Legislative Assembly of Ontario

The House resumed 8:15 o’clock, p.m.

Hon. J. W. Snow (Minister of Government Services): Mr. Chairman, before you proceed with the business of the House, I would like to take this opportunity to introduce to the hon. members the group of young gentlemen from Oakville, members of the 7th Trafalgar Boy Scout Troop, and three of their leaders who are with us this evening in the west gallery.

Mr. C. E. McIlveen (Oshawa): Mr. Chairman, I would like to introduce a group of Oshawa Sea Scouts and their leaders. This seems to be the automotive cities’ night tonight. They are in the west gallery above us. Thank you.

LAND SPECULATION TAX ACT (CONTINUED)

House in committee on Bill 25, An Act to impose a Tax on Land in respect of certain speculative Transactions affecting the Control or Ownership of Land.

Mr. Chairman: Now in the consideration of Bill 25 are there any comments, questions or amendments in the first part of section 1 down to about the middle of the page? Down to sub-sub (B) inclusive?

An hon. member: Carried.

Mr. V. M. Singer (Downsview): No, it is not carried at all.

Mr. Chairman: I know. The member for Lakeshore.

Interjections by hon members.

Mr. Singer: Well, if you fellows would draft a bill that could be understood, we could go along with it. This has simply got us so confused we --

Hon. E. A. Winkler (Chairman, Management Board of Cabinet): How could we do that to the member?

Mr. Chairman: The member for Lakeshore has the floor.

Mr. P. D. Lawlor (Lakeshore): I confess I don’t understand a single phrase in the bill either.

Hon. A. Grossman (Provincial Secretary for Resources Development): It is going to be a great night.

Mr. Lawlor: However, I came in a spirit of great humility, Mr. Chairman, in order to learn from the minister tonight.

Hon. A. K. Meen (Minister of Revenue): Oh, come off it, Pat, old buddy.

Mr. Lawlor: Humility. It’s a new-found trait.

Mr. Chairman, it puzzles me; do you mean to tell me that even at this stage we are finished with the title? Are you serious?

Mr. Chairman: Yes.

Mr. Lawlor: Oh, you are. You have really made up your mind about that? All right.

Interjections by hon. members.

Mr. Lawlor: Mr. Minister, that clause (B), do you care to launch into your Delphic oracle trance at this particular stage and describe to me what you have said during second reading with respect to the business of intestacies and wills and the various complications? Or would you rather wait for that for a subsequent clause and come back to it? How do you feel about that?

Hon. Mr. Meen: I think, Mr. Chairman, that the interpretation of (B) can be better understood when we are dealing with the disposition section. Then the hon. member for Lakeshore would probably have some questions in connection with the disposition in an estate resulting through the subclause (B), deriving under an estate.

Mr. Chairman: In the meantime, can it stand as part of the bill? Does the later section affect it in any way?

Mr. Lawlor: Well, on (C) the minister has gone to some trouble with his fool amendment --

Hon. Mr. Meen: This is part of the problem, that --

Mr. Chairman: Order please, we’ll have to place that amendment and see if --

Hon. Mr. Meen: Mr. Chairman --

Mr. Chairman: Order please. Before we get that far, is there any further discussion up to that point?

Mr. Singer: I don’t know whether there is discussion up to that point or not, but what happened to the old (C) which seems to have disappeared, and why did it disappear?

Hon. Mr. Meen: If the hon. member would care to look in his book I think he’ll find the old printed copy of the Act that will have the old (C) in it.

Mr. Singer: I have the old one here and --

Hon. Mr. Meen: We have replaced (C). Actually, section 1, sub (1), sub (a), sub (i), sub C, which is the one we are on now --

Mr. Singer: Yes:

Mr. R. F. Nixon (Leader of the Opposition): That’s a capital “C”.

Hon. Mr. Meen: -- is the old sub (C) dealing with non-arms’-length transactions and it’s an expansion --

Mr. Chairman: Order please. I think if the hon. minister will read his amendment --

Hon. Mr. Meen: Does the --

Mr. Chairman: Order please; order.

Hon. Mr. Meen: Could I ask the Chairman, does he wish me to read the amendment or would he like me to simply move that subclause (C) of sub (i) of clause (A) of subsection (1) of the bill be deleted and the present sub (C) as it appears in the reprinted copy of the bill be substituted therefor?

Mr. Chairman: I think for the sake of Hansard it should be read once.

Hon. Mr. Meen: Then I’ll do so, Mr. Chairman.

Mrs. M. Campbell (St. George): We don’t have to -- now he is hooked.

Hon. Mr. Meen: I will do so formally, and with some regrets, because we do have some long amendments.

Hon. Mr. Meen moves that subclause (C) of sub (i) of clause (A) of subsection (1) of section 1 of the bill be deleted and the following substituted therefor:

(C) The fair market value of the designated land at the time it was so acquired if it was so acquired:

1. by the transferor from a person or persons with whom the transferor was not dealing at arm’s length at the time the designated land was so acquired by him;

2. by the transferor that is a corporation that so acquired the designated land in consideration of the allotment and issue of its shares;

3. by the transferor that is an organization, syndicate, association of persons, partnership, joint venture or corporation without share capital that so acquired the designated land in consideration of the admission to membership therein of any person, or

4. by the transferor by way of gift.

Mr. Singer: Before you sit down, tell us why you deleted all that came below that?

Hon. Mr. Meen: In short, Mr. Chairman, this is an expansion of (C). More specifically and, I think, with greater clarity it touches on the various types of potentially non-arms’-length deals. Sub (1) of (C) specifically refers to non-arms’-length transactions; sub (2) specifically refers to shares that may not have an otherwise discernible value; sub (3) deals with memberships in an organization, syndicate or so on and, of course, sub (4) deals with a transfer by way of gift: Any of those, therefore, with a valuation which is hard to ascertain except by way of ascertaining the fair market value by way of assessment.

Mr. Lawlor: I wanted to say, Mr. Chairman that it goes some lengths; it should be recognized by the House that it does go some lengths. One was trying to figure out in what context, in what various circumstances the fair market value assessments, the fair market value adjustments, were going to be made as opposed to actual value and in what a range of circumstances this would be done. Under the previous bill I found it difficult to do that and this does go some lengths to clarify what you’re seeking to do and when these things arise.

Hon. Mr. Meen: I might just say, Mr. Chairman, that I thank the member for Lakeshore for those views. That was the conclusion we had reached as well.

Mr. Lawlor: It just points up, Mr. Chairman, what a drastic job of drafting appeared in the previous situation. This latter-day conversion to good draftsmanship is something that really should be given recognition. It is so rare.

Mr. M. Shulman (High Park): It was completely unintelligible.

Mr. Chairman: The member for Downsview.

Mr. Singer: Perhaps you could tell us what gave you the second thoughts other than greater clarification and more exactitude and all that sort of nonsense? Why were you able to bring in this very meagre sub (C) of 1(1) in your original bill and find, on more sober consideration, that it required really four sub-sections to expand? What gave you the thought?

Hon. Mr. Meen: Perhaps a little bit of perspicacity; further reflection on the Act itself, Mr. Chairman. It’s amazing what one can detect in any of these bills, particularly when they’re drafted from scratch to use the colloquial. One sees on subsequent reflection that perhaps there may not have been a full delineation of the various problems which could arise in a section such as this where we’re trying to deal with non-arms’-length transactions.

I must say when I looked at subclause (C) where we talked about dispositions with whom the transferor was not dealing at arms’ length, it seemed to me to be adequate. Then it was pointed out to me: “What about when you join the local club and you take certain shares? What about the various cases where, in exchange for a parcel of land, you take certain shares in a corporation? How do we equate the value?”

There might then be some question as to whether you applied an alleged value -- a book value or whatever it was -- to the shares in order to determine what your consideration for the exchange of the land might be, just to use one illustration. It was clear we should expand upon it and my counsel, I think, have done an excellent job, as indicated by the member for Lakeshore, in redrafting subclause (C).

Mr. Singer: Mr. Chairman, what puzzles me is if they’ve done such an excellent job now, and presumably you had the same group before, why did they do such a poor job in the first instance? What puzzles me, insofar as this bill is concerned -- we enunciated some of our concerns when you came to amend the title and those doubts still have not been cleared up -- is why there was such a terrible job of draftsmanship done in the first instance? What sort of new thinking suddenly occurred to you between April 9 and May 9 that showed you a bit of light?

When you got around to seeing a bit of light in expanding the definition in the old sub (C) of (a) of 1 of (1), why didn’t it occur to you that a very integral part of this Act was to fix the rate of taxation which was really going to be paid? What brought this new idea to you? Presumably you had the same advisers. Presumably you didn’t consult with the outside world. You didn’t consult with Ottawa; you didn’t consult with any established accountancy firms. You haven’t been able to quote to us a single opinion of a noted tax lawyer who practises in Ontario. What brought the new ideas to you?

Hon. Mr. Meen: Mr. Chairman, I happen to have had the benefit of probably the smartest tax lawyer in Ontario in the case of the head of our legal branch in this Ministry of Revenue. Nevertheless whenever one is pioneering as we are with this legislation, it’s inevitable that there will be amendments. We’ve said that from the beginning. The Treasurer (Mr. White) said that on April 9 and he has said it since. I have repeated that on a number of occasions. I said it, in fact, during second reading of this bill, that we were bound to encounter all kinds of areas in which we could in some fashion or other strengthen this bill. You just can’t come up with perfection the first time you take a run at a new piece of legislation.

Mr. Singer: Your bill is certainly far from it.

Hon. Mr. Meen: The hon. member for Downsview must surely know that. He has been through this. He has drafted agreements in the past. Whether he’s drafted legislation ab initio the way our legal counsel has had to do in this case, I wouldn’t know. But I can say this, that if he’s had the kind of law practice I had for many years, he had to start from scratch with the preparation of many agreements. He couldn’t go to an O’Brien on conveyancing every time and fill out a form and start from scratch. He had to start from scratch himself, rather than use a precedent from some other learned tome. I would suggest to him that our counsel in this instance had to do just that. I think we can with every justification give him full marks for coming up, in the draft that I had for introduction on April 9, with as good a draft as it was.

Certainly we’ve found areas that we could improve on, and this was one of them. We’ve found areas in which we really hadn’t accounted for the problems that were made known to us, as for example, with builders which we’ll get into that section in due course and, as for example, with respect to genuine investors in rental accommodation, and we’ll get into that in due course. Those were areas that we really hadn’t thought out as full as I would have liked to have. That’s just one of those things when you don’t have the chance to consult with counsel, tax advisers, with accountancy firms and with all the other people you might like to talk to when you’re putting --

Mr. Singer: You don’t have the chance? Why don’t you?

Hon. Mr. Meen: Obviously, and the hon. member for Downsview fully knows that, when you are dealing with matters in the budget there’s a very limited number of people with whom you can discuss these matters, and we were quite limited in the area in which we could discuss these things.

As was indicated as I mentioned by my colleague, the Treasurer, and I’ve said it too, we knew perfectly well in new areas like this we were going to have a lot of amendments. This is one in which an improvement became obvious to my people and to me; and so there it is. Once again, I repeat, as the hon. member for Lakeshore has expressed it rather well, it expands and expands well that area of non-arms’-length transactions.

Mr. Singer: Mr. Chairman, if the draftsman whom the minister praises so highly is the same person who suggested that you bring in an Act imposing a tax, the rate of which we don’t know, then I share something less than your enthusiasm for him. Anyone who brings in a bill that relates to taxation and who can’t tell us what the rate of tax is going to be, certainly hasn’t done his job. It really isn’t the draftsman’s responsibility; it’s the minister’s responsibility for which he deserves the highest condemnation.

Insofar as getting outside advice goes, even accepting your rather feeble excuse about not being able to seek it in advance of April 9, you have still had a month since in which to seek it.

Hon. Mr. Grossman: Walter Gordon tried that once and got into trouble.

Mr. Singer: Well, all right.

Hon. Mr. Grossman: He sure did.

Mr. Singer: Maybe the minister who is now interjecting and the one who is trying to present this bill would have done far better if they’d sought some outside advice from time to time, and brought in some bills that are meaningful. I would like the hon. member for St. Andrew-St. Patrick (Mr. Grossman) to get up and tell us what kind of sense it makes to bring in a tax bill that doesn’t tell us the rate of tax. The minister can’t tell us the rate of tax.

Hon. Mr. Meen: Of course I can.

Mr. Singer: Maybe the member for St. Andrew-St. Patrick is smarter than the whole bunch and he can tell us. I would like to know why you haven’t got an opinion for us in the month that has passed since the budget.

Hon. Mr. Grossman: Did you ask the minister?

Mr. Lawlor: He has been thinking about a different bill all the time.

Mr. Singer: Yes, a month has passed since the budget to clear up those problems. I would like to know why, when you brought in a bill on April 9, you weren’t ready last Tuesday to tell us about these important changes that your very brilliant draftsman had dreamed up. I think the whole thing is a farce. I think you fumble from clause to clause. What we see tonight is a little improvement on what we saw earlier, but not much.

Mr. Chairman: The hon. member for Lakeshore.

Mr. Lawlor: Mr. Chairman, I think you have to be a little indulgent with us over here. After all, this particular legislation is a cause of severe irritation and aggravation. Place yourself salubriously in my shoes and the shoes of members of the opposition and commiserate with us.

The thing that you have been subjected to by your Treasurer is what we are, by reflex action, subjected to over here, only it is more excruciating. We haven’t got the phalanx of people about us to tell us the nice interstices of the thing.

Secondly, you don’t give half enough credit to the member for Downsview. I can tell you as a legislator or as a legal draftsman, his documents emerge pure and prime, pristine and glowing. It comes straight like a Minerva, glowing from the head of Jove. He doesn’t go over them six times. They come out and they are done well. Singer doesn’t fool around with things like that. He gets to the point.

Hon. Mr. Meen: Probably gets his junior to do it.

Mr. Lawlor: And with all the mollycoddle that we have to put up in this particular context, it just shows you, Mr. Chairman, what could be done.

If a minister can introduce 27 amendments overnight, so to speak, within 48 hours of introducing his bill, think if they had a week. When he tells us in his mock rational way that he’s warned in advance, in second reading, that there will be innumerable, indefinite and ad infinitum amendments to it, we can well believe it.

He is starting off extremely well and I would expect that almost before the bill is dry and the ink is off it we will be inundated, and we will have to put up with the man all summer long, redrafting, re-organizing, changing the bill, changing its intent, putting a new title in here and there and by the time we are finished, the last product will scarcely resemble the first. That is my prognostication and my belief and I think we may well come to grips with your particular piece of affrontry right now in the course of this bill and in the particular clauses that we are facing throughout this evening.

I am going to ask you from time to time to tell me in simple English, if that doesn’t trespass upon parliamentary privilege, just what certain clauses in this legislation mean. Let’s get down so that at least the legal and accounting professions will have some glimmer of what you are trying to do.

Mr. Chairman: Does this motion carry?

Motion agreed to.

Mr. Chairman: Any comments, questions or amendments on the next section that goes into the rest of page 2 and page 3?

Mr. Lawlor: Page 3, Mr. Chairman, there is an amendment. You had better move the amendment, Mr. Minister.

Mr. Chairman: At the bottom of page 3, the hon. minister has an amendment.

Mr. Shulman: Amendment to what? Have we passed page 2? I would like to --

Mr. Chairman: Order, please. The hon. member, on page 2 it’s --

Mr. Shulman: Is the amendment on page 2 or page 3?

Hon. Mr. Meen: Page 3, as I see it.

Mr. Chairman: The member for High Park.

Mr. Shulman: I want to ask you about this 10 per cent, which is inadequate. Would the minister care to comment on how he arrived at that figure?

Hon. Mr. Meen: Yes, I know, I see the section. I am just trying to find this in context. This is the section dealing with increasing the value allowable -- and I am trying to use the simple language to which the hon. member for Lakeshore referred -- an adjusted upward value of 10 per cent per annum as indicated here. No, I am sorry, the 10 per cent is not a cumulative figure. This is the net maintenance costs limitation. It’s a maximum of 10 per cent and I suppose it’s fair to say to the member for High Park that it may be treated by some as arbitrary. It’s about the cost of maintenance of real estate, perhaps on the top side. We put that as a top limit; the cost of mortgage, taxes and what not in the real estate over a year should not exceed that.

However, in today’s mortgage market, if one were to be carrying a mortgage that was large in comparison with the market value of the realty, we quite recognize that 10 per cent probably would be exceeded and therefore you would be running at that 10 per cent level. But it was a figure picked by the Ministry of Treasury, Economics and Intergovernmental Affairs as a fairly conservative allowance towards the costs that could be added in each year; non-accumulative, of course.

