🤔 real estate tax

• in canada, we have no tax on sale of your "principal residence"
• if your home is the minimum you need and will need, the house isn't an investment, b/c increases in your house price also result in increases to other houses
  • can only benefit from rising house prices if
    • move to location with lower real estate prices
    • downsize
  • it just so happens, that for a typical family, it is natural to downsize when retiring, because they needed and had a larger home for when they had kids living with them
    • the "empty nest egg" period between kids-leaving and downsizing is when there is a real investment
      • BUT, this can also be seen as a market inefficiency / perverse-incentive
        • ie. do we want a market where people are incentivized to keep larger homes than they need?
          • or, wealthy individuals to buy much larger/fancier homes than they need
        • a harberger-tax or some other land-value tax would pressure homeowners to downsize sooner
          • IMO, more efficient use of real-estate
        • a non-exemption on taxes for "principal residence" (say, a 100% VAT tax) would lead to situations where sellers are priced out of the market
          • ie. after selling home they were in for 20 years, they couldn't afford an equivalent
            • hence the motivation for the "principal residence" exemption
          • instead of a "100% principal residence exemption", could have a "fixed amount principal residence exemption" pegged to inflation
            • ex. 500k/person
              • ex. 2 spouses: 500k x 2
              • could include children?
            • ie. the first 500k of primary residence sale is untaxed, but remaining is taxed at typical capital gains rate
            • basically saying that "500k of housing per person" (inflation pegged) is "needs based", and anything above is choice / luxury
              • ie. 2 people in an 8M house
                • when sell, get (1M/8M = 12.5%) reduction on cap gains
              • ie. 2 people in a 2M house
                • when sell, get 1M/2M = 50% reduction on cap gains
              • ie. 2 people in a 1M house
                • when sell, get 100% reduction on cap gains
            • this is philospically similar to the "personal amount" fixed deduction in Canadian taxes
            • the political "difficulty" would be in picking a "fair" amount
              • too high, and it might as well just stay as a "100% exemption"
              • too low, and it "punishes" people in cities
              • ex. 500k/person in 2023 in Canada
                • 1000sqft 2 bedroom in downtown Toronto
                • more than enough for 2 people
                • could be closer to 400k/person
              • also... "luxury" home owners (over the cap) would need to start tracking upkeep expenses

2023-03-04 Update

• Could instead have a "per-year-accumulating real-estate cap gains exemption"
  • ex. $25,000 / year (5% of 500k)
  • ie. no more "principal residence exemption", this covers all real-estate cap gains
  • avoids the tax-dodge of: rent out a place for 20 years, then move in for the final year to make it your principal residence
  • does it start accumulating from birth? 18+? when you own?
  • is it transferrable? tradeable?
  • (or, just a lifetime exemption)