The flipside of the affordable housing crisis
… is people like me, who have made spectacular capital gains as home owners. Through the dumb luck of having bought real estate at the right time, before the current boom, my family has reaped a windfall profit that only an oil executive could sneer at.
It is not particularly accessible. We need to live somewhere and could only really cash out if we were to move out of Vancouver. We could borrow against the equity but I’m not a very good consumer of all the crap out there. So it is a gain that is limited, although it does serve to provide a level of insurance and stability.
But a large gain nonetheless and if we were to sell I would pay not a penny in capital gains taxes. That kind of policy may be a good thing, or not. Still, it is public policy that makes the call to exclude capital gains on principal residences, as well as preferential tax treatment of other capital gains, such as when you sell stocks, the cottage or a Picasso.
Base-broadening to include full income taxes on all capital gains (they could be averaged over five years or so to smooth out the impact) would be a real deterrent to the speculation in real estate (and in financial markets) we have seen in recent years. And would provide tax revenue to build some actual affordable housing, for which we have a massive market failure right now.
This would be a controversial and unpopular shift in tax policy, of course, so it is probably never going to happen. But it is at the heart of the growing gap in wealth distribution that has emerged in recent years, and would make the income inequality stats look all the worse were Statscan to count accrued capital gains in its income measures.