Yesterday City of Toronto’s Executive Committee met to start determining whether or not they should cap the amount of land transfer tax Toronto homeowners are required to pay. There’s no doubt that this tax comes with its fair share of problems, but the Toronto Real Estate Board (TREB) says that capping it is not enough. And that in fact, the tax “needs to be scrapped, not capped.”

It was the C.D. Howe Institute that recently showed what a harmful impact this tax has on the Toronto housing market. The tax, the Institute says, is largely responsible for the 16 per cent drop in home sales in the GTA; and they also conducted a poll that showed 77 per cent of Torontonians that were going to put off their home-buying decision for another two years. And that they would do so specifically to get rid of the tax. And 68 per cent of Toronto homeowners overall reject the idea of the tax.

Now that the tax is coming under scrutiny by the Executive Committee and it could possibly be capped, TREB says that’s just not good enough.

“The Toronto Land Transfer Tax should be scrapped, not capped,” says TREB president Ann Hannah. “We are encouraged that the Executive Committee is considering action on the Land Transfer Tax, but, not only is capping not enough to correct the problems that this tax is creating for our City, it could make this bad tax even worse.”

TREB says that the tax needs to be scrapped because it’s hurting home buyers and the housing market. And at a time when it’s already experiencing a cooling and a slowdown. The Board also states that not only does this hurt home buyers, it also throws the market out of whack because it won’t allow it to chug along on its own.

Enid Slack of the University of Toronto, agrees with that train of thought.

“If you want to reduce the land transfer tax, why would you not just reduce the tax rate, and the tax rates are going down, so there is some certainty of the taxpayers going forward? With this method of capping, they’re not going to know what the tax rate is next year.”

Von Palmer, TREB’s Chief Government and Public Affairs Officer, says that the only way to solve the problem of the tax, is to get rid of it.

“The best approach is a phased elimination of this tax. The only way to truly solve the problems that this tax is creating for our City is to get rid of it; and with a predictable phase-out strategy, home buyers could make informed decisions and City Council could set a reasonable schedule, which would make market distortions unlikely.

“Capping equals keeping. That’s not good enough for our City and it’s not what Torontonians want. The public has repeatedly made it clear that they want the land transfer tax scrapped,” she continued.