic to have to charge PST on his services but not okay for a restaurant to charge HST on its food service?

Why is it okay to charge PST on a washer/dryer but not okay to charge HST on laundromat services?

Etc...

The PST was brought in the 1940's when BC was about producing goods and services were a small part of the economy.

It's only natural to update and modernize the tax system even if it takes 65 years to do it.

[Wilber]

Yes, and people can choose to rent.

Oh, and there is no HST charged on residential rent.

In fact, my wife and I are renting a nice condo right now because we think people are crazy.

The place we are renting is costing us 25% what it would cost to pay for a mortgage on it (assuming 20% down), strata fees, and property taxes.

In fact, the price these units are selling at is 32 times the annual rent (i.e. higher than in places in NY).

And this isn't even in the lower mainland - it's across on the Island where prices appear to be better (emphasis on "appear.").

Someone has to pay for the property and all those fees in order for you to have something to rent. Your landlord is now paying HST on all those things required to maintain your property. Do you think none of that is reflected in the rent you pay?

[Wilber]

Then change industries.

Retired and my income isn't indexed other than what I make from my own investments.

[TimG]

Someone has to pay for the property and all those fees in order for you to have something to rent. Your landlord is now paying HST on all those things required to maintain your property. Do you think none of that is reflected in the rent you pay?

The landlord gets a refund from the government for all HST paid - even if he does not collect HST on the rent.

[Wilber]

You can buy an apartment for what people paid for houses 20 years ago. People are still buying houses.

I don't think you can. Home prices in my area have quadrupled in the past 20 years. Incomes haven't. The home in Point Grey that my parents sold in 1968 for $38,000 is now assessed at 2.4 million. My mother in law's old house on a 66' X 120' lot just down the road is assessed at $15,000. The lot it sits on is assessed at 2.2 million. A real estate agent recently told her if she wanted to sell she should ask 30% over the assessed value.

[Wilber]

The landlord gets a refund from the government for all HST paid - even if he does not collect HST on the rent.

Has that changed because it wasn't that way originally. Why should landlords and renters be exempt and not private homeowners? This tax is supposed to be more equitable is it not?

[Wilber]

So, why is it okay for the auto mechanic to have to charge PST on his services but not okay for a restaurant to charge HST on its food service?

Why is it okay to charge PST on a washer/dryer but not okay to charge HST on laundromat services?

Good question. My point is the tax on the washer/dryer is being changed from a one time tax on the cost of the unit to a tax on every nickle it makes during its lifetime. That is a huge difference.

[TimG]

Has that changed because it wasn't that way originally. Why should landlords and renters be exempt and not private homeowners? This tax is supposed to be more equitable is it not?

A landlord pays taxes on the proceeds of any sale. A homeowner does not.

The HST is only one of many tax benefits that apply to landlords but not homeowners because they pay tax on the capital gain (i.e. deducting mortgage interest).

Edited April 23, 2011 by TimG

[Wilber]

A landlord pays taxes on the proceeds of any sale. A homeowner does not.

A homeowner cannot write off mortgage interest.

[TimG]

A homeowner cannot write off mortgage interest.

Same reason. If you gave your mother-in-law a choice between paying capital gains on that 2.2 million or being able to take various tax deductions which do you think she would take?

[msj]

Someone has to pay for the property and all those fees in order for you to have something to rent. Your landlord is now paying HST on all those things required to maintain your property. Do you think none of that is reflected in the rent you pay?

Given that the price on the unit next door is 32 times our annual rent I can state that it is obvious that markets do not price things very well at some times so, no, I don't think it is as simple as saying that prices automatically go up due to the HST.

Furthermore, the HST new home owners rebate significantly mitigates the amount of the BC portion of the HST tax that is being paid.

Another problem here is that much of what the landlord would be buying from Home Depot to make any repairs already would have been taxed at 12% (GST + PST) and is now being taxed at 12% (HST).

Yes, to have a plumber come by and clear the kitchen sink it will cost 7% more.

But these types of things don't happen very often on a brand new condo that has a useful life of about 75 years (steel/concrete construction).

[msj]

The landlord gets a refund from the government for all HST paid - even if he does not collect HST on the rent.

For commercial rent - yes - because HST is being charged.

For residential rent - no - because residential rent is HST exempt so no ITC's (input tax credits - aka HST paid) can be claimed while no HST is being charged.

This is as compared to, say, a fisherman who would be "zero rated."

He doesn't charge HST on his sales but gets back all the ITC's that he has paid.

[msj]

A homeowner cannot write off mortgage interest.

Of course not. It's a personal expense rather than being a business expense or investment expense.

A homeowner doesn't pay tax on net rental income.

