More On Affordable Housing

August 6, 2017

A few days ago I published a list of policy ideas that I believe will help alleviate the housing affordability crisis in Vancouver. I mentioned at the time that  I would probably forget something as I wrote, and I did:

10. Capital Gains Tax:  I would change the regulations on the capital gains tax exemption for principal residence by adding a time component to ensure that speculative flipping became less profitable.  I would suggest that there be no exemption for a resale in the first 12 months of ownership; 25% exemption in year 2; 50% exemption in year 3; and 75% in year 4. The full exemption would apply thereafter.  I would also insist that the time limits only begin when the true beneficial owner of the property proves residency in BC.  Not only would this provide a disincentive for speculative buying, but would reinforce the idea that a home is primarily a home rather than an investment.

Policy #10 also implies a much broader definition of transparency in property ownership, enough at least to identify the genuine beneficial owner.


Towards An Affordable Housing Policy

August 3, 2017

Some weeks ago, I published my views on densifying Grandview. I wrote it primarily as a prophylactic against the lies that others were putting in my mouth but, when it was done, it was a relief that I had finally put it out there; whether others agree with it or not is irrelevant, the fact is I am willing to stand up and be counted for what I believe.

Yesterday afternoon, I was engaged in a discussion about housing policy — not for the first time — and I was disappointed that the idea of banning foreign house purchases was still so prevalent as a “solution” to our affordability crisis. I have real trouble with picking on an entire class of people (in this case, “foreigners”) as scapegoats for any problem — surely the 20th century taught us the dehumanising and murderous folly of that! Besides, a “foreign” tax would not stop rich Torontonians or Montrealers from buying all the property and we would be back at square one.

As an antidote to that kind of discussion, I have decided to list nine policy ideas that I believe will significantly improve the housing situation in Vancouver. A few of these ideas are repeats from my densification model. This list  is not in priority order, and I bet that some of the things I want to say will be forgotten before I get to them, but this list should encourage a debate of what is practicable in the near future.

1. New Building Development approvals:  I believe that the  primary reason we are in this mess is because City Council and their development cronies have deliberately continued to build housing units at costs/prices that ignore the median income levels in our city. They have built for greed rather than need. I would make it clear by City By-Law that approvals for new builds must meet an income test — a high percentage, say 75-80%, of all units for sale or rent must be available at rates equivalent to a maximum of 30% of Vancouver’s media family income. Failure to meet that test will guarantee failure of development approval.

2. Elimination of CACs, full payment of CACs: I have argued this point in a lot more detail elsewhere.  Not only would this reduce the cost of building but, at least as important, it would return a measure of democracy to decisions on public amenities.

3. Empty unit tax: One of the results of building for greed rather than need is the vast amount of empty housing units to be found in Vancouver, tens of thousands of them.  I would impose an empty unit tax that really bites; it should be high enough to encourage the sale or use of most of these units. The revenue from such a tax would  be collected in an Affordable Housing fund (see #9 below).

4. Property value:  If we really believe that a house/apartment should be a home not an investment (which  is what it has been for most of our history) then I would end the free market in property for sale.  In the same way that we already limit rents to a certain CoL increase each year, then the value  of a home for sale should be similarly limited. The million-dollar windfalls that have fallen into the laps of certain sellers are an historical anomaly and have helped destroy the market for young and lower-income families. Market pressures will allow prices to fall if required, but the law will limit any maximum increase.

5. Property Tax:  Regardless of the bellowing we hear every year, property taxes in Vancouver are comparatively low. The standard $1.5 million house in Vancouver pays about $5,000 in taxes. A similarly valued property elsewhere in most of North America pays multiple times that much (see examples in New Jersey [tax $US14,971] , Connecticut [$US21,145], Kansas [US$10,000],  Portland OR [US$12,128]).  I would add an affordable housing surtax to Vancouver properties all of which would be devoted to an Affordable Housing Fund (see #9 below).

6. Rental units:  I would change the law to ensure that rents are tied to the unit not to the tenancy. In other words, there can be no increase in rent simply because a tenant moves out (or is forced out). This works well in other jurisdictions such as Montreal and would deal with the appalling eviction rate we have in Vancouver.  There would have to be some incentive to landlords for suites to be upgraded and renovated as needed (need more thought on this) but there should be no permanent displacement and current tenants would gain the right to return at the same rent.

6. Existing suites:  There are still a large number of “illegal” suites in the City. I would grandfather all these suites, without additional permit requirements, so long as they are registered. Once registered, they should fall under the Rate of Change legislation, ensuring that the number of rental units is not reduced. I would amend the Rate of Change rules to include any group of three suites on a lot rather than seven as of today.

