By: Larry MacDonald
The Ontario Government’s 2009 Budget will harmonize the Goods & Services Tax (GST) and Provincial Sales Tax (PST). Ontario citizens will pay one sales tax of 13% on goods and services.
To help with the adjustment to a single sales tax, the Ontario Government will send families earning less than $160,000 cheques totaling $1,000 over a 12-month period. And certain items will be exempt. Of note, the 8% PST will not be applied to children’s clothes/shoes/car seats/diapers, books, and new houses under $400,000 (there will be a partial rebate for new houses between $400,000 and $500,000).
Harmonization will make the Ontario Chamber of Commerce happy. It has long argued that it will save companies $100 million a year by cutting the red tape involved in paying two taxes and by allowing deductions for the PST on new business equipment.
But families buying a newly built $500,000 house will have to pay an extra $40,000 in taxes. So say good bye to that dream house. Put a downpayment on that $350,000 box house like the rest of the proletariat — five feet away from your neighbours’ $350,000 box houses on either side, of course.
Another highlight is the big increase in the deficit to finance a huge fiscal stimulus – much like the federal Conservatives announced earlier this year. This, of course, is largely unnecessary, in my opinion. The Canadian economy rises and falls on the tides set by the U.S. economy (and Ottawa has already unleashed a giant pick-me-upper). Recovery will come when the U.S. recovers.
The opportunity cost of blowing a such wad will be less money for health care and other vital public services. Wait times for operations likely have no hope of diminishing now. In fact, they could get worse. Hey, I’d rather have an extra five years to live than a new hockey rink two blocks over. And don’t overlook how government borrowing crowds out business borrowing, which would have otherwise financed new plants and jobs.
6 Responses to “ Ontario Budget highlights ”
I can’t feel sorry for people buying a house for $500,000 and more needing to pay an extra tax, they can afford it. For too long we have led everyone to believe that they need to live in a huge house with a separate bathroom for each family member. Let’s return to simpler times and you can avoid the tax. What I would like to see with this move to harmonized sales tax be added into the purchase price of all items. If I’ve got my last $20 in my wallet, I’d like to be able to go into a store and know in advance if I’ve got just enough money for my purchases. I don’t want to get to the checkout and find out my purchases (which total less then $20) really cost $20.97 and I therefore needlessly use a credit card rather than suffer the embarrassment of not having enough. I’d would rather adjust my purchases before I get to the checkout counter so that I’ve got enough to pay for them.
By Barb Trisch on Mar 26, 2009
In response to Barb’s comment – Just because you are purchasing a $500,000 home doesn’t necessarily mean that you can “afford” the additional tax. Many people save and plan in order to be able to afford such a house – I know my family plans to purchase a house around $400,000 and it’s not because there’s a separate bathroom for every family member, it’s because it offers us the space that we need for a large family! All this will do is slow new home sales as families choose existing houses, thereby causing builders/contractors their jobs.
By Stacey Arnold on Mar 26, 2009
In response to Barb’s comment, if the price of new homes in the $500K range jumps by $40,000, there will be an effect on the market as a whole. People will tend to stay below that price point and many people will want to avoid new home purchases. This will cause a rise in price on existing homes in all price ranges – keep in mind that almost everyone who buys a $500k home has a cheaper one to sell and if the tax costs make new homes less attractive, ALL used homes will tend to increase in price due to the demand.
By Stan Adams on Mar 26, 2009
It is quite easy to build a 3000 sq. ft. nicely finished home that falls within the $400,000 guidelines almost everywhere in Ontario except the GTA. There the land cost drives the price up to the point where the tax kicks in very quickly.
I wonder if Mayor Miller actually thought all this through before he embraced the announcement.
This is a plain and simple land tax that will drive home seekers and builders further away from the city core and cause more and more commuting with all the attached costs.
By Gary Peck on Mar 30, 2009
I don’t think that you can buy a nice finished home that falls within the 400K. Base price now is minimum 450K 2400 sq.ft. and you don’t get any upgrades. So, builders should do something because a lot of people can’t afford that much house. I was thinking to buy up to 400K but NO.
By Buyer on Jan 24, 2010