Policy Forum: The Prevalence of Low Income Tax Payments Among Owners of Expensive Homes in Vancouver and Toronto

18 Pages Posted: 2 Feb 2023

See all articles by Thomas Davidoff

Thomas Davidoff

University of British Columbia (UBC) - Sauder School of Business

Paul Boniface Akaabre

Independent

Craig Jones

Independent

Date Written: 2022

Abstract

In 2018, the top 5 percent of homes in Greater Vancouver, based on their property value, had a median value of $3.7 million, but the median owner of a home in this group paid income taxes of just $15,800. Using data from the Canadian Housing Statistics Program, the authors analyze the relationship between homeowners’ income tax payments and the value of the homes they own. In metropolitan Toronto, the elasticity of non-corporate owners’ income taxes paid with respect to property value appears to be in line with that in many US cities, at roughly 0.7. (A 10 percent increase in property value is on average associated with a 7 percent increase in income tax paid.) In metropolitan Vancouver, that same elasticity is only about 0.3 or 0.5, depending on whether the elasticity is calculated on the basis of medians or means, and would be at or near the bottom among US metropolitan areas. These results call into question the overall progressivity of taxation in Greater Vancouver. We provide mixed evidence concerning the role of foreign buyers in making Vancouver’s income tax – property value relationship weak. In contrast to other Canadian and US metropolitan areas, Vancouver exhibited a particularly weak relationship between income tax and property value between 2011 and 2016. A modest minimum income tax based on property value could raise billions of dollars annually in both the Vancouver and Toronto metropolitan areas.

Keywords: Taxation, Housing Demand

Suggested Citation

Davidoff, Thomas and Akaabre, Paul Boniface and Jones, Craig, Policy Forum: The Prevalence of Low Income Tax Payments Among Owners of Expensive Homes in Vancouver and Toronto ( 2022). Canadian Tax Journal/Revue fiscale canadienne, 2022, Vol. 70, No. 4, p. 843-859, Available at SSRN: https://ssrn.com/abstract=4344000

Thomas Davidoff (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Paul Boniface Akaabre

Independent ( email )

Craig Jones

Independent ( email )

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