The Prevalence of Low Income Tax Payments Among Owners of Expensive Homes in Vancouver and Toronto

Background

In 2018, the top 5% of homes in Greater Vancouver had a median value of $3.7 million, yet their owners paid median income taxes of only $15,800. In metropolitan Toronto, the elasticity of income taxes paid by non-corporate owners with respect to property value is about 0.7, comparable to many U.S. cities; in metropolitan Vancouver, the elasticity ranges between 0.3 and 0.5, placing Vancouver near the bottom of U.S. metropolitan areas. These findings raise concerns about the progressivity of taxation in Vancouver; a modest minimum income tax tied to property value could generate billions annually for both Vancouver and Toronto. This project aimed to explore the relationship between homeowners’ income taxes and property values using Canadian Housing Statistics Program data.

Methodology

First, this project analyzed Canadian Housing Statistics Program (CHSP) data to examine the relationship between property values and homeowners’ income tax among non-corporate homeowners across different quantiles of metropolitan home price distributions.

Second, this project compared patterns between Greater Vancouver and the Greater Toronto Area (GTA), including measures of elasticity between income tax paid and property value.

Third, this project compared Canadian findings with U.S. metropolitan areas, using census data to assess differences in the relationship between housing wealth and income taxation.

Results

This project produced a journal article comparing household incomes and the relationship between income tax and housing wealth in Greater Vancouver and the GTA. While both regions have similar pre-tax incomes, the GTA shows a stronger link between income tax paid and property values, comparable to US metropolitan areas.

In contrast, Greater Vancouver has a weaker connection between income tax and property values, suggesting many luxury homes are purchased with wealth not taxed in Canada. This indicates a weakly progressive tax system in Vancouver; the data are mixed on whether foreign-buyer taxes would tighten the tax-property value link. The study suggests that minimum income taxes tied to property value could significantly increase government revenue and tax progressivity.