It’s the great tax revolt of 2018, Vancouver-style.
British Columbia’s plan to target owners of highly valued properties for extra tax revenue has triggered an uprising by millionaires who don’t feel rich.
Thousands of B.C. properties, including more than 30,000 detached houses in the Vancouver region, will be hit by a new surtax to be imposed starting next year on homes valued above $3-million.
Anger has been steadily rising since the provincial government first announced the annual property surtax in its February budget. Since then, homeowners have been doing a slow burn, belatedly banding together at recent protests.
B.C. Attorney General David Eby, who represents the Vancouver-Point Grey riding, has tried to quell complaints, defending the new surtax in a March letter to constituents. That merely elicited more anger in April, and prompted Mr. Eby to cancel a May 1 meeting with 300 residents hours before the scheduled start time, citing security concerns.
The surtax has been the focal point of one town hall in late May and another two so far in June.
Homeowners are crying foul because they believe they have been unfairly targeted by the annual property surtax on their nest egg.
Take Maarten Mulder and his wife, Wendy Hales. Mr. Mulder works part-time as an electrical site reviewer for an engineering firm, while Ms. Hales teaches geography part-time at a local college.
The couple will need to pay an extra $870 a year as a result of the BC NDP government’s property surtax, an unwelcome surprise when they already have mounting bills and three children to raise: Tom, 14; Elleke, 12; and Ian, 11. Two of the three kids have special needs – Tom is in a wheelchair and Ian has a learning disability.
In the backyard, there are two wooden storage sheds assembled by Mr. Mulder and an old used barbecue. Parked on the street are the family’s two minivans: A 2007 Toyota Sienna and a 2015 Dodge Caravan.
“We’re not looking for sympathy, but it’s bad tax policy,” Mr. Mulder said last week as he stood on the sidewalk with the family dog, Tyske, in the Kitsilano neighbourhood on Vancouver’s pricey west side. The land value alone exceeds $3-million for every single lot on his street and also nearby blocks.
The couple bought their place in 2006 for $1.3-million. Their property’s total assessed value surpassed $3.4-million last year, though the 82-year-old house itself is technically worth only $68,200 – considered by developers to be a teardown.
Premier John Horgan’s NDP government has drawn the ire of homeowners caught in the web of what is formally called an “increased school tax.”
The school tax label is a misnomer because the extra money raised each year will go into the province’s general revenue, say B.C. protesters, who look on in envy at California, where long-time homeowners sitting on valuable properties pay low property taxes.
Critics wonder why the NDP government is targeting people living in principal residences, most of whom are many years or even decades away from selling. They say the NDP has overstepped its bounds in introducing what is seen as an asset tax that won’t help with housing affordability for first-time buyers, and doesn’t tax income or consumption.
“The concern is that people’s savings are under attack. It’s really an NDP tax grab,” said Andrew Wilkinson, leader of the B.C. Liberals, the official opposition.
But Mr. Horgan blames the previous B.C. Liberal government under Christy Clark for failing to take enough measures to intervene during a real estate boom that has resulted in sky-high prices and created an affordability crisis. The Liberals implemented a 15-per-cent tax on foreign buyers in the Vancouver region in August, 2016. Four months ago, the NDP increased the rate to 20 per cent and also expanded the foreign-buyers tax to cover other urban areas in the province.
At a town hall on May 27, more than 900 residents packed into the Jericho Hill gymnasium in West Point Grey on a sunny Sunday to voice their displeasure at Mr. Eby, whose riding includes Kitsilano.
Mr. Eby said it’s best to look at the big picture. “The tax is part of the government’s fiscal plan, and the government is investing in things like schools and health care and other initiatives that make life better for British Columbians,” he said after the raucous meeting in which he endured booing and jeering.
Protest signs have popped up all over the riding, including ones that blare: “Stop Thief! Don’t let Eby and the NDP steal your hard-earned life savings.”
One angry resident after another lined up to take turns speaking at two microphones at the town hall, organized by the West Point Grey Residents Association. They lambasted the NDP for its new measure to collect extra revenue from the surtax, which is over and above the usual annual property tax bill. They disputed B.C. Finance Minister Carole James’s characterization that the tax increase amounts to “a little bit more.”
Some of the speakers said their large price gains are the result of hard work and skill in investing in housing as an asset, clashing with the NDP’s view that the time is ripe to tax millionaires who benefited through sheer luck from the real estate boom. After the meeting, animator David Fine went to unlock his bicycle outside the gymnasium, making the point that not everyone with a Vancouver property valued above $3-million drives a Porsche or Mercedes.