Mr. Shulman: Mr. Chairman, I hope the minister’s federal confrères don’t use that same figuring in their economic planning, because you surely must be aware that the rate of inflation is now higher than 10 per cent. What you are saying in effect --

Hon. Mr. Meen: We are not talking about inflation.

Hon. Mr. Grossman: That’s about to be resolved in the next month or so.

Mr. Shulman: Yes, we are going to cure everything. We are talking about the accretion in value --

Hon. Mr. Meen: No.

Mr. Shulman: We are too. We most certainly are. The lesser of the figures in (A) or (B) is the amount that will be exempted from the tax, and the most that possibly can be allowed is 10 per cent per year.

Hon. Mr. Meen: Right.

Mr. Shulman: All right. Well, let’s put it down in simple terms. If I buy a property for $1,000 this year, regardless of what my cost is in carrying it, the most I can sell it for next year, without paying tax, is $1,100.

Are you with me?

Hon. Mr. Meen: No, Mr. Chairman, I’m not. That’s not what we are talking about.

Mr. Shulman: Well, correct me if I’m wrong.

Hon. Mr. Meen: If I might just repeat to the hon. member for High Park, what we are talking about here is a top limit of 10 per cent under (A) but a lesser amount of the net maintenance cost incurred by the transferor with respect to the designated land, and there is another definition of maintenance cost. In no way whatever is that related to the cost-of-living index.

Mr. Shulman: Wait a minute. It says, (A) or (B), not an aggregation of the two.

Hon. Mr. Meen: That’s correct.

Mr. Shulman: It’s the maximum. So the most you can have is 10 per cent.

Hon. Mr. Meen: That’s right.

Mr. Shulman: Okay. You are referring to the cost of carrying, are you not?

Hon. Mr. Meen: Yes, maintenance cost.

Mr. Shulman: All right. The cost of carrying is added in effect to the cost of your land.

Hon. Mr. Meen: Yes.

Mr. Shulman: Okay. Does the minister really think that 10 per cent is an adequate figure in this time of continued inflation?

Mr. Lawlor: Particularly when the cost of a mortgage is 11% per cent.

Mr. Shulman: Where can you get an 11% per cent mortgage today?

Hon. Mr. Meen: Well, if the member for High Park is asking me questions, I presume he would like me to try to answer them. What I’m saying is that if the mortgage were the full amount of the market value of the property -- and most mortgages are running 10 per cent or more these days -- then of course the 10 per cent would be the top limiting figure. But if a person has a $100,000 mortgage on a $200,000 parcel, then a 10 per cent mortgage is costing five per cent of the total market value of the property. He still has a cushion above that --

Mr. Singer: You could take a mortgage of 75 per cent or 90 per cent --

Hon. Mr. Meen: -- and it would be that five per cent figure then, rather than 10 per cent. Although this was established by the Ministry of Treasury, Economics and Intergovernmental Affairs as to what they considered to be a reasonable figure for carrying charges across the board, in the colloquial, there may be cases where that 10 per cent may very well be a limiting factor. There may be other cases where it’s well above the ceiling of the carrying costs.

Mr. Shulman: Mr. Chairman, let’s try again. It doesn’t matter whether the mortgage is 10 per cent or zero, you are going to have to pay the cost of that money, whether it’s in the form of a mortgage or in any other form. If you buy a property today -- let’s come back to my $1,000; let’s suppose there is a property you could buy for $1,000. Suppose you bought this building for $1,000; whether you have a mortgage on it for $950 or a mortgage on it for $5, the cost to you is $1,000, and the cost of that money goes on every year. Are you with me?

Hon. Mr. Meen: Yes.

Mr. Shulman: The cost of money today is not 10 per cent or 11 per cent, its running now at about 12 or 13 per cent. By the end of this calendar year, I have no hesitation in predicting it will be over 15 per cent, regardless of who wins the election. What you should have done here, instead of putting an arbitrary figure as you have done, was put in an elastic figure tied in to the rate of inflation. Because you are just kidding yourself when you are deciding the size of the mortgage and saying, “Well, if we have a tiny mortgage, there is no cost.” It costs the same thing anyway. It is just hidden in one case and obvious in the other.

Hon. Mr. Meen: Well, with all respect, Mr. Chairman, that’s not really what this section is aimed at. You know, the market value of that land may not be related to what the owner had to pay for it. Therefore what we are getting at here is his carrying costs, the amount he is paying for taxes. We realize he may well have a mortgage on it for a part, but presumably not all, of the worth of the property.

Mr. Shulman: That’s irrelevant.

Hon. Mr. Meen: I know, the member for High Park says it is irrelevant, because if there is any surplus it is equity, and that equity could be out somewhere else earning him 10 or 12 or 15 per cent, he says.

Mr. Shulman: Exactly.

Hon. Mr. Meen: Well, if he wants to put his money out at usurious rates, that’s fine, but as far as we are concerned --

Mr. Shulman: Holy smoke, you are going to be here a long, long time. Oh boy.

Mr. Lawlor: That’s the first good thing you have said, it is pure usury.

Hon. Mr. Meen: I would just suggest to him that we are aiming at a reasonable figure for the carrying costs of real estate taking it by and large, be it vacant land, be it real estate just developed --

Mr. Singer: Who said it was reasonable? In today’s market he doesn’t know what he is talking about.

Hon. Mr. Meen: And we are talking about the maintenance costs --

Mr. Chairman: Order please.

Hon. Mr. Meen: If he wants to put his money into real estate and have it sitting there not earning him other money, not being productive, then he can be our guest, but that 10 per cent is the top limit.

Mr. Shulman: All right, let me ask the minister a question. Is there anywhere in this Act --

Hon. Mr. Meen: Why don’t you speak to your friend?

An hon. member: Why don’t you put that in your Act?

Mr. Shulman: Ready?

Hon. Mr. Meen: Sorry. Go ahead.

Mr. Shulman: Okay. I will abandon that point for the moment as you obviously don’t understand it, but I will come back to that.

Is there anywhere in this Act that allows for the accretion due to inflation?

Hon. Mr. Meen: There is no more provision for that in this Act than there is in the capital gains legislation.

Mr. Shulman: All right. Then the only room for accretion without taxation is this stupid section, is that what you are saying?

Hon. Mr. Meen: No, in certain instances, of course, with respect to farm property there is an allowance, but again that’s a lot of real estate being used for the production of food and so that is a specific case, and I don’t think any members here will quarrel with that. But otherwise this Act is not aimed at any kind of escalation with respect to the cost of living index or otherwise.

Mr. Shulman: Well, if I may be so bold, did the minister overlook that little matter, or has he forgotten about inflation, or is he unaware of inflation?

Hon. Mr. Grossman: What’s inflation?

Hon. Mr. Meen: No, we are fighting inflation.

Mr. Shulman: You are fighting inflation?

Mr. Singer: When did that start?

Hon. Mr. Grossman: Somebody has to do it, the people in Ottawa aren’t doing it.

Hon. Mr. Meen: I think we have made that clear and in fact if Maurice Park and others can be listened to -- and I hope the hon. member for High Park is listening to Maurice Park -- he will recognize that maybe we’re already having some beneficial effect with this legislation, although I don’t pretend to take the entire credit with this Act and the Land Transfer Tax Act for the improvement of things.

Mr. Lawlor: That is very gracious of you.

Hon. Mr. Meen: But we are fighting it, so why should we admit that it is going to run at 10 or 12 or 15 per cent? What we are trying to do is keep the lid on --

Mr. Shulman: What you are trying to do is ignore it.

Hon. Mr. Meen: -- and keep a lower figure on it, recognizing that in some instances it may run higher than that. But if you take the average investment, I think the hon. member for High Park would concede that it should not cost more than an average of 10 per cent per annum to carry that particular real estate investment. He lost income if he had the equity out in something else, be it interest payment on the part that is mortgage and taxes, and so on.

Mr. Shulman: The minister is perfectly right if he had made this speech 15 years ago, and perhaps he is reading an old speech, but surely he is not saying that with all seriousness --

Hon. Mr. Meen: It is there, it isn’t mine.

Mr. Shulman: -- that you can carry something on 10 per cent today when the cost of borrowing money is higher than 10 per cent? It just doesn’t make sense. I expect more intelligence from you, I expect a little more thought from you.

