Skip to main content

Why hammer someone who wants to purchase a yacht or a plane, but leave untouched someone who wants to buy an antique rug, or, for that matter, a high-end condo in Vancouver or Toronto?

CHRIS HELGREN/Reuters

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Step away from that marina, sir. Put down the keys to the Tesla, ma’am. Everybody keep their money in their wallets and nobody gets hurt.

In the current election campaign, many of Canada’s leading politicians sound like the cops on a true-crime TV show. Except they’re not policing the mean streets of an inner city. They’re cracking down on rich folk who want to buy expensive baubles in legitimate ways.

Story continues below advertisement

Liberals want to levy a 10-per-cent luxury tax on those conspicuous consumers when they purchase a car, boat or airplane valued at $100,000 or more for personal use. The NDP has a similar proposal but aims to make the luxury tax an even stiffer 12 per cent.

Fundamentally, this appears to be a fight to demonstrate each party’s solidarity with the middle class. Unfortunately, fine sentiments don’t make for good policy.

Why should people have to pay a luxury tax on a $100,000 car but not on a lavish extension to their house? Why hammer someone who wants to purchase a yacht or a plane, but leave untouched someone who wants to buy an antique rug, or, for that matter, a high-end condo in Vancouver or Toronto?

The economic logic here is hard to follow. If splashing out money on big-ticket goods is such a bad thing, Ottawa should be taxing all varieties of high-end spending, not just some. On the other hand, if Canada wants to encourage consumption to spur the economy, cracking down on some of the most popular types of luxury spending seems like a questionable idea.

The logic gets even murkier if you try to think about how the proposed luxury taxes might affect people’s behaviour. Wealthy consumers may decide to buy two $99,000 cars instead of a single $200,000 car. Or they may look for vendors who can find ways to structure deals as leases rather than sales. Or they may simply decide to shop for their big-ticket items out of the country, and keep the new boat or plane at their winter place in Miami.

None of those likely outcomes would do anything to help ease inequality, create middle-class jobs or spur Canada’s economic growth. A luxury tax may not do much for Ottawa’s bottom line, either.

A review of the proposed Liberal luxury taxes by the Parliamentary Budget Officer concludes it is hard to figure how much money the levies might raise. “The exact magnitude is uncertain,” the PBO declared in a recent report, since the ultimate figure all depends on how sensitive consumers would be to price. The budget office’s best guess is that the tax might raise $585-million in its first year. To put that into context, total federal spending this year will come in around $355-billion. In the overall scheme of things, even a successful luxury tax would barely qualify as a rounding error.

Story continues below advertisement

The only inarguable rationale for the sudden interest in luxury taxes is politics. Nothing demonstrates a party’s loyalty to the middle class more than a demonstrated desire to crack down on blatant displays of wealth. And there is no more politically palatable tax than one that affects only a small group of voters who are doing just fine anyway.

But the optics cut in both directions. While luxury taxes may send out a comforting message to middle-class voters that everyone is paying their share, they also signal that Ottawa disapproves of the highly successful. Never mind if these folks have earned their money and paid income tax on it. Now they will have to pay extra to enjoy it.

There are better ways to do things. If Ottawa needs additional revenue, perhaps the fairest way to get it is through the income tax system – not through the government passing moralistic judgments on what is acceptable for someone to purchase. As it stands, a luxury tax is political theatre, not substance.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter