Housing is already subject to excessive taxation; adding a capital gains tax would only add to the growing burden

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A recent FP Comment policy debate ended with the idea that Ottawa needs to put a stop to the “subsidy” and “tax incentive” that is said to be wildly distorting Canada’s housing markets. The claim is that Canada’s tax-free capital gains on primary residences is a major market distortion that keeps housing prices high. It is time to bury this idea. It is an inaccurate depiction of existing tax regimes and, above all, misguided economic theory. There is no subsidy.

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As noted by Lawrence Solomon, the tax facts on housing point in the other direction. Housing is already subject to excessive taxation, and adding a capital gains tax would only add to the growing burden. Writer Neil Sharma this week drew attention to a study that suggests that government taxes imposed by all levels of government account for more than 30 per cent of the purchase price of new homes in the Toronto/Hamilton area.

Another burden is property taxes that are assessed on the basis of market value. If a home doubles........

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