Capital Gains Tax vs Income Tax

[cannuck]

On 4/22/2024 at 1:11 AM, August1991 said:

Prior to 1970, only working people paid income tax. Working capital paid no tax..

Any inference that what is subject to capital gains is "working capital" is erroneous at best.  Only the money in an IPO, PO or private placement is ever going into a company to "work".  In our new Casino Capitalist economy, the vast majority of capital gains are purely speculative and create no wealth - just inflationary pressure.  So, John Q. Public is owed that inflationary gain by taxing it back as much as possible.  Personally I would like to see 99% for a day trade, 95% first year, decreasing 5% per annum until reaching that individual's tax bracket rate on actual income.

Ms. Freespend actually got this one right.

[Army Guy]

On 4/22/2024 at 10:26 PM, herbie said:

We don't hide. Cross a picket line and find out....

I'm scared, you guys are SOOOO tough...like BC tough, NDP tough , or like a chewy steak tough....

[August1991]

On 4/26/2024 at 12:36 AM, cannuck said:

Any inference that what is subject to capital gains is "working capital" is erroneous at best.

....

Ms. Freespend actually got this one right.

I'm going to ignore all that: a dollar is a dollar is a dollar.

[cannuck]

On 4/27/2024 at 5:18 PM, August1991 said:

I'm going to ignore all that: a dollar is a dollar is a dollar.

nothing could be further from the truth.

[Aristides]

On 4/23/2024 at 12:57 PM, herbie said:

Deductible mortgages encourage people to give more to banks. The tax dollars not collected are removed, gone, the same as if being spent on a balance sheet.

Seeing as how the govt is YOU, directing revenue into bank profits is not a good idea and as most posters carry on so over redirection of wealth to the needy, redirecting it to the wealthy corporations is total hypocrisy. Unless of course mortgages were exclusive to a Crown corporation Bank, which they'd hate because that would be eeewww socialist.

 

Where do you think mortgage interest goes? The longer it takes a person to pay off their mortgage, the more money the bank gets. Banks pay taxes on their profits.

[suds]

10 minutes ago, Aristides said:

Where do you think mortgage interest goes? The longer it takes a person to pay off their mortgage, the more money the bank gets. Banks pay taxes on their profits.

Not to mention tax on investor dividends.

[Aristides]

3 minutes ago, suds said:

Not to mention tax on investor dividends.

And capital gains when they sell their shares.

[suds]

Our Canadian Pension Plan has assets totaling over $790 billion. Out of that $790 billion, 13% are invested in Canada while 40% is invested in the U.S.  If we really wanted to increase our economic productivity, maybe we should consider bumping up that 13% figure just a tad.

[CdnFox]

3 minutes ago, suds said:

Our Canadian Pension Plan has assets totaling over $790 billion. Out of that $790 billion, 13% are invested in Canada while 40% is invested in the U.S.  If we really wanted to increase our economic productivity, maybe we should consider bumping up that 13% figure just a tad.

Sadly - canada is not a very good investment at the moment.

[Aristides]

11 minutes ago, suds said:

Our Canadian Pension Plan has assets totaling over $790 billion. Out of that $790 billion, 13% are invested in Canada while 40% is invested in the U.S.  If we really wanted to increase our economic productivity, maybe we should consider bumping up that 13% figure just a tad.

CPP is financed by the people paying into it to support them in their retirement. It should not be used as a government tool.

[Aristides]

On 4/23/2024 at 12:54 PM, Moonbox said:

It wouldn't, because underwriters use gross (pre-tax) income to qualify borrowers.  That's true for both the lenders, and even more so for the insurers who underwrite high-ratio mortgages. 

It's kind of a non-choice.  The math on this would be so bad that it'd be nothing but a latent tax trap that would keep lower income families perpetually poor.  

That would be a choice a buyer could make. A non choice would be not getting into a home at all because you couldn't qualify.

 

Quote

Unfortunately you're wrong.  Lack of supply is definitely one of the biggest problems, but real-estate speculation has driven up prices dramatically as well.  There was something like 1.3M vacant homes in Canada in 2022 - airbnbs, foreign students whose parents needed somewhere safe to park cash etc.  25 years ago, investment companies didn't play this game at all.  Now, over 20% of purpose-built rentals are owned by large financial landlords (think REITs, fund coNo, but it will discourage speculative investing.  I suspect we're going to see a lot of these airbnbs etc hit the market before the new rules take effect.  

 

 Greater taxation on gains will not increase supply. A big part of buying a rental is the capital gain that will be made when you sell. Increasing capital gains taxes will not be an incentive to build and own rental property. 

Quote

No, but it will discourage speculative investing.  I suspect we're going to see a lot of these airbnbs etc hit the market before the new rules take effect.  

Who will buy them if you remove an incentive to get into rentals? Many of these units were built as short term rentals in vacation locations and aren't suitable for full time residency. 

[Moonbox]

41 minutes ago, Aristides said:

That would be a choice a buyer could make. A non choice would be not getting into a home at all because you couldn't qualify.

1)  This wouldn't help you qualify. 

2) Even if it did, you'd be better off financially by renting and investing whatever surplus you have elsewhere, far more tax efficiently. 

47 minutes ago, Aristides said:

Greater taxation on gains will not increase supply. A big part of buying a rental is the capital gain that will be made when you sell. Increasing capital gains taxes will not be an incentive to build and own rental property. 

Therein lies the problem.  Nobody's building rentals for the long-term income streams.  They're doing it for short-term speculation and capital appreciation.  Something like 25% of private GTA condo rental owners were in the red monthly back in 2018 (worse today, certainly).  The rental part of the equation is just to help recoup carrying costs before it's sold.  

56 minutes ago, Aristides said:

Who will buy them if you remove an incentive to get into rentals? Many of these units were built as short term rentals in vacation locations and aren't suitable for full time residency. 

They obviously weren't incentives for the rental market though, were they?  They were incentives for speculation and fast money.  If you want to incentivize PBR's and affordable family housing, then public policy has to be focused on that.  Removing costs and taxes/fees (like removing HST on PBR development), and making passive rental income more competitive with capital gains are good starts, but much more will be needed.   

[Aristides]

15 minutes ago, Moonbox said:

1)  This wouldn't help you qualify. 

2) Even if it did, you'd be better off financially by renting and investing whatever surplus you have elsewhere, far more tax efficiently. 

1:  It would if they changed the qualification rules because of it. After tax income will go up and so will your ability to make payments.

2: I disagree, your rent payments are going toward paying  off your landlord's mortgage. 

 

Quote

Therein lies the problem.  Nobody's building rentals for the long-term income streams.  They're doing it for short-term speculation and capital appreciation.  Something like 25% of private GTA condo rental owners were in the red monthly back in 2018 (worse today, certainly).  The rental part of the equation is just to help recoup carrying costs before it's sold.  

They obviously weren't incentives for the rental market though, were they?  They were incentives for speculation and fast money.  If you want to incentivize PBR's and affordable family housing, then public policy has to be focused on that.  Removing costs and taxes/fees (like removing HST on PBR development), and making passive rental income more competitive with capital gains are good starts, but much more will be needed.   

Capital appreciation is obviously an incentive. Why would you build something if there is no money in it and especially if there is little or no profit from actual rents? You can't speculate on what doesn't exist. 

[Moonbox]

3 minutes ago, Aristides said:

1:  It would if they changed the qualification rules because of it. After tax income will go up and so will your ability to make payments.

Lenders don't care about after-tax income.  A $100,000 single-income is treated the exact same as two $50,000 incomes, despite the fact that the dual-income has substantially more after-tax.  There are many reasons for this, not the least of which being that actuarial math can't account for the fickleness of tax policy.  

16 minutes ago, Aristides said:

Capital appreciation is obviously an incentive. Why would you build something if there is no money in it and especially if there is little or no profit from actual rents? You can't speculate on what doesn't exist. 

Why would you undertake a purpose-built rental project when there's far more money and incentives towards short-term speculation?  The answer is you don't, and Canada hasn't for decades.  

 

[August1991]

23 hours ago, cannuck said:

nothing could be further from the truth.

To me, a dollar earned through labour should be taxed in the same way as a dollar earned  through savings.

Why should a capital gain be taxed any differently from a work gain?

Edited May 3, 2024 by August1991

[August1991]

I'm serious about this.

Why is the capital gain of a principal residence exempt from tax?

Yet people struggling to change their life, get a job, lose their various benefits

[herbie]

2 hours ago, August1991 said:

Why is the capital gain of a principal residence exempt from tax?

Seriously?
Because it never was and would be political suicide to even suggest. You'd need a leader with the stubbornness and willing to fall on his sword like Brian Mulroney to sneak it in out of the blue.

When the vast majority of Tory supporters are  owners and the majority of Liberal supporters are all homeowners, and even us Dipper homeowners would put your head on a pike for even suggesting the only actually valuable asset that's theirs should be taxed, just forget about even thinking it. It's not 1917 Czarist Russia the evil landowners are your Mum & Dad, friends and neighbours.

[herbie]

While you're at it, help us put the arseholes suggesting Inheritance Taxea heads on those pikes too. You boomer folks saved that dough for you not the govt.

[August1991]

18 minutes ago, herbie said:

Seriously?
Because it never was and would be political suicide to even suggest. You'd need a leader with the stubbornness and willing to fall on his sword like Brian Mulroney to sneak it in out of the blue.

...

I think that I now understand the secret of the Democrats and federal Liberals in urban areas.

I was recently in Portland, Oregon. NIMBY.

 

[August1991]

33 minutes ago, herbie said:

While you're at it, help us put the arseholes suggesting Inheritance Taxea heads on those pikes too. You boomer folks saved that dough for you not the govt.

I am not talking about a wealth tax - many of us pay property taxes. (Why? This is a true wealth tax.)

I think that people should pay tax on their income - (I would prefer people pay tax on their spending .)

[Aristides]

15 hours ago, Moonbox said:

Lenders don't care about after-tax income.  A $100,000 single-income is treated the exact same as two $50,000 incomes, despite the fact that the dual-income has substantially more after-tax.  There are many reasons for this, not the least of which being that actuarial math can't account for the fickleness of tax policy.  

 

 

Lenders will do as they see fit. They will care about what they see fit to care about. If conditions change, so will they.

 

Quote

Why would you undertake a purpose-built rental project when there's far more money and incentives towards short-term speculation?  The answer is you don't, and Canada hasn't for decades.  

Why would you build anything if appreciation isn't a reason to build it?

[Moonbox]

4 hours ago, Aristides said:

Lenders will do as they see fit. They will care about what they see fit to care about. If conditions change, so will they.

I'm telling you what they care about, with almost 10 years of direct experience writing and underwriting mortgages (I farm that work out now). Lenders don't use after-tax income because it's too flexible/unreliable to count on, and would require way too much time and effort to parse through tax returns even if it wasn't.  

4 hours ago, Aristides said:

Why would you build anything if appreciation isn't a reason to build it?

Nobody said they shouldn't appreciate, did they?  The problem is that the overwhelming (perhaps only) reason to build is short-term speculation and capital appreciation.  All of the money, resources and labour go into building housing that fits this dynamic, which also happens to be the types that least help improve housing availability and affordability.  

Incentives and policy need to be redirected towards building on the lower end - towards purpose-built rentals, and more numerous and utilitarian housing for families, rather than 1-bedroom 700 square foot condos with granite counter tops and heated bathroom floors.  

Edited May 3, 2024 by Moonbox

[Aristides]

3 hours ago, Moonbox said:

I'm telling you what they care about, with almost 10 years of direct experience writing and underwriting mortgages (I farm that work out now). Lenders don't use after-tax income because it's too flexible/unreliable to count on, and would require way too much time and effort to parse through tax returns even if it wasn't.  

Nobody said they shouldn't appreciate, did they?  The problem is that the overwhelming (perhaps only) reason to build is short-term speculation and capital appreciation.  All of the money, resources and labour go into building housing that fits this dynamic, which also happens to be the types that least help improve housing availability and affordability.  

Incentives and policy need to be redirected towards building on the lower end - towards purpose-built rentals, and more numerous and utilitarian housing for families, rather than 1-bedroom 700 square foot condos with granite counter tops and heated bathroom floors.  

What incentives would you suggest and would they involve public money?

[Moonbox]

47 minutes ago, Aristides said:

What incentives would you suggest and would they involve public money?

There's no one thing, or even a few things that will solve this problem.  A comprehensive rethinking of how our entire economy is working right now needs to be undertaken.  

Here's a good article on it:

https://thoughtleadership.rbc.com/the-great-rebuild-seven-ways-to-fix-canadas-housing-shortage/

A summary of some of the items:

1)  Curbing immigration, and/or being selective with who we let in based on skills (focusing on trades)

2) Massively expanding and promoting skilled-trades labor, training and education

3) Loosening zoning and density restrictions on PBR housing, lowering ppty taxes on apartment buildings, providing lower-interest rate loans on apartment construction, easing fees and approval times for such projects etc.  

What needs to be done is far more expansive than this, but I can't summarize it all here.  

 

[CdnFox]

32 minutes ago, Moonbox said:

There's no one thing, or even a few things that will solve this problem.  A comprehensive rethinking of how our entire economy is working right now needs to be undertaken.  

Here's a good article on it:

https://thoughtleadership.rbc.com/the-great-rebuild-seven-ways-to-fix-canadas-housing-shortage/

A summary of some of the items:

1)  Curbing immigration, and/or being selective with who we let in based on skills (focusing on trades)

2) Massively expanding and promoting skilled-trades labor, training and education

3) Loosening zoning and density restrictions on PBR housing, lowering ppty taxes on apartment buildings, providing lower-interest rate loans on apartment construction, easing fees and approval times for such projects etc.  

What needs to be done is far more expansive than this, but I can't summarize it all here.  

 

a rare case where we do agree - those things will make a substantial difference and some of them can make a difference within a year.