But just a minute, I want to come back to another matter. You are ignoring the inflation, you are bringing this tax in. You can ignore it very well but it won’t ignore us. What you are saying in effect because you are ignoring the inflation is that the man who buys a property today, if for whatever reason -- illness or death, or whatever -- he is forced to sell a year from now, if because of the natural course of inflation that has risen 10 per cent or 20 per cent or 50 per cent, you don’t care, you are going to take your pound of flesh.

Hon. Mr. Meen: No, I am not saying that, Mr. Chairman.

Mr. Shulman: What are you saying?

Hon. Mr. Meen: This is one of the incentives -- and I am surprised that the member for High Park hasn’t recognized this -- to get land on the market for some productive use in a way that the owner will be able to escape some kind of speculation tax. And if, indeed, values keep going up because he holds it off the market, then he is going to pay tax, and we aren’t going to allow him any very substantial increase in the base price every year. We are going to make it a disincentive to him to hold it, so why should we put a top limit that was at the current borrowing level or the current rate of return? If the hon. member for High Park wants to put his millions into mortgage loans or whatever --

Mr. Shulman: I haven’t got any mortgages at 15 per cent.

Hon. Mr. Meen: Yes, 12 or 15, and he thinks that we have set too high a level at 10 per cent. He is probably quite wrong because in fact we are aiming at below that level rather than above, as a further incentive to people not to hold on to unproductive real estate of this sort but to get it out onto the market.

Mr. Shulman: Does the minister not realize he is going to produce exactly the opposite result? Let me give you a concrete example of what your section does here.

I own a building. I own one building where I have my medical practice. You are going to make it impossible for me ever to sell that building. With no increase in the value of real estate whatsoever, because of inflation that building is going to be worth 15 per cent more dollars at the end of one year. I may want to go out of practice next year and sell that to another doctor, and there is no way I can do it because you’ll tax me if I do it. I am in the same position as 100,000 other professional men in this province.

For goodness’ sake, stop talking like you’re in the 1930s and there’s no inflation. You have to allow for inflation. If you don’t, you’re just going to freeze all real estate and the price is going to go through the roof because what it does mean is that when I do put that thing on the market, I’m going to have to charge so much more to make up for this stupid tax you’ve brought in.

Hon. Mr. Grossman: He doesn’t make enough money in medicine.

Mr. Shulman: Will the minister reconsider? Surely, to the former Minister of Revenue, you must realize the flaw in this.

Hon. Mr. Grossman: It’s a matter of opinion. You know, the hon. member figures he knows all about how money works, and nobody in the world will admit that 100 per cent. He thinks it will work that way, but it is otherwise.

Mr. Chairman: Is there any further discussion on this?

Mr. Shulman: I’m not through by many days yet. I’ve been trying to educate him. It’s difficult, but I’m going to try, Mr. Chairman. You cannot consider the cost of carrying property as it was in the 1940s and 1950s as being applicable today. I think anyone in this House will tell you that. Anyone who has a home. Anyone who has a business. And you’re supposed to be the people who are experts on business.

Surely, you must be aware that you can’t carry things on 10 per cent, and you kid yourself when you figure the size of the mortgage. You just demean yourself when you say people are handing their money out at usurious rates at 12 per cent. Do you think the Toronto-Dominion Bank is practising usury? Do you think the Bank of Canada is practising usury? Is that what you think usury is today?

Hon. Mr. Grossman: Yes.

Mr. Shulman: You show yourselves so much out of touch with what is going on.

Hon. Mr. Grossman: Would the member for Ottawa Centre (Mr. Cassidy) like to answer that for him? Answer the member, answer your colleague.

Mr. Shulman: Regardless of what my colleague thinks on financing -- I defer to him in many fields -- I will not defer in that field. The basic rate -- not the rate that you and I can get, but the basic prime rate that banks charge one another -- is around 10 per cent.

Hon. Mr. Grossman: Shame.

Mr. Shulman: This is not the result of usury. It’s not the result of any political party and it won’t be changed no matter who is elected. It’s the result of inflation.

Hon. Mr. Grossman: Wait until Bob gets elected.

Mr. Shulman: Don’t provoke me. Mr. Minister, you’re making a gross error here. You’ve made a lot of errors this last few weeks. You amaze me. I’ve never seen a minister make so many errors, and the only reason I forgive you is that I suspect they aren’t your errors. You’ve been set up as a straw man that we have to knock down and, by God, you’re going to be knocked down as a result of this bill.

I came from the office of a lawyer today and he asked me to quote him in here and I’ll mention him. He’s Henry Ritterspoon, and he does a tremendous amount of real estate business. He said, “For God’s sake, go into that House tonight and stop that idiot.” He said he’s stopped cold and doesn’t know what to do. He said, “I had lunch today with a dozen different lawyers. Everybody is running around a different way. Nobody knows what this means. Nobody knows what to do. All real estate transactions have stopped, for all practical purposes. We have a lot more houses on the market at higher prices because they have to allow for the extra tax they think they’re going to cost.”

These are the real estate people who tell me to come to you, and you say: “No, no, no. My experts over there keep sending me the notes. They say, ‘Don’t worry. Don’t worry, Art. It’s going to be okay’.”

It’s not going to be okay. You’ve made a gross error in this section. And what bothers me is not committing errors. We expect that. What bothers me is that you won’t reconsider. You can’t put a flat arbitrary figure here, point one. Point two, I’m going to abandon you and I’m going to abandon your bill, because you’re all going to sink together, the three of you. You cannot refuse to allow for the ravages of inflation, because if you do refuse you’re going to produce a freeze on the entire land market in this province. Nobody will be willing to sell. That s what you’re doing.

There’s no use casting pearls before those who cannot understand them so I’ll leave it at that point, Mr. Minister. But you will look back on this debate some months from now and say, “I wish I had thought of that.” I predict that.

Mr. Chairman: Is there anything further on this subsection?

The member for Ottawa Centre.

Mr. M. Cassidy (Ottawa Centre): Yes, I have two or three questions, Mr. Chairman, that I want to put forward to the minister because I think that of all the sections of this bill, this is probably the one which distresses me most.

Mr. Chairman: May I just point out that we are considering page 3?

Mr. Cassidy: That’s correct. I’m on page 3 and I’m on exactly the same subsection as was being referred to by the member for High Park.

I want to ask the minister whether he considers there is equitable treatment between different circumstances for a property holder with this particular 10 per cent rule.

Hon. Mr. Meen: Yes, I think so. We’ve got three different types.

We have the kind of investment in which land is not left in, say, a farming state and on which there would be certain maintenance costs. The transferor would have these minimal allowances of 10 per cent.

We have farming properties on which a further 10 per cent per annum is allowable if the property is kept in farming, as the members will have noticed.

And we have the investment end of real estate, investment for housing accommodation -- perhaps it is fair to say there are other areas as well -- in which 10 per cent on the carrying costs of, say, a duplex or a fourplex or whatever is probably not unrealistic despite what the member for High Park has had to say about it. I don’t think it’s terribly generous but I don’t think it’s all that unrealistically low either. The treatment in that sense is the same for all.

Perhaps I might take this opportunity to mention that if the member for High Park is concerned about his office building, he might be reminded that commercial properties are free of the speculation tax and so he would not have to --

Mr. Shulman: It is not commercial.

Hon. Mr. Grossman: Do you mean you are operating against the zoning bylaws?

Hon. Mr. Meen: -- vary the amount of his tax in order to recoup his costs.

Mr. Shulman: It is not a commercial building.

Hon. Mr. Meen: He’s free to dispose of it.

Mr. Lawlor: Don’t you sell smoke bombs out of there?

Hon. Mr. Meen: I think, as closely as we could get, Mr. Chairman, to the various types of investment, recognizing that there are different types and recognizing, too, that there is no real way in which you can identify a speculator -- a speculator to one person is an investor to another; it’s a subjective test and we’ve had to come at this from a different direction rather than try to identify and spell out just what constitutes a speculator and therefore what constitutes an investor -- I think, recognizing there are these various types of investors, be they speculators or genuine investors, the treatment across the board as to carrying costs is not unrealistic although it may not be equitable to the same degree.

We are trying to levy this with an even hand. Recognizing that you treat the farmer differently from the way you treat the fellow who gets 100 acres and uses it for weekends or from the fellow who invests genuinely in residential accommodation, the aspect of maintenance costs across the board is probably quite realistic.