A homeowner doesn't pay tax on a capital gain on his house if it's a principal residence whereas the landlord does when he sells his property for a capital gain.

[Wilber]

Same reason. If you gave your mother-in-law a choice between paying capital gains on that 2.2 million or being able to take various tax deductions which do you think she would take?

I'm not sure, it was her parents house and she has lived in it for 92 years. When she leaves she says she will be carried out in a bag so I'm not sure capital gains mean all that much to her.

[msj]

I'm not sure, it was her parents house and she has lived in it for 92 years. When she leaves she says she will be carried out in a bag so I'm not sure capital gains mean all that much to her.

Sure, but to the beneficiaries of her estate, the difference between the house being a taxable capital gain and not is about $460,000 of tax.

[ToadBrother]

A homeowner cannot write off mortgage interest.

Because a homeowner is not a business. Homeowners don't really get to write anything off. They may get tax credits for certain types of improvements, but fundamentally you're talking about two different things. A business gets to write off anything that is deemed a cost of doing business (ie. payroll, insurance, loan interest, repairs and maintenance but not improvements and so forth).

[ToadBrother]

Yes, to have a plumber come by and clear the kitchen sink it will cost 7% more.

But these types of things don't happen very often on a brand new condo that has a useful life of about 75 years (steel/concrete construction).

From a pure fairness point of view, those providing services in many jurisdictions with PST-style taxes have been getting a helluva break for years. The whole notion of VAT is indeed to more fairly distribute the burden. Why shouldn't a plumber have to charge the whole HST on his labour? The poor bugger at the plumbing supply store has to charge it on the materials the plumber uses.

[Wilber]

Sure, but to the beneficiaries of her estate, the difference between the house being a taxable capital gain and not is about $460,000 of tax.

On the other hand she could have written off 60 years of expenses.

[Wilber]

From a pure fairness point of view, those providing services in many jurisdictions with PST-style taxes have been getting a helluva break for years. The whole notion of VAT is indeed to more fairly distribute the burden. Why shouldn't a plumber have to charge the whole HST on his labour? The poor bugger at the plumbing supply store has to charge it on the materials the plumber uses.

So what, the final customer pays it in the end, not the store or the plumber and the final customer will now be paying more.

[ToadBrother]

So what, the final customer pays it in the end, not the store or the plumber and the final customer will now be paying more.

All that depends on the balance of inputs and outputs. At the end of the day, VATs are very economically attractive, which is why they're becoming more prevalent. Like I said, for low income earners, the way to give a helping hand is through rebate cheques.

This is no different than the complaints over the GST. It was going to raise prices, it was going to be such a hardship. Know what happened, people got used to it, low-income earners learned to expect and even look forward to the quarterly rebate cheques. Doomsday didn't come and no one lost their shirts.

[Wilber]

All that depends on the balance of inputs and outputs. At the end of the day, VATs are very economically attractive, which is why they're becoming more prevalent. Like I said, for low income earners, the way to give a helping hand is through rebate cheques.

No it doesn't, each party adds in its own costs and the total is paid by the final customer.

This is no different than the complaints over the GST. It was going to raise prices, it was going to be such a hardship. Know what happened, people got used to it, low-income earners learned to expect and even look forward to the quarterly rebate cheques. Doomsday didn't come and no one lost their shirts.

And on average the GST resulted in higher costs for Joe citizen even if it did help many businesses. Why bring up low income earners, they are getting rebates. They aren't the ones footing the bill. You can get used to a lot of things, that doesn't mean they are good for you.

[msj]

On the other hand she could have written off 60 years of expenses.

Like what?

Mortgage interest? Property tax?

Let's say the mortgage interest was $30,000 (since the house was bought on the cheap and paid off within, say, 15 years) and property taxes were $125,000 over that time.

Then, even at a marginal tax rate of 35% (and this is fairly high), she could have saved about $54,000 in tax over that time.

Now, I'm not doing any kind of PV calculation here because it doesn't need to be made: it is a fundamentally stupid idea for most people to write off their mortgage interest and property taxes only to accrue a huge tax liability upon the sale of their house (or upon their demise).

I'd take the tax free gain and save the $460,000 in tax now rather than save $54,000 (ish) over 60 years.

[ToadBrother]

No it doesn't, each party adds in its own costs and the total is paid by the final customer.

This isn't incremental. Inputs and outputs get balanced out.

And on average the GST resulted in higher costs for Joe citizen even if it did help many businesses. Why bring up low income earners, they are getting rebates. They aren't the ones footing the bill. You can get used to a lot of things, that doesn't mean they are good for you.

It means the tax has less drag on the economy, which is good for everybody. You're acting like the consumer lives in a isolated bubble here.