BC Election & the NDP Rental Rebate

As you may or may not know, the writ has been dropped in the BC election and all week we’ve been getting details about each of the parties plans. The Liberal Party released their full platform (more on that separately) on Monday and (I think) the NDP will release theirs tomorrow on Thursday April 13.

The BC NDP though have been making small announcements here and there and today one really caught my eye.

I can’t find any more details that this but imagine the rebate is more about addressing affordability and disconnect in how ownership and rental is treated. We should learn more tomorrow to help with that side of the debate (please BC NDP don’t use flipsnack or similar to release your platform), [UPDATE: JOHN HORGAN HAS NOW BEEN QUOTED AS SAYING “If homeowners can have a homeowner grant, renters should be able to have a grant as well.” That is actually a very straightforward argument using the horizontal equity principle. Of course, we could instead get rid of the homeowner grant, but even then homeownership is hugely subsidized in this country.] but that aside for now if we are going to have such a rebate why would a tax economist be interested in this?

Yah, I am excited for completely different reasons. I have, in fact, been calling for recognition of rental payments in the tax system for the sole purpose of collecting information for compliance purposes.

We know anecdotally and from compliance audits that small suppliers are fairly poor with their reporting of rental income for tax purposes. There are several reasons for this, including lack of knowledge, fear (their suite is illegal so they think if they report the income they will be visited by by-law officers), and pure tax evasion. The pure tax evasion is not just related to the rental income itself but also related to improper claiming of the home owner grant and principal residence exemption. How much money is lost to such antics? We don’t know but recognition of rental payments through the income tax system could allow us to determine this. It could also extend beyond just tax compliance but also using the information to investigate compliance with rental laws (like rental increases, the ol’ I tell you that I am evicting you because my granny is moving in but really I want to increase the rent more than the legal requirement, etc.)

But this rebate would have to be implemented properly to achieve these multiple objectives. It would have to be delivered through the income tax system, which means it would have to be the form of a tax credit. I know, I know, economists including myself rail on about how ridiculous all these boutique tax credits are. But given the number of renters in BC, given that arguments can be made that the tax credit actually works to address horizontal equity issues between home owners and renters, and given the possibility of the tax credit to pay for itself through compliance efforts, well, I am fairly excited about the possibility (and launching a research agenda in a few years time). It would have to collect information on the address of the rental, how much total rent paid, and name and contact details for the landlord. And would have to be implemented in a way to also minimize fraudulent claims by people who are not actually renting.

So if the BC NDP win this election, that they follow my advice here:

Oh and as an aside, did you know that many provinces, including BC and Ontario, in the past had rental income tax credit?


One thought on “BC Election & the NDP Rental Rebate

  1. […] we had the details, I had additional comments about why it was great for tax compliance reasons here. So this is one to […]

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