BRIEF OF THE TORONTO REAL ESTATE BOARDRecommendation Index the Home Buyers’ Plan (HBP) to the Consumer Price Index (CPI) in $2,500 increments to ensure it never loses its purchasing power. Rational· Inflation steadily erodes the plan’s value: Budget 2009 recognized the need to adjust the HBP for inflation. The limit was raised by $5,000, the first increase since 1992. · A creator of jobs and economic growth: In 2009, more than 46,000 homes were purchased using the HBP. This resulted in over $1.9 billion in spin-off spending and more than 16,000 jobs. · A gateway to financial security: The HBP has allowed over two million Canadians to save for both retirement and a home without needing to choose one priority over the other. · Indexation is an established practice: Tax Free Savings Account (TFSA) limits are indexed to the CPI and rounded to the nearest $500. The HBP should be indexed incrementally as well. · No cost until 2015: Using Budget 2009 as a starting point, the plan would adjust by $2,500 in 2015 at a cost of $7.5 million. A further $2,500 increase would occur in 2020. Recommendation Allow the deferral of previously written off depreciation (Capital Cost Allowance) on an investment property when owners sell in order to reinvest. Rational· Remove a major reinvestment obstacle: Investors who sell an income property often have insufficient funds after tax to acquire a property of similar value. Consequently, many hold onto properties instead of reinvesting in the community. · Level the playing field: Over half of individuals who would benefit from this policy change have incomes below $50,000. Real estate developers get tax advantages unavailable to small real estate investors. This includes the ability to defer tax, and a much lower tax rate, depending on their type of business. · Unleash a chain reaction of benefits: Investment in property triggers renovations, retrofits and redevelopment, which accelerates the economy, greens the environment, and revitalizes communities. The average property investment generates $287,850 in economic spin-off activity. In addition, more than one job is created for every two investments. · A fiscally prudent approach: This proposal reflects a focus on growing the economy, while being fiscally responsible. Indeed, the cost is offset considerably by the collection of other revenue, including Capital Gains Tax from property sales, and GST/HST and income tax from spin-off activity. All deferred tax is ultimately collected when investors decide not to reinvest or later, through their estates. |