With the Toronto Real Estate Board campaigning for the repeal of the Second/City Land Transfer Tax, it’s hard to believe that one of their members (me) would argue that you need to put all property taxes in perspective. Yes, I would like to see the City Land Transfer Tax disappear but that is a $330 million dollar revenue stream to the City and it’s difficult to just eliminate without another revenue source. But how I like to explain it to buyers of Toronto properties is that the City Land Transfer Tax is really a prepayment by buyers of a portion of their property taxes over the next few years.
Let me explain. Property taxes are determined by multiplying the Assessed Value of your property by the Municipal Mill Rate. Each municipality (read Toronto) sets a residential mill rate to pay for municipal services provided. Theoretically the mill rate is set such that revenues collected will equal City expenditures.
In 2011, the last year that I have for comparable rates, the mill rate for Toronto was 79.3 or .793% of the property value. On a $500,000 property, the annual property taxes payable would be $3,965. By comparison the mill rates in Mississauga were 96.2, in Markham 93.2, and in Ajax 136.4. That means a $500,000 property in Mississauga would have taxes of $4,810 and in Ajax a $500,000 property would attract taxes of $6,820 annually. For Ajax, that’s a difference of $2,855 annually! The City Land Transfer tax in comparison is $5,725 or about two years of savings in annual taxes versus Ajax!
Finally do you believe the level of services – from transportation, to parks, recreation, and schools are comparable between Ajax and Toronto? Probably not!
So if the City of Toronto were to do away with the City Land Transfer Tax, then annual residential property tax rates would have to increase closer to those of the 905 Region. What do you want??