Mr. Cassidy: Mr. Chairman, I want to suggest that the clause is inequitable. If you start to look at cases you are quite possibly compelled to the conclusion that the whole 10 per cent idea ought to be abandoned. The government, I think, has suggested that about three of four per cent of the transactions taking place in the province are speculative. The Liberal Party suggests that maybe one per cent is speculative. As I think the minister knows, I don’t want to debate it, we would consider a much greater percentage of the transactions taking place in the province are speculative.

Thanks to the housing policies of the Minister of Housing (Mr. Handleman) and of the government, the fellow who buys a house in Toronto or Ottawa or Hamilton today simply for himself and his family is forced to take part in a kind of speculative activity. Once he has hold of the house he has an investment which is rising in value an awful lot faster than, say, even the rate of inflation at the present time.

However, let me talk about the equity of this 10 per cent rule. If the minister can bear with me on two or three examples --

Mr. J. A. Renwick (Riverdale): I can bear with you.

Mr. Cassidy: Thank you. Let’s take the example, first, of some person who wholly owns a property which cost $20,000 a few years ago and is now worth $100,000, for the sake of argument. It’s been held in the family for some time. The earnings from the property -- it’s an investment property; it’s this apocryphal fourplex that everybody is talking about -- more than cover the expenses and therefore they have no net maintenance cost. Is that correct?

Hon. Mr. Meen: That could be.

Mr. Cassidy: For the sake of argument, if the property is rising in value by 10 per cent between April 9 of this year and April 9 the next year and they sell it, they then become liable for tax on the 50 per cent rate on $10,000, plus the additional taxes that are imposed on whatever is left; so they have to pay $6,000 or $7,000 or $8,000 worth of tax on a $10,000 profit, between the fair market value this year a month ago and the fair market value a year hence.

Hon. Mr. Meen: If I could just interject, that is true if the hon. member is talking about the residential accommodation investor who only holds for one year.

Mr. Cassidy: Yes.

Hon. Mr. Meen: But the hon. member will have noted my amendment. We picked a rather arbitrary figure perhaps of three years to clearly identify the genuine investor in housing rental accommodation.

Mr. Renwick: They are really “genuine.” How do you spell genuine investor?

Hon. Mr. Meen: If he holds for three years then he takes off 15 per cent abatement of the 50 per cent, and now it is 35. So he does get some improvement. But what the hon. member for Ottawa Centre says is true if he talks in terms of holding the property from now until the next year and again for the next three years. By holding for three years and one day, he will have accumulated 90 per cent abatement on the 50 per cent tax.

Mr. Cassidy: Is the three years backdated, if the property has been held for seven or eight years?

Hon. Mr. Meen: No, it is not, Mr. Chairman. The reason for that is that we are not going back to tax gains. I know the hon. member suggested that we should be doing that, that we should be taxing gains back before 1974.

Mr. Cassidy: Oct. 21, 1971 was the date.

Hon. Mr. Meen: That raises the question of do you go back to 1492, to cite an extreme case. We are not. We are relating it to present-day situations and mortgages that were placed and so on and the contractual obligations entered into by people prior to April 9 for things that we considered we shouldn’t tamper with and which we would inevitably do if we were to relate back to an earlier date.

Having done that, then I felt that it was not appropriate to relate the ownership term either to a date prior to April 9, 1974, whether it be an apartment investor, a fourplex investor or a farmer who has held his farm in farming for some years. I think if the philosophy is right for any one of these illustrations or examples, it is right for them all. Therefore, we don’t go back.

Mr. Cassidy: I’m not seeking to be provocative. I disagree with a lot of the elements in the tax, and also because of the kind of attitude that people have; they hear that there is a 50 per cent tax on certain speculative values. As the minister knows, there will tend to be an overreaction by some people who say we do not look at the fact that the tax is perhaps only one or two per cent of the total amount that they will receive from the sale of the property.

Point one is that he may be leading to a drying up of the normal flow of investment properties on to the market for a period of three years and a day until that exemption begins to apply. Point two, if I can come back to the example that I was using of an investment property worth, say $100,000 which comes on to the market in a year’s time, if it is wholly owned and if the maintenance costs are no more than the earnings so that there is no net maintenance cost and there is a $10,000 profit at the end of the year and there was no mortgage -- that is case 1 -- then there is a $5,000 tax.

Let us suppose for the sake or argument that on April 10, 1974 our --

Hon. Mr. Meen: Excuse me, it is not quite so. Remember there are taxes and other things that are chargeable against them. It is not quite so, but I recognize that the hon. member is essentially correct.

Mr. Cassidy: Let’s suppose that a hypothetical investor is watching this debate and watching very closely the advice of the member for High Park and myself. The thing for him to do in order to avoid that $10,000 worth of tax will be to find somebody who will give him a mortgage on the property for, say, 70 per cent or 80 per cent of the value at a rate of 12 per cent or 13 per cent.

At the end of the year, when he intends to sell, he has accrued a liability and maintenance cost equal to about 10 per cent of the value of the whole property. At that point, then, he simply pays the taxes he would have paid before this tax ever came into effect. But he will be liable to no land speculation tax at all.

Does the minister follow me as far as that goes?

Hon. Mr. Meen: Yes, I do indeed, and I think also he would be liable for fraud and a few other things -- what’s the word I want? -- a less than bona fide mortgage loan in which he was in league with a phoney lender in order to generate a phoney expense.

We recognize that there are other ways to check out the legitimate operator and whether or not it is a legitimate mortgage.

Mr. Cassidy: Okay.

Hon. Mr. Meen: And I see the hon. member for High Park is smiling and shaking his head like mad. I guess he has thought up a dozen ways in which to make a phoney deal look straight, I don’t know.

Mr. Shulman: On a point of privilege and in view of that ridiculous comment, I was shaking my head at the foolish thinking of the minister.

Mr. Renwick: That’s an inflammatory remark. If you want to get this bill through you had better --

Mr. Shulman: He is not going to get this bill through this year, at this rate. On a point of privilege, Mr. Chairman, I was shaking my head at his foolishness. You don’t need a phoney deal. It is so obvious that you just take a legitimate deal and a legitimate mortgage. This is the point my colleague was making. You are discouraging thrift. Anyone who pays a mortgage off is out of his head.

Hon. Mr. Meen: If that is the case, if it’s thoroughly legitimate, then, of course, he’s paying the money out --

Mr. Shulman: Don’t you see what you are doing?

Mr. Cassidy: Okay, Mr. Chairman, as the minister says, if it is designed to defraud the provincial tax collector, then there may be something in the Act --

Hon. Mr. Meen: -- or the federal income tax people, too --

Mr. Cassidy: As far as the federal people are concerned, if a fellow wants to take out a non-arms’-length mortgage from his wife or a nephew, or somebody else with whom he is in a business partnership, this is perfectly legitimate. But, at any rate, let’s assume that he goes to a legitimate mortgage investor and borrows the money on mortgage at a rate of around 12 per cent against this particular property.

There is nothing to stop him, since he owns the property outright, taking the proceeds of that mortgage loan and turning around and investing it further somewhere else.

Hon. Mr. Meen: No, not at all.

Mr. Cassidy: The proceeds from that investment, however, do not have to be credited against this particular property insofar as the terms of the Act stand. Is that correct?

Hon. Mr. Meen: Yes, I think that is correct, Mr. Chairman. And I might just observe that we are not trying to stop that kind of thing either. There are people who are financing deals and their own programme of investment based on their present equity in securities. They would be quite entitled to place a mortgage loan on their property, if they wished, and to use the proceeds of that loan at whatever per cent -- 10 or 12, or whatever -- to go on and perhaps put the down payment on another piece of rental accommodation. We are not quarrelling with that at all. That is just one of the reasons for having a top limit of 10 per cent. If we raised that top limit, as I think of this now, we would play into the hands of the speculators because they would be able to put even more mortgage money out based on the same security.

I think what most lenders will do, and what most investors in this kind of security will do, is put on a mortgage, the interest rate on which, together with their carrying cost, would come up to about the 10 per cent level.

On this basis, if we raised that 10 per cent level, we would have them placing even larger mortgages, presumably legitimate and not phoney or colourful in any way. And they would then go on and use that money to finance another transaction -- I am not suggesting it has to be a vendor’s mortgage back in every case -- simply to make it a legitimate charge.

