The Theory Behind Justin Trudeau’s Crackdown on Short-term Rentals (Airbnb) in Canada and Why it Will Likely Result in LESS tax revenue – January 22, 2024
For the most part I’ve argued that the housing problems stem from MUNICIPAL governments, and the worst thing the FEDERAL government ever did was get involve in the housing market.
Well, now that the Feds are losing popularity in Canada, they’re also losing revenue, making their federal debt situation worse. Government regulations hinder tax revenue because they change behavior.
For example, Airbnb drives down COSTS for travelers to Canada. So, if there are fewer short-term rentals in the Canadian housing market, the result may include fewer people traveling to Canada, and again, housing in Canada is mostly a municipal government problem, if it were profitable to rent out your apartment, more people would do it, but in most cities in Canada, the judges and the laws tend to side with the tenants, even when the tenants are wrong, the landlord gets stuck with the bill.
Tax Write-offs, in general, are overrated; as a business owner, you’re still paying out-of-pocket costs, which typically include sales taxes only to push down your taxable income.
So if the government says no you as a business are not only going to take all the risk but you’re also going to pay taxes, that will equate to a change in behavior. What that change in behavior will be, I’m not sure exactly, but it will likely result in LESS spending for the business owners, as there will be nothing to gain by spending for housing-related business ventures.
The same scenario has played out with Trudeau’s war on fossil fuels; investments are drying up for fossil fuel-related energy projects; however, “renewable” based energy companies REFUSE to pick up the slack without government subsidies.
So, for myself, I see a similar situation unfolding regarding housing in that these new regulations by Trudeau will likely end up as some sort of housing subsidy on the other end, which will accelerate the Federal Debt.
I believe Trudeau has been selling off Federal properties for housing, which sounds nice until you recognize the additional COSTS on the other end. You also have to remember that blended into all of this are Canadian consumers and voters not having to change their ECONOMIC behavior or voting patterns.
This theory that BIG GOVERNMENT knows best, at least economically, has proven to be a recipe for disaster as Justin Trudeau hasn’t been proven to be a good redistributor of money. It’s one thing to raise taxes, which is what the Crackdown on Short-term Rentals is, but if you’re going to raise taxes, as the Prime minister, you’re supposed to be better with redistribution, which Trudeau to date hasn’t proven he can do.
Prices are higher, taxes are higher, and the results are economically bad; that’s the economic legacy of Trudeau to date.
Interesting times ahead!