Personal Finance

Tax on our net assets - are we ready?

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  • Jul 15th, 2020 2:04 pm
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[OP]
Deal Fanatic
Oct 7, 2007
9200 posts
5050 upvotes

Tax on our net assets - are we ready?

So, I heard through someone close to me that our federal government is exploring the idea of taxing our net assets as a source of additional tax revenue. It sounds like the initial calculations are being run at a tax rate of 1% on a very high amount of net assets and I predict that this concept will be PROPOSED/INTRODUCED at a level that doesn't affect most people so as to get buy in from the population BUT once established, the amounts and percentages will be tinkered so as to go after the savings of the middle class.

I expected this based on the new asset tax recently introduced in BC on homes (even if it is your principal residence) that reach a certain threshold which is also subject to tinkering as the government sees fit. When introduced, it was done under the premise of pitting those who couldn't afford a house against those who could and saying those that could afford one should pay "a little bit more".

It seems that our system of taxation continues to go after those who are working hard to not be reliant on handouts from the government but are effectively getting punished through additional taxation.
Last edited by choclover on Jul 14th, 2020 2:29 pm, edited 1 time in total.
17 replies
Deal Addict
May 16, 2017
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I've heard through someone close to me that the COVID-19 deaths in Brazil are a hoax and the coffins are empty.

Presumably you are referring to the BC housing "speculation tax", which does NOT generally apply to principle residences.

Next.
Deal Expert
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Mar 9, 2007
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Think of the Childre…
Anything could be possible.

WOULD SOMEBODY THINK OF THE CHILDREN!!!
Deal Addict
Dec 4, 2016
1994 posts
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Elizabeth warren has proposed net worth tax and made it the core of her campaign, along with universal health care. Since Canada already has universal health care, a wealth tax is certainly not out of the question. Keep in mind that the luxury home "school tax" was introduced during headlines of people living in 5 million dollar homes while collecting welfare, since they have income from overseas that are not reported to CRA. This situation is somewhat unique to BC, to be honest.

A more realistic tax would be luxury taxes for relatively expensive vehicles, at the 100k level, as long as it's not bought under a business and used purely for business purposes. Ontario might introduce a luxury home tax just like in BC, with an empty home tax to go with it. That's almost guaranteed if/when NDP/Liberal gets into power at the provincial level.

Increasing capital gain inclusion rate could also be considered, as the government of the day can argue that TFSA room has grown large enough that anyone who's run out of TFSA/RRSP room would be considred "rich" and can afford to pay more tax.
Deal Addict
Jan 2, 2015
1633 posts
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Toronto, ON
There have been rumors of a wealth tax ever since the Canadian government started asking about houses sold on your tax return. There are no reliable sources of information stating so. A wealth tax is far harder to impose than an income tax, and a Toronto or Vancouver resident with a $1 million house would have to pay more tax than someone with an identical (but far cheaper) house in an area where housing prices are sane and rational. I don't think housing prices are even rationally measurable, making a mockery of terms such as "fair" market value.
robsaw wrote: I've heard through someone close to me that the COVID-19 deaths in Brazil are a hoax and the coffins are empty.
Remember when people claimed that China was understating the number of people who died? Conspiracy theories are never consistent.
Newbie
Sep 19, 2010
33 posts
13 upvotes
Vancouver, BC
BlueSolstice wrote:
A more realistic tax would be luxury taxes for relatively expensive vehicles, at the 100k level, as long as it's not bought under a business and used purely for business purposes. Ontario might introduce a luxury home tax just like in BC, with an empty home tax to go with it. That's almost guaranteed if/when NDP/Liberal gets into power at the provincial level.
There's already a different PST rate for higher value goods. As an example if you buy a Lambo its 20% PST + 5% GST. Still selling like hotcakes
Deal Fanatic
Oct 26, 2008
6838 posts
2615 upvotes
BC
To flesh out the complex BC passenger vehicle tax structure, maybe this helps:

Dealership (PST) + 5%GST
Under $55,000 (7%)
$55,000 - $55,999 (8%)
$56,000 - 56,999 (9%)
$57,000 - $124,999 (10%)
$125,000 - $149,999: (15%).
$150,000 and up: (20%)

Private Sale (PST)
Under $124,999 (12%)
$125,000 - $149,999 (15%)
$150,000 and up: (20%)

Add the 5% GST when buying at a dealer. Note that for vehicles $125K and over, the GST is applied after the PST has been applied. That is, tax on tax.

I think this clarifies why both $55K and $125K are often quoted as a luxury thresholds, but in fact the $55K threshold only applies at a dealer.

(Non-passenger vehicles are excluded. But pickup trucks are included, of course.)
[OP]
Deal Fanatic
Oct 7, 2007
9200 posts
5050 upvotes
robsaw wrote: I've heard through someone close to me that the COVID-19 deaths in Brazil are a hoax and the coffins are empty.