7. Suites in Older Homes:  I am aware of a number of older homes, in perfectly good condition, where the owner would like to add a revenue suite. However, the current rules at City Hall require extraordinary, expensive, and quite unnecessary adjustments, sometimes to the entire house before a suite can be approved.  Health and safety are one thing, but many of these rules seem designed to obstruct the construction of suites and, at the same time, to serve as profit centers for the City coffers. I would push for far less stringent regulations for new suites constructed in buildings built before 1940.

8. Increase units per lot: Rezone most areas to allow three units per lot if wanted, and maintain rental-only for laneway houses. This is described further here.

9. Affordable Housing Fund: I recognise that the policies outlined above would primarily assist the average working person or family.  Something different is required for very low income/welfare/homeless residents. It is vital that all three levels of government get back into the low-income housing business. At the municipal level I have suggested two revenue streams that could be fed into an Affordable Housing Fund. This should also be the receiving point for funds loosed by senior levels of government. The fund should be used to build housing on city-owned land for welfare & low income residents. In the event that we can clear up the crisis at that level, the fund could then be used to create publicly owned housing or to fund cooperative housing societies.

Well that’s it. I have never professed to be a housing analyst, but these ideas seem like common sense to me, especially as we drag along on this unaffordability crisis. They are just ideas and I welcome debate and discussion to ensure that, as soon as possible, we find the right balance.



Taming The Corporate Tax Dodge

July 12, 2017

Google has just managed to escape paying taxes due in France of about $1.3 Billion. I don’t know how much they paid in legal fees, but clearly on the lawyers and Google investors gained anything from the shell game they play. In honour of the “little” people who pay their taxes every month or year, I have decided to replay the suggestions I first made in January 2016:


Until we manage to mature into a society that can depend on mutual aid and cooperatives, we have to mitigate the abysmal effects of today’s market capitalism and the supra-national power of corporations.  Over the next few weeks I will be posting a number of ideas of how to fundamentally change the economic system, but today I want to start with the problem of corporate tax dodging through foreign ownership.

Google, Amazon and many other international companies make billions of dollars in revenue from , say, sales in the UK, but manage to pay virtually no tax in the UK.  They do this through foreign ownership — sometimes through multiple countries — and so-called management fees that the UK operation has to pay to the home corporation. It has become a regular scandal in the UK and threatens to do the same elsewhere.

For example, a classic case is brewing in the United States with Johnson Controls. This is a company that, as the Times says, exists only through the generosity of the Federal and state taxpayers.  And yet, it is now planning a reverse takeover with a smaller Irish company.  This will turn Johnson into an Irish company and they estimate saving $150million a year on US taxes while still retaining its location in Milwaukee.

Centre-right politicians have suggested that lowering corporate tax rates will encourage more companies to stay in- house as it were.  That is just an excuse to make the rich richer.  There is a simpler and much more efficient way.

I suggest that corporate income taxes be eliminated completely. They should be replaced by a “license to operate” fee equal to, say, a flat rate of 10% of revenues earned in the country no matter where the head office is based. Simple to understand, simple to manage, and, I suspect, very difficult to get around.

Country of ownership becomes immediately irrelevant, and transfers to an offshore HQ will be pointless for tax purposes. Indeed, they may well create a double taxation situation in which those transfers become taxable revenue in the home country. It also gives corporations the right to NOT operate in any particular country if they choose to forgo the revenues.

Finally, I would make this tax law bullet-proof by including a provision that, should some smart accountant or lawyer find a loophole, then that loophole is closed retroactively.

As I wrote earlier, there will be other ideas on corporate governance in the days and weeks ahead.

Towards Voluntary Taxation

March 1, 2017

It is tax time again.  And yet again I make my pitch for an all-voluntary tax system.

Way back in June 2002, I proposed doing away with all non-voluntary taxation by replacing income and all other taxes with a consumption tax. This is what I wrote in 2002, and I still see little need to change the basic structure proposed:

The basic principles for a new tax scheme are that it should be essentially voluntary, and concerned with ensuring equal opportunities for all. Therefore, I would propose the elimination of all personal and corporate income taxes as they violate by their very nature the voluntary aspect of taxation. I propose to replace the revenue with an all-inclusive sales tax on goods and services with a few, well-defined exceptions (the figures below represent Vancouver costs of living and could be adjusted as required):

• all foods
• shelter (to $18,000/year rent or the first $350,000 of purchase)
• all non-cosmetic medical, dental and optical-health services
• all educational services
• financial services (bank charges etc) to $500/year
• legal services to $2,500/year

The sales tax should be a single percentage across all categories of goods and services in order to reduce accounting and bureaucratic requirements.

