Property wealth–equity in general, frankly–isn’t taxable like income is (and neither is capital gains). If you hold property, you can use that equity to buy more property and accumulate more wealth, but since it isn’t income, it isn’t taxed by government the same way.
Yes, property taxes are a thing, and yes, we do tax capital gains, but not like we tax income or consumption. Allowing wealth and equity to snowball takes that money and marks it “off limits” to government. So government revenues drop and services decay.
I’d also add that our tax regime is incredibly unfair to labour, especially skilled labour. If you’re a high-earning worker, you’re taxed much more than someone who just lets their money accumulate through passive rent-seeking. If you wonder why Canada has a brain-drain issue, this is a good reason: it’s more advantageous to be a landlord than it is to be a doctor, engineer or other highly-paid, highly skilled professional.
Thank you for replying. If I understand correctly, you are saying that principal appreciation ( unlike income ) is not taxable like income is.
There is some truth to that. Property sold for a profit is taxed as capital gains but at a lower level than income. On your primary residence, there is an exemption. And your point that you can essentially “spend” appreciation without selling by borrowing against the equity is a good point ( without attracting taxation ).
I am not sure I agree that this withholds tax revenue from the government though. After all, asset appreciation is kind of money from nothing. It does not represent money that came from somewhere without getting taxed. And, as above, this newly created money results in new tax revenue. Even borrowing creates new money in the economy, including consumption taxes.
What all this new money does is devalue money as well, which devalues cash savings but also devalues debt.
I will have to think about your perspective a little more. At the moment, your other points feel stronger.
There is no doubt at all though that “ownership” accelerates wealth inequality as assets tend to appreciate faster than wage growth.
Property wealth–equity in general, frankly–isn’t taxable like income is (and neither is capital gains). If you hold property, you can use that equity to buy more property and accumulate more wealth, but since it isn’t income, it isn’t taxed by government the same way.
Yes, property taxes are a thing, and yes, we do tax capital gains, but not like we tax income or consumption. Allowing wealth and equity to snowball takes that money and marks it “off limits” to government. So government revenues drop and services decay.
I’d also add that our tax regime is incredibly unfair to labour, especially skilled labour. If you’re a high-earning worker, you’re taxed much more than someone who just lets their money accumulate through passive rent-seeking. If you wonder why Canada has a brain-drain issue, this is a good reason: it’s more advantageous to be a landlord than it is to be a doctor, engineer or other highly-paid, highly skilled professional.
Thank you for replying. If I understand correctly, you are saying that principal appreciation ( unlike income ) is not taxable like income is.
There is some truth to that. Property sold for a profit is taxed as capital gains but at a lower level than income. On your primary residence, there is an exemption. And your point that you can essentially “spend” appreciation without selling by borrowing against the equity is a good point ( without attracting taxation ).
I am not sure I agree that this withholds tax revenue from the government though. After all, asset appreciation is kind of money from nothing. It does not represent money that came from somewhere without getting taxed. And, as above, this newly created money results in new tax revenue. Even borrowing creates new money in the economy, including consumption taxes.
What all this new money does is devalue money as well, which devalues cash savings but also devalues debt.
I will have to think about your perspective a little more. At the moment, your other points feel stronger.
There is no doubt at all though that “ownership” accelerates wealth inequality as assets tend to appreciate faster than wage growth.