Mr. Cassidy: Okay, as the minister says, there will be an incentive there for people to buy heavily mortgaged property. If I can follow the argument through a bit further -- in fact, if you started out with $100,000 worth of property which is wholly owned, in order to legitimately avoid this tax to the maximum extent feasible, what you would seek to do would be to stretch your equity as far as possible, and to have your equity as highly levered as possible. In other words, if, in fact, there are 75 per cent mortgages available, you would seek to own $400,000 worth of property -- with your original equity of $100,000.

Now, in other words, if a legitimate widow, for example, wants to avoid this tax, all she needs to do is go out and buy three times the amount of property that she has right now and make sure that the whole lot is heavily mortgaged. But the minister knows very well what will happen if a lot of investors decide to do that, or speculators, or whatever you want to call them. You will get more money chasing property and you will get more investors or speculators chasing mortgage financing, because the effect of this tax situation is that an 11 or 12 per cent mortgage is to them quite possibly almost cost-free. There is a real inequity that is taking place here between property which is wholly owned and without financing, and property which is heavily mortgaged and therefore becomes liable to less of this particular tax.

Hon. Mr. Meen: Mr. Chairman, the hon. member may be right, but it is only cost-free if there is a continual increase in the appreciation at that rate or higher, so that he is getting the full credit for the increase in the base rate.

Mr. Cassidy: Okay, but my point is that because the optimum situation for that particular individual becomes a situation where they have the maximum leverage from their equity, you will get a number of individuals who are, rather than trying to get out of the speculative market, seeking to get further into it. This is because they find that in tax terms they can do better that way than they can with their existing property.

Hon. Mr. Meen: Well, that might be but there aren’t many like that.

Mr. Cassidy: That incentive exists already, but it has not reduced. If anything, it has increased.

Hon. Mr. Meen: I am not sure that that is the case. I can see a good many incentives one way and certainly some disincentives. Just because there may be some minor tax advantage to running your property highly mortgaged so that you have got high expenses and therefore have your capital out somewhere else, it doesn’t strike me as being necessarily a great incentive to hold on to these properties and to have them running that way to achieve the maximum of 10 per cent. Remember, it’s still money out of your pocket in the long run.

Mr. Cassidy: Well, the point that I’m making, though, is that it’s not a minor tax advantage we are talking about. In relative terms, it is quite a substantial advantage that I, because of a way that I manage my affairs, can avoid on a $100,000 property, a tax incidence of $5,000 a year. This is 50 per cent of a $10,000 appreciation in value per annum.

One assumes that the way the government is running things, that this kind of appreciation in value is going to continue. I want to point out to the minister, as well, that there is nothing in here to stop what one might call co-operative bidding-up of values in order to increase the impact of this particular clause. The minister may recall that one or two people -- I think I may have said it myself -- said that at 10 per cent a year government is condoning the doubling in property value every seven years, because of the compound interest factor. And then somebody from the government side came back and replied no, it’s 10 per cent simple, not 10 per cent compounds.

Hon. Mr. Meen: I don’t know who said it. Is the hon. member speaking of the farm credit?

Mr. Cassidy: No, I am talking about the 10 per cent in subclause (i)(v).

Hon. Mr. Meen: Well, that is simple. That’s simple interest.

Mr. Cassidy: It’s simple, yes.

An hon. member: It really is simple.

Hon. Mr. Meen: Now, if that is the top limit, and it could well be less, you see --

Mr. Cassidy: Okay, it could well be less. Certainly on raw land, for example, where there is no offsetting income it’s simple. Ten per cent is presumably the amount that is going to be charged. People will mortgage their property fairly heavily in order to get the maximum advantage, and, if nothing else, they will simply lend the money to each other. Does the minister disagree with that?

Hon. Mr. Meen: I think I’d ask you to say that again. I was reading a note here --

Mr. Cassidy: Okay, people speculating in raw land will tend, if nothing else, to lend money to each other in order to minimize their tax liability under this speculative gains tax.

Hon. Mr. Meen: Well, I am not sure that that accomplishes anything. I think that’s why it went by me the first time. What’s accomplished by A lending money to B and B lending money to A?

Mr. Cassidy: I don’t want to get into it in a big way, but people on that side of the House know a lot more about these things than I do, or at least they practise them. But, for the sake of argument, suppose that somebody has half a million dollars worth of property and doesn’t want to lever it up into a couple of million dollars. He has half a million dollars’ worth of development land, or land with development potential, on the edge of town in Metro Toronto or some other city in the province, which he wholly owns, and it was worth half a million dollars in April of 1974. It’s worth his while to find a loan of $400,000 on the value of that property, and if he can’t do anything else with it, put that $400,000 in deposit certificates of the Bank of Montreal for 9% or 10 per cent.

Interjection by an hon. member.

Mr. Cassidy: The net interest cost to him is, maybe, a two per cent differential but the saving to him is the tax saving on the 10 per cent appreciation a year.

Hon. Mr. Meen: The member, I think, is still disregarding the fact that the interest paid to the other party would be taxable in the other party’s hands.

Mr. Cassidy: Okay.

Hon. Mr. Meen: If you are having a cross-exchange of mortgage loans, which I thought was what the hon. member was talking about, A to B and B to A, of course the moneys paid may well be a credit to A when he pays the money to B. It may well be a credit to him to exalt by a limit of 10 per cent the base price of his real estate. But on the other hand the money he has paid over to B is going to be taxable in B’s hands --

Mr. Renwick: Or White Acre.

Hon. Mr. Meen: -- at normal income tax rates. If B is lending money to A --

Mr. P. G. Givens (York-Forest Hill): He said he had no experience.

Hon. Mr. Meen: -- I think we’ve got the kind of situation -- I think the hypothetical case is really without any practicality.

Mr. Cassidy: Okay. If the money is channelled through a legitimate financial institution, for example, it’s fairly clear from my understanding of the Income Tax Act that if you borrow money to earn money, the cost of the interest required to earn the interest is a deductible expense.

Hon. Mr. Meen: Yes. If they can demonstrate the use to which the money was put, I think in some circumstances that is correct.

Mr. Cassidy: Okay.

Hon. Mr. Meen: If they can show they made some money from the loan perhaps it is chargeable. That gets to be rather complicated arithmetic in a case where you are talking about something as elementary as the ownership of land.

Mr. Cassidy: Okay, but if you have a three or four-sided circle in which the money goes around it can be a device to simply and legitimately evade this particular tax.

The other point is that the 10 per cent simple per year appreciation in the value of speculative land on the edge of town could be increased to 12, 14 or 16 per cent over time in a very simple manner and in this way. After one year, to take an example, the $100,000 worth of property is sold to the fellow down the street for $110,000.

At that point, the allowable expense is not $10,000 a year, it’s $11,000. After a year or two, it’s sold to somebody else for $121,000 and then for $133,000 and then for $146,000 and so on. That 10 per cent simple, in effect, can be made into 10 per cent compound and the only restraint on it is the level of brokerage fees, if they apply, and the land transfer tax.

Has the minister made any allowance for that?

Hon. Mr. Meen: Every time one of those transactions takes place, if it’s arm’s length there’s the 50 per cent tax on the increment of $10,000. I don’t see that anybody is going to be very hard-pressed there -- I should say I don’t think anybody is going to be really promoting that kind of transaction because he is going to be losing half his profit in tax right off the bat.

Mr. Renwick: No, he will make it up in --

Hon. Mr. Meen: I don’t think that’s as attractive an arrangement as the member would make it sound.

Mr. Cassidy: No, the point is that if there is a net maintenance cost of 10 per cent of the acquisition cost of the property, the next year its 11 per cent and the next year it’s 12 per cent of that original price. That again is permissible under this particular formula if the property is mortgaged all the way through the piece. That’s not an unrealistic kind of hypothetical kind of example.

I know what we are doing is writing a primer for people to evade or avoid this particular tax but I’ve got to say the whole thing disturbs me greatly. It is so easy for somebody to avoid that even I, without tax experience, can put on the record a number of means by which the tax can be quite legitimately and legally avoided. What’s happening, because of the loopholes built in -- and this is the first of many -- is that the tax will simply channel speculative activities into certain patterns and forms designed to minimize the tax liability.

Mr. Renwick: And maximize the gain.

Mr. Cassidy: And maximize the gain. That’s as old as time began but the minister has not got a tax which is effective if, by other means, people can simply do what they were doing before and continue to take substantial profits.