Presumably you are referring to the BC housing "speculation tax", which does NOT generally apply to principle residences.

Next.
The tax you cite is a valid one but this is a different tax over and above the one you mention that DOES apply to principle residences.
[OP]
Deal Fanatic
Oct 7, 2007
9200 posts
5050 upvotes
BlueSolstice wrote: Elizabeth warren has proposed net worth tax and made it the core of her campaign, along with universal health care. Since Canada already has universal health care, a wealth tax is certainly not out of the question. Keep in mind that the luxury home "school tax" was introduced during headlines of people living in 5 million dollar homes while collecting welfare, since they have income from overseas that are not reported to CRA. This situation is somewhat unique to BC, to be honest.

A more realistic tax would be luxury taxes for relatively expensive vehicles, at the 100k level, as long as it's not bought under a business and used purely for business purposes. Ontario might introduce a luxury home tax just like in BC, with an empty home tax to go with it. That's almost guaranteed if/when NDP/Liberal gets into power at the provincial level.

Increasing capital gain inclusion rate could also be considered, as the government of the day can argue that TFSA room has grown large enough that anyone who's run out of TFSA/RRSP room would be considred "rich" and can afford to pay more tax.
Actually the threshold is significantly lower than 5 million (i.e. many regular families live in homes that attract the tax that are no means rich but just average). But now that the tax is in place, the levers can be adjusted as needed to tax as desired.
Deal Fanatic
Dec 20, 2018
7226 posts
6406 upvotes
choclover wrote: So, I heard through someone close to me that our federal government is exploring the idea of taxing our net assets as a source of additional tax revenue. It sounds like the initial calculations are being run at a tax rate of 1% on a very high amount of net assets and I predict that this concept will be PROPOSED/INTRODUCED at a level that doesn't affect most people so as to get buy in from the population BUT once established, the amounts and percentages will be tinkered so as to go after the savings of the middle class.

I expected this based on the new asset tax recently introduced in BC on homes (even if it is your principal residence) that reach a certain threshold which is also subject to tinkering as the government sees fit. When introduced, it was done under the premise of pitting those who couldn't afford a house against those who could and saying those that could afford one should pay "a little bit more".

It seems that our system of taxation continues to go after those who are working hard to not be reliant on handouts from the government but are effectively getting punished through additional taxation.
I heard my friend and saw a post on FB from other woke people that they are incorporating microchip in milk so when we drink milk they start tracking us and use the microchip to steal our bankng passwords

Also heard from another friend who knows someone in the govt who says they're going to spray agent orange in conservative neighborhoods

Don't be a sheep and wakeup to the truth!
Deal Addict
User avatar
Dec 24, 2007
1686 posts
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BC
I heard from someone else....?

I hear lots of things from some people who claim they got the real goods from "inside sources". That Covid-19 is a leaked biological weapon, that there is a "deep state" operating within government, that the 5G network will cause cancer, that the Facebook is cooperating with the government to track all your movements and contacts,...

Unless you have some actual evidence to back up what you or somebody you know is saying, it isn't worth speculating or commenting on.
Deal Addict
Oct 27, 2012
2817 posts
4604 upvotes
Toronto
WetCoastGuy wrote: I heard from someone else....?

I hear lots of things from some people who claim they got the real goods from "inside sources". That Covid-19 is a leaked biological weapon, that there is a "deep state" operating within government, that the 5G network will cause cancer, that the Facebook is cooperating with the government to track all your movements and contacts,...

Unless you have some actual evidence to back up what you or somebody you know is saying, it isn't worth speculating or commenting on.
I'm not surprised given the OP's post history. MSM = trash and fake news, anything not MSM = good, reliable and shows you are an independent thinker.
Deal Addict
Jun 14, 2018
1275 posts
1562 upvotes
choclover wrote: The tax you cite is a valid one but this is a different tax over and above the one you mention that DOES apply to principle residences.
Which one is the tax that BC introduced that also applies to principal residences?
Deal Addict
May 16, 2017
2362 posts
3082 upvotes
choclover wrote: The tax you cite is a valid one but this is a different tax over and above the one you mention that DOES apply to principle residences.
Presumably you are talking about the "school" portion of the property tax calculation that has new progressive rates at various assessed value thresholds. Which is not an overall "asset" tax nor is it new as a concept but a change in the rate system.

Regardless, the whole thing is pure speculation at the Federal level - and friend-of-a-friend stories deserve to be unceremoniously dismissed as the imaginative products of creative minds that they are.
Member
Oct 11, 2013
217 posts
61 upvotes
Almost American
I've been wondering how on earth governments are going to balance their books in the wake of COVID-19... They were already using a lot of monetary easing policies to help stimulate their economies. Now that debt has ballooned and we've lost our credit rating with at least one agency, now what? Tax on assets flat? Tax corporations holding cash? More income tax?

