Here's a primer on the MLTT, a tax refilled by home buyers and real estate professionals but one that's delivered a huge revenue boost for the city since its implementation in 2008.
Who pays the tax? Anyone who buys a home or business in the city.
How much is it? For residential properties, the tax is changed as a percentage of the sales price. Here's how the tax is calculated on a property with at least one, but not more than two, single-family residences.
- $55,000 to $400,000: 1.0 per cent
- Over $400,000: 2 per cent
You can also use this handy calculator:
If your new home cost $500,000, you'll pay $5,725 in MLTT to the city. If your house cost $800,000, your MLTT bill will be $11,725. The average price for a detached home in Toronto is about $750,000. And remember this is separate from the provincial property transfer tax, which is slightly higher than the MLTT. Also, Toronto is the only municipality in Canada to charge a MLTT.
Yikes. Any way around this? No. First-time home buyers can get a maximum MLTT rebate of $3,725. But to qualify, it has to be the first time you or your spouse has owned a property "anywhere in the world." And this rebate only applies to residential property.
So how much cash does this generate for the city? Plenty, or as a line in a city budget document puts it: "MLTT revenues continue to exceed expectations." In 2010, the city expected to earn about $160 million. Instead, the tax pulled in more than $275 million. In 2012 the city planned to haul in $240 million from the MLTT. Then, cha-ching, the tax ended up generating about $345 million.
Where do real estate professionals stand on this? Surprise! They're against it. Von Palmer, a spokesman for the Toronto Real Estate Board, calls the MLTT a "tax grab" that hits home buyers when their finances are already stretched to the limit. His group has a website (see link at left) that gathers case studies and make the case against the MLTT.
"Because it has to be paid up front, that's what makes this tax a huge problem," said Palmer. "This cannot be added to your mortgage. It gets [home-buyers] at a time when they can least afford it."
Palmer said MLTT money sent to city hall would be better left to home buyers to redistribute in the form of increased down payments, renovations or new furniture.
Where do city politicians stand? Eliminating the MLTT was a plank in Rob Ford's 2010 mayoralty campaign. Since then, Ford has talked about trimming the tax with an eventual move toward phasing it out entirely. "Many councillors love this tax," Ford, quoted in the Toronto Star, said in the speech to the Toronto Real Estate Board in June. "They want to keep it and keep spending the millions of dollars it brings in."
What role will the MLTT play in the budget debate? On Monday city staff floated a proposed budget with a 2.5 per cent property increase. As for the MLTT? No recommendations to reduce it. That's just the starting point in what will be a long battle over the budget, but it seems safe to say the MLTT won't go away or face any significant cut this year.
Palmer concedes the city can't simply say goodbye to more than $300 million in annual revenue in one stroke of the pen. Instead he'd like to see it drop slowly over time.
"We support the phase-out approach, we think it's responsible," he said, and floated a 10 per cent reduction as a good place to start this year.Suggest a correction