Hon. Mr. Meen: Mr. Chairman, I think what the member is talking about is people doing precisely what they have been doing up to now -- rolling one deal over another and building a $100,000 farm to a $200,000 to a $400,000 to a $750,000 and to a $1 million farm; or that kind of thing. The only difference is that at least under this arrangement, he’s doing it under the guise of just being able to increase the base rate so that you can charge up more against the basic cost of carrying a mortgage on the thing. I think that what he’s disregarding is that at least a half of that rollover is being derived as tax then for the benefit of the people of Ontario by this kind of action.

Mr. Cassidy: But the point is, though, that the Act says in effect that land and property will be allowed to double in value at least once every 10 years, and possibly more frequently. Therefore, the aims that the minister talked about, to stabilize housing and land prices in the province, clearly would not then be maintained.

Hon. Mr. Meen: Oh, I think so, because we reduce the incentive to this turnover by about 50 per cent. They’re only making half as much. Do I take it that the hon. member for Ottawa Centre is really suggesting that this 10 per cent figure is too high?

Mr. Cassidy: Yes.

Hon. Mr. Meen: Yes. I was just wondering, because your colleague from High Park says it’s too low.

Mr. Shulman: It shouldn’t be fixed.

Mr. Cassidy: We looked at it from different ends of the spectrum.

Hon. Mr. Meen: I think so and I hope so, because we’re the government and we’re trying to hit some happy medium and I think we’ve found it, thanks to you two gentlemen. I think I can see the opposite sides of this picture clearly, and I think that what we’re coming in on is some modest figure that is a disincentive to the speculator to put in too large an amount. And, in fact, it’s a disincentive to the speculator who buys a parcel, mortgages it to the hilt and then goes out and buys another one with the proceeds and can then multiply that up and roll it over time and time again.

Mr. Cassidy: No, it’s an incentive to do that.

Hon. Mr. Meen: No, it’s not.

Mr. Cassidy: Yes. We’ve just been through that.

Hon. Mr. Meen: Because if your colleague from High Park is correct, and I think he is, that mortgage rates are running well above 10 per cent on good security, the speculator is going to be paying a good deal more than 10 per cent for his mortgage financing on that property. And if he has financed it to a very substantial part -- and the hon. member for Ottawa Centre himself talked about three-quarters; and I don’t think that’s disproportionate, except if you try to do that on vacant land you’ll probably have some -- but, talking in terms of residential accommodation, it probably wouldn’t be out of the way to find 75 per cent financing. Subject to that, you’re getting an interest rate that’s running well above the 10 per cent figure to which you make reference in this section. Therefore, I think that’s a disincentive to the speculator to get into that kind of racket.

Mr. Cassidy: If it’s raw land that is certain --

Mr. R. F. Nixon: Mr. Chairman, has the NDP decided whether the 10 per cent is a disincentive or an incentive?

Mr. Cassidy: You go ahead. I’ve had a turn.

Mr. R. F. Nixon: I don’t know how long you want to continue this. I doubt very much if either one of you is going to win. Is it settled that it’s an incentive or a disincentive?

Hon. Mr. Meen: I think we have different views. In my view it is a disincentive to the speculator.

Mr. Cassidy: He’s going to profit from speculation; that’s what the government intends to do.

Mr. R. F. Nixon: All right. Like the hon. member for High Park, who is interested in his doctor’s offices on Roncesvalles -- right?

Mr. Renwick: Roncesvalles, Alhambra and Sorauren were battlefields in the Peninsular Wars.

Mr. R. F. Nixon: Yes, well, I’m thinking about that nice little package of doctors’ offices, with the drug store in the basement, up on one of the streets up in --

Mr. Renwick: Roncesvalles.

Mr. R. F. Nixon: That’s it. So while we’re talking about conflict of interest, I want to let you in on something, Mr. Chairman, and that is, I own some farmland. And since I had a bona fide offer for that farmland from the hon. member for Riverdale just a moment ago, in one of his more lucid moments, I really think that we should look for a moment at the provisions of sub-section (v) on page 3.

Mr. Shulman: Wait, we’re not through page 2 yet.

Mr. R. F. Nixon: Are you doing this by page or by section?

Mr. Chairman: Well, it was so hard to call by numbers and sections and subsections and clauses and subclauses, it was easier to do it page by page.

Mr. Shulman: Paint by numbers.

An hon. member: I think a little change in pace would be good anyway.

Mr. Chairman: Is there something further on this 10 per cent bit on page 3?

Mr. Shulman: I’m still on the 10 per cent bit. I haven’t given up yet.

Mr. Chairman, just so the apparent conflict over here can be resolved, I was not suggesting we use a specific higher figure, because I wouldn’t know what figure to suggest. What I was suggesting is that none of us can look into the coming months and tell how bad the inflation is going to be, and you should have a floating figure tied to the current inflation rate.

Mr. R. F. Nixon: You did. And you said it was going to be 16 per cent by the end of this year.

Mr. Shulman: My prediction.

Mr. R. F. Nixon: Well, don’t say nobody can do it.

Mr. Shulman: That’s my prediction. I may be out by one per cent! The point is, with a fixed figure -- but I want to go to a different point entirely.

Mr. R. F. Nixon: Well, you invest in grain futures so it won’t bother you. You should be able to pay your bills.

Mr. Lawlor: Particularly if the Liberals are re-elected.

Mr. Shulman: The other point is, have you given any consideration to the inflationary effect of this section? I’m sure you must be aware that there are many properties through the province which have no mortgage, which are bought outright. But anyone in the future would be a very foolish man not to mortgage his property. I hope you realize that people who invest are not particularly stupid. They are probably just as bright as the minister and the other people on that side who brought in this bill.

Hon. Mr. Meen: That sounds rather flattering.

Mr. Shulman: It really wasn’t meant that way. It will be very obvious, if and when you force this thing through, that anyone who has land that is owned outright is a damned fool if he doesn’t put a mortgage on it. In effect, he can get that mortgage money at no cost. By raising his costs up to the 10 per cent he will save sufficiently so that he can, in effect, borrow money and use it for other purposes which will, in effect, cost him nothing.

The inflationary effect of this boggles my mind, if everybody suddenly wakes up to what you have done here -- which is to say that it is not economic to use thrift any more and pay off mortgages, and that it is not economic any more to own land outright but it is economic to borrow money and use it anywhere else.

Mr. Cassidy: That’s right. That’s right.

Mr. Shulman: Do you realize what that means to the inflation in this province? This is something that I am sure you haven’t considered or you wouldn’t have brought this section in. It is a bastard section. You are not going to be able to sleep with it.

Mr. R. F. Nixon: There is a mixed metaphor.

Mr. Shulman: That’s a mixed metaphor. Have you given any thought to that problem which must now devolve upon you?

Hon. Mr. Meen: Yes, I can say that we have. We simply are not prepared at this time to have a provision in here that is related to the cost-of-living index or to inflation in general. We have these provisions as to costs and we have the other allowances for adjustment in the base price, but we are not tying anything in here to the cost-of-living index.

Mr. Shulman: May I ask the minister a question? Does the minister have any idea, a ball-park figure, of the gross value of property that would be affected by this bill which is not mortgaged in the province at this time? Would a billion dollars be a fair figure or would it be higher?

Hon. Mr. Meen: Mr. Chairman, I have no idea.

Mr. Shulman: Well, just let us for the sake of argument, and I stand to be corrected, take a figure of a billion dollars. I don’t suppose I would be out very much.

Mr. Renwick: Not far.

Hon. Mr. Meen: I think, if anything, the hon. member would be away low.

Mr. Shulman: All right. I am saying a billion and being very modest.

Interjection by an hon. member.

Mr. Cassidy: Try 10 --

Mr. Shulman: All right. I am taking a very modest figure, but let’s suppose that there is a billion dollars’ worth of property which is paid for outright and is owned across the province, and it suddenly becomes uneconomic to hold it outright. So the people then borrow money from the various mortgage companies in the United States or elsewhere, and all of that extra money suddenly comes into our economy. Have you any idea what the inflationary effect of that amount of money will be? Have you given any thought to this at all?

Hon. Mr. Meen: No, it doesn’t happen to be one of my responsibilities and I will say quite candidly --

Mr. Cassidy: What are you doing with the bill then? You are leading the bill through the House.

An hon. member: Oh, boy!

Hon. Mr. Meen: We are talking about a section in the Act here limiting the maintenance casts of a piece of property, that is all.

Mr. Shulman: You must consider the implications.

Hon. Mr. Meen: Now, if the economists in the province are concerned about this we might ask the Treasurer what he thinks might happen.