He doesn’t count himself in the camp of being a savvy buyer but he asserts that the NDP is offside in pursuing tax revenue from unrealized capital gains. He said the aggressive tax policy breaks away from the federal norm of treating the most valuable asset for Canadians as sacred – tax-free capital gains when a principal residence is sold.
“The extra school tax is an inappropriate tax,” said Mr. Fine, who disagrees with the NDP on the surtax but generally supports the government otherwise. “I don’t have a big issue paying the tax, but the notion of taxing unrealized assets is an issue for me.”
The property owned by Mr. Fine and his wife, animator Alison Snowden, was assessed at nearly $3.8-million last July, which would translate into about $1,600 in annual surtax.
On June 4, Mr. Eby finally held his constituency’s town hall at a community centre in his riding, with his supporters cheering him. “This meeting today was a much better reflection. The true feeling in the community is that people are divided,” he said later.
A gathering on June 7 in the District of West Vancouver attracted nearly 500 people to a packed theatre. “Frankly, you’re targeted,” Jordan Sturdy, a B.C. Liberal member of legislature for the riding of West Vancouver Sea to Sky, told the audience.
Andy Yan, director of Simon Fraser University’s city program, studied BC Assessment data for valuations on July 1, 2017. He found that 19,399 detached properties, or 24 per cent of the total within the City of Vancouver, were assessed at $3-million or more. For the Vancouver region, 30,588 detached homes were valued for at least $3-million, or 7.7 per cent of the total.
The actual amount to be paid, effective for property tax bills in 2019, will be based on BC Assessment’s valuation on July 1, 2018.
A 0.2-per-cent tax will be imposed by the government on the portion valued above $3-million and up to and including $4-million; for the portion above $4-million, a 0.4-per-cent rate applies.
For example, the owner of a property assessed at $4-million will fork over extra taxes of $2,000 next year, while the owner of a $6-million home will cough up an extra $10,000.
The NDP advises people who are cash-strapped, including seniors on fixed incomes, to defer their property taxes, which would then become payable upon the sale of a property.
“My 82-year-old mom stocks up on toilet paper when it’s on sale. She would never think of deferring the tax. Taking on debt is not in the mindset of many seniors,” said Phil Moore, president of the Real Estate Association of Greater Vancouver.
Mary Lavin, a member of a group called Wake Up Vancouver, said the NDP has engaged in class warfare but the issue should be framed as a surtax that could eventually affect properties valued above $1-million and also be expanded to tax personal assets such as financial investments.
“The surtax sets a dangerous precedent and it’s a slippery slope,” said Ms. Lavin, who owns a property valued slightly above $2-million.
But the anti-surtax movement hasn’t swept up every homeowner in the $3-million club.
Retired lawyer Joan Rush, 66, attended the first two gatherings, showing up in support of the NDP’s tax policy. At the first event, she was one of only two people who publicly backed the surtax, saying homeowners have enjoyed windfall gains and should count their blessings.
After an anti-surtax homeowner heard that Ms. Rush believes in the new tax, the scene deteriorated. “The elderly woman beside me was so angry that she was practically spitting at me,” Ms. Rush recalled. “She actually got the people in the rest of our row to all move over a seat so that she could move one seat away from me.”
Ms. Rush and her 70-year-old husband, Dennis, own a Point Grey property assessed last year at nearly $4.7-million, a huge leap from the $570,000 that they paid in 1990. They say they will gladly defer their taxes, including an estimated $4,800 in annual surtax.
The average price for detached homes sold within the City of Vancouver hit $3,080,563 last October, just shy of the record high in April, 2016. “It has been a housing freak show,” Mr. Rush said.
Pro-surtax resident Wolfgang Tolkien owns two properties with his wife, Sabine Bartels-Tolkien, with each place worth roughly $2.2-million. While the new tax doesn’t affect them, they pledge to proudly pay it if the government were to lower the threshold in the future.
“Nobody likes new taxes, but we have an obligation to give back to society,” said Mr. Tolkien, who disrupted an anti-surtax protest, held before one of the town halls. “Other people have a mindset that they’re not rich. They’ve become accidental millionaires.”
Alex Hemingway, public policy finance analyst at the Canadian Centre for Policy Alternatives, is a fan of what he views as a fair wealth tax. “When you talking about the big increases in land value, that’s something you’re gaining in your sleep,” Mr. Hemingway said.
Back in Vancouver’s Kitsilano neighbourhood, Mr. Mulder and Ms. Hales don’t feel rich in a city where teardowns in some areas sell for roughly $3-million.
The couple, who stayed away from the town halls and say their support for the NDP is bent but not broken, nod in agreement that their income has fallen in recent years and they need to live within their means. “If we could see the benefits of this tax, it would sweeten the pill that we need to swallow,” Ms. Hales said.