This is just an opinion, but I would tax the large healthy financial institutions and other corporations like Telcos operating here in Canada, flat, based on their current balance sheet. They've accumulated the most wealth and it wouldn't penalize the little guys. Based on how profitable they already are, it wouldn't take long for them to recoup and recover.
Deal Fanatic
Dec 20, 2018
7226 posts
6406 upvotes
expresspotato wrote: I've been wondering how on earth governments are going to balance their books in the wake of COVID-19... They were already using a lot of monetary easing policies to help stimulate their economies. Now that debt has ballooned and we've lost our credit rating with at least one agency, now what? Tax on assets flat? Tax corporations holding cash? More income tax?

Govt's don't need to balance their budgets if they're a sovereign nation with control of their fiscal and monetary policy . Eg our debt servicing costs is actually lower this year than last year despite more debt due to lower interest rates .

Not sure what you mean by losing our credit rating? You mean Fitch which put us as same rating as other G7 nations other than Germany ? It has same impact as credit score going from 850 to 840 ..none. doesn't affect our borrowing costs or ability to borrow

You can't compare sovereign nations to individuals, it's totally different

As for cost of paying the borrowing, it doesn't need to be as long as there's positive growth in economy/population. It's when you don't have population/economic growth that it becomes potentially a problem but even then, look at japan and it hasn't had any real impact despite massive debt and declining population but economist think it's just a matter of time before the aging and declining population impacts their finances .
Deal Addict
Jan 2, 2015
1633 posts
638 upvotes
Toronto, ON
expresspotato wrote: I've been wondering how on earth governments are going to balance their books in the wake of COVID-19... They were already using a lot of monetary easing policies to help stimulate their economies. Now that debt has ballooned and we've lost our credit rating with at least one agency, now what? Tax on assets flat? Tax corporations holding cash? More income tax?

This is just an opinion, but I would tax the large healthy financial institutions and other corporations like Telcos operating here in Canada, flat, based on their current balance sheet. They've accumulated the most wealth and it wouldn't penalize the little guys. Based on how profitable they already are, it wouldn't take long for them to recoup and recover.
They're already being taxed, but not on the balance sheet. I wouldn't want that kind of a disaster, either, being taxed on assets every year. They're profitable, so why not tax their profits, like we're already doing? Making matters worse, if you increase their taxes, they cut staff. I'm more interested in taxing those multinationals that pay almost 0% tax.

Canada's debt is now much larger. Liberals will claim this isn't that important, or that they need to raise taxes to cut the debt. Conservatives will claim the debt is very important and the best way to cut the debt is to cut expenses or... cut taxes. So nothing will change.
Deal Addict
May 16, 2017
2362 posts
3082 upvotes
FoFai2015 wrote: Canada's debt is now much larger. Liberals will claim this isn't that important, or that they need to raise taxes to cut the debt. Conservatives will claim the debt is very important and the best way to cut the debt is to cut expenses or... cut taxes. So nothing will change.
Partisan people like to point out the historical fiscal flaws of the "other" party. The reality is that both Conservative and Liberal governments have presided over massive debt/deficit movements over the decades - in both directions. The difference is primarily in who benefits - not on actual fiscal results. Historically, at the Federal Level, those setting debt precedents have been (after the post-WWII adjustments):
- Diefenbaker- Con - 1962 - high of 33% of GDP
- Trudeau- Lib - 1971 - recovery to 21% of GDP
- Mulroney - Con - 1991 - high of 55% of GDP
- Chretien - Lib - 1997 - record high of 64% of GDP
- Chretien - Lib - 2002 - recovery to 44% of GDP
- Harper - Con - 2008 - modern historical low of 31.4% of GDP
- Harper - Con - 2012 - increase to 38.3% of GDP
- Trudeau - Lib - 2015/16 - current gov't low of 31% of GDP
- Trudeau - Lib - 2020 - your guess is as good as mine where this will end up but likely at 50%+ of GDP for largest 1 year rise in terms of % of GDP.

Obviously a lot of circumstances play into the big deficit/debt movements, typically related to world-wide events.

It is funny thought to study the claims of the political parties. Here in BC, the NDP is often held-up as fiscally irresponsible, particularly on their previous record up to 2001 when the BC Liberals came into power before being replaced by the NDP again in 2017. Funny thing is the Liberals up'd the BC Provincial Debt by about 10x what the NDP managed and economic growth numbers that hardly had significant differences (Other than foreign investment - lower during NDP). It is all about WHO gets the $$$.

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