Manitoba slammed for high land tax on homes
June 18, 2021
Manitoba’s land transfer tax has ballooned over the past two decades and is in need of reform, says a new report from the C.D. Howe Institute.
In “Damage Control: Options for Reforming the Land Transfer Tax in Manitoba,” authors Bev Dahlby and Jack Mintz examined the land transfer tax in Manitoba and consider three options to reduce the tax:
• First, a revenue-neutral change which would exempt the first $150,000 of a transaction from land transfer tax with a 2.45 percent rate applied to the value of the transaction in excess of $150,000;
• Second, an exemption for the first $150,000 with a 2 percent tax rate applied to the excess; and,
• Third, indexing tax brackets with a one-time correction from 2004 to 2020.
Dahlby and Mintz prefer the second reform option—an exemption for the first $150,000 with a 2 percent tax rate applied to the excess—as it has the strongest effect in reducing market distortions and provides the highest net gain to the economy at $23.4 million.
“Compared to other Canadian cities, the land transfer tax in Winnipeg for a property sold at $500,000 is third highest in the country,” write the authors. Winnipeg only trails Vancouver and Toronto while soaring above Montreal, Moncton and St. John’s.
With inflation, Manitoba land transfer tax payments, unchanged from 2004, have increased as real estate properties have become more expensive. More specifically, land transfer tax revenues in Manitoba increased ninefold from 1997 to 2019, and the average land transfer tax rate more than doubled, the study found.
The authors remain critical of land transfer tax in general because the tax can reduce the number of real estate transactions, and hurt young families and those moving to Manitoba. It is also inequitable because people who need to move more frequently bear more tax, regardless of their income or wealth.