The use of the sales tax for the bulk of government revenues brings a great deal of volunteerism to the matter. The exceptions provide an important and necessary break for those goods and services which can be described as the necessities of life; above that, the more I choose to buy, the more taxes I choose to pay.  Rampant consumerism therefore becomes a tax liability.

On the other side of the ledger, also to the good, the simplicity of the scheme allows for huge bureaucratic savings in administration and zero non-compliance. The tax would also be levied on all capital transfers outside the jurisdiction. It will oblige tens of thousands of “tax lawyers” to find genuine productive employment.

All government activity should be categorized into line items that can be shown to have a direct bearing on the level of the sales tax. In this way, the people are enabled to make decisions about what sections of government can be further cut to reduce the level of taxation. Conversely, any additional work to be performed by the government can be readily calculated as an addition to the sales tax.

In other words, the cost of a government service will be immediately and directly calculable — and the people can make their judgments on whether to go ahead with it on that basis. It is one thing to say that a government program costs $600 million — an abstraction at best; it is quite another to say that program x will cause a rise in the sales tax by 1%.

In a capitalist system where the government bureaucracy acts as a nanny on so many issues, taxation of some sort is inevitable, as will be resistance to such taxation. The sales tax that I propose will allow the taxation system to operate on a voluntary basis, thus achieving considerably greater support and compliance.

It might be claimed that rich folks will simply remove their money from Canada to avoid the sales tax.  Possibly true, but in my scheme, the sales tax would apply to all such financial transfers from the moment the scheme is announced.

Finally, I believe that many polical types concern themselves far too much with how much money people make. If we concentrate on the input (salaries, bonuses etc) there will always be those who can play fast and loose with the rules.  However, if you apply taxation to outputs (purchases, transfers etc), the returns will always be progressive: the more they spend, the more they’ll pay.

A Reform Proposal For Corporate Governance

February 3, 2016

This is the second in a series of discussions about changes that need to be made to modern capitalism to protect the mass of humanity in advance of a full and revolutionary change to mutual aid and co-operativism. In the first, I proposed new taxation rules for corporations; here I discuss corporate governance in more general terms.   I note once again that these are just notes, eager for debate and adjustment.

The key to the improvements required for corporate governance is a constitutional amendment (or similar, depending on each national situation) stating specifically that corporations do not have the same rights as human beings; they have only the specific and particular rights granted to them by legislative or executive action.

More specific changes would include a ban on quarterly reporting and forecasting; possibly the half-yearly reports, too.  This will enable a new cadre of senior executives to concentrate on managing their companies for the long-term rather than for short-term stock market speculation. The CEO of the world’s largest investment management firm, Larry Fink of BlackRock agrees that CEOs should “focus on creating long-term value instead of emphasizing quarterly targets.”  This is such a fundamental and important priority that I would impose severe penalties (including mandatory jail time) on CEOs for any breach.

Loans from the taxpayer would be permissible (see the current Bombardier requests) but indulgence of this kind in state socialism would trigger a specific set of rules of governance. Until the loan has been completely repaid:

  • no dividends or similar may be paid to shareholders;
  • no share buy-backs or similar schemes are permitted;
  • no increase in executive emoluments (of any and all kinds);
  • no executive bonuses of any form.

Lay-offs totalling 5% or more of company personnel in any two-year period trigger the same rules for a period of two years; this sanction shall not be concurrent with the loans’ rules. The two-year sanction for any breach of maximum lay-offs will be imposed at the end of any loan repayment.

Corporations may pay unlimited salaries and bonuses to executives, subject to sanctions not being in place. However, the portion of any emolument exceeding thirty (30) times the average non-executive wage or salary shall not be a deductible expense for purposes of determining the corporation’s taxes (in a corporation income tax situation), or shall be added to aggregate revenues (in the license scheme proposed earlier). This will assist the system to return to the Eisenhower days (for example) when profits from increased productivity were shared more equitably among all workers. Currently, CEO pay and benefits are on average more than 300 times that of the average employee.

Bankruptcy rules for corporations must be changed to ensure that non-executive wages, salaries, and pensions are first in line for payment. Labour should not be a risk proposition. If you work, you must be paid. I believe trade suppliers should be paid next. Banks, other lenders, and investors have to bear the risks that their rewards suggest.

Finally, no corporation should be allowed to make political donations (in cash, in kind, through third-parties, etc. without limitation) without the express consent of sixty percent (60%) of all shareholders both as to amount to be contributed, and to whom donated.

If we put these rules in place, then we will mitigate some of the worst excesses of modern capitalism. If they stay in place long enough, these changes will tend to lean us in the direction of mutual aid and co-operativism, which should be the ultimate aim.

The next in this series will look specifically at reform proposals for banks and insurance companies.