Mr. Renwick: Where is he? Let’s get him

Mr. Cassidy: Let’s adjourn the House and get him in.

Hon. Mr. Meen: I have no idea and neither does the hon. member for High Park have any idea --

Mr. Shulman: I am sorry, I can’t hear you.

Hon. Mr. Meen: The hon. member for High Park admits, just as I do, that he doesn’t know, nor do I know what the amount of real estate in Ontario might be that it is encumbrance-free right now. But I would hesitate to suggest to him that just because there is an enormous amount that is mortgage-free the owners are going to suddenly rush out-

Mr. Shulman: For the sake of 10 per cent?

Hon. Mr. Meen: -- and load them up with mortgages. What are they going to do with the money?

Mr. Shulman: Ah!

Hon. Mr. Meen: Indeed, where are they going to get the money?

Mr. Cassidy: They will drive interest rates up.

Mr. Shulman: Well, I can answer where they are going to get it very easily.

Hon. Mr. Meen: As soon as they get it they are up to the top limit of 10 per cent again, which maybe bears out what the hon. member for Ottawa Centre was suggesting -- namely, his idea is that 10 per cent is too high.

Mr. Shulman: To answer your question in turn, where they are going to get the money is from United States mortgage companies which are quite happy to lend at 13 per cent.

Interjection by an hon. member.

Mr. Shulman: No, not necessarily.

Mr. R. F. Nixon: Way too high or too low?

Mr. Shulman: Which? The figure of 10 per cent?

An hon. member: Yes, how would the hon. member like to tell us?

Mr. Shulman: It has to be an elastic figure. You have to put in a figure saying the amount will depend on the rate of inflation in the previous year.

Hon. Mr. Meen: Starting at what?

Mr. Givens: You won’t get a mortgage of 13 per cent anywhere in the world today.

Mr. Shulman: It doesn’t matter if it is 30 per cent. They will take enough mortgages to push their costs up to the 10 per cent because they would be crazy if they didn’t. They can reloan that in Switzerland or anywhere else.

Mr. Givens: If they have to pay 18 per cent to get 10 per cent how do they make money?

Mr. Shulman: If you borrow money at 18 per cent on a mortgage today you will still get your 10 per cent advantage because you can lend the money out.

Interjections by hon. members.

Mr. Shulman: You now have the money in your hands, which you can then lend out again anywhere at the same percentage. Are you with me?

Mr. Givens: Yes.

Mr. Shulman: Okay, to come to another point. I am a little worried because you say you haven’t considered the implications of the possible extra infusion of money into the province. You say that is somebody else’s province.

Mr. Cassidy: It’s you who have the experts on this thing and they should give you the answers.

Mr. Shulman: But let me ask you this, since you say it isn’t your province, has somebody given that some consideration, or are you aware? You say that’s not in your province, has anyone in the ministry -- I presume you have an economist over there somewhere -- have any of your economists, if you have any economists, given this particular problem any consideration?

Hon. Mr. Meen: No, Mr. Chairman. I do not have any economists in my ministry. There are a number of economists, of course, and highly qualified economists, in the Ministry of Treasury, Economics and Intergovernmental Affairs.

Mr. Renwick: Where are they? Where’s the minister?

Hon. Mr. Meen: I personally have no information on that particular point on this bill.

Mr. Shulman: These gentlemen you’ve got lined up -- for shooting purposes, I presume -- under there, are any of them economists?

Hon. Mr. Meen: No.

Mr. Shulman: No?

Hon. Mr. Grossman: Why should they be?

Mr. Shulman: Mr. Chairman, it sort of boggles my mind that the government can bring in a bill like this, which is going to affect the economy in such a tremendous way, and you don’t even have a single economist to advise you what’s going to happen. It is a little irresponsible, if I can be so bold.

Interjection by an hon. member.

Mr. Shulman: Pardon?

Interjection by an hon. member.

Hon. Mr. Meen: They’re like doctors, they can never agree.

Mr. Shulman: I don’t care if they can’t agree. At least I would hope you would have one economist to give some advice. The implications --

Mr. Renwick: The hon. member for St. Andrew-St. Patrick is equally upset with us about the bill.

Mr. Shulman: The implications of the various sections are horrendous as far as the economy goes, and you haven’t got a single economist to advise you. All right. That really boggles me. But let’s go on to another point.

Hon. Mr. Meen: It doesn’t take much.

Mr. Renwick: Oh, don’t leave that one.

Mr. Shulman: You like that one?

Mr. Renwick: Yes.

Mr. Shulman: My colleague is quite right. It is a very, very serious matter. There are tremendous implications finance-wise. It isn’t enough for you just to consider the tax effect or the effect on the price on land because there are wide ripples that will come out of this. In the mortgage market there’s going to be a tremendously increased demand for mortgage money which, in effect, means that the price of mortgage for the ordinary guy who wants to buy a house is going to go up, because there’s one pool and as the pressure and the demand increases it’s going to rise. I don’t think there’ll be any question about that.

Mr. Renwick: No question about that.

Mr. Shulman: I’m sure the hon. member for York-Forest Hill will agree with me there.

Mr. Renwick: If I had to coin a phrase, I would say you were penny wise and pound foolish.

Hon. Mr. Meen: Say, that’s a good one.

Mr. Givens: You’re lucky you’re out of this. This will go down in history as the Meen’s test.

Mr. Shulman: This is going to go down in history as the boondoggle bill, because you’ve no idea where you’re heading. You’re really going into uncharted sea and you haven’t even gone to the trouble of getting proper expert advice.

Mr. Renwick: And you haven’t even got an inflatable jacket.

Mr. W. Hodgson (York North): Can you sail the boat, Morty?

Mr. Shulman: Well, I’m a pretty amateur economist, but I personally don’t think it’s sailable.

Hon. Mr. Grossman: That’s not what your book said.

Hon. Mr. Meen: You’re not kidding.

Mr. Shulman: But I would hope you would hire a professional economist and pay him so that we’ll be able to blame someone other than you afterwards. I know what you’ll do, you’ll retire from politics and then we’re going to say, “Who are we going to blame? That fellow who lives out in --”

Mr. Renwick: Allan Grossman’s been down south investing all his money in foreign real estate.

Hon. Mr. Grossman: That’s the thing. You’re not kidding.

Mr. Shulman: I want to ask you a question.

Hon. Mr. Meen: Oh.

Mr. Shulman: Another question, on another subject. I want to come back to what my colleague was discussing about the three-year rule.

Mr. R. F. Nixon: Buying property in Florida? Does that come under this subsection?

Hon. Mr. Meen: That’s not under this subsection. Are we moving on?

Mr. Shulman: No, we’re not.

Mr. Renwick: Oh, no.

Mr. Shulman: Does the Leader of the Opposition want to take over on this subsection?

Mr. Givens: Sit down.

Mr. Chairman: The hon. Leader of the Opposition.

Mr. R. F. Nixon: Come on, this is much too interesting to leave like that.

Mr. Cassidy: I just wanted to ask the minister --

Mr. Renwick: Well, could I -- on a point of order?

Mr. Cassidy: On a point of order, all right.

Mr. Renwick: I was a little late getting back. What section are we on?

Mr. Chairman: The 10 per cent.

Mr. R. D. Kennedy (Peel South): The title is settled.

Interjections by hon. members.

Mr. Renwick: With unanimous consent, could we revert to the title of the bill?

Interjections by hon. members.

Hon. Mr. Grossman: With unanimous consent.

Mr. Renwick: All my friends will give unanimous consent, I know that.

Mr. R. F. Nixon: Not those over here.

Mr. Renwick: I am kind of inclined to agree that the hon. member for York North wants to give unanimous consent as well.

Mr. Chairman: Meanwhile, anything further on the bottom of page 2?

Mr. Renwick: What price are you going to get for your farm these days, Tom? What’s your uncle doing in his grave tonight? He must be revolving at a rapid rate.

Hon. Mr. Grossman: Turning over.

Mr. Renwick: He wishes he was never Premier.

Mr. Chairman: Is there anything further at the bottom of page 2?

Mr. Cassidy: At the bottom of the page, two or three things, Mr. Chairman. I’ll be very brief though, because I think a lot of what needs to be said has been said.

An hon. member: Oh, my God!

Mr. Cassidy: The government had a couple of choices: It could have profited from speculation, which is what the minister claims it’s doing; it could have sought to stop speculation, which is what the Treasurer said that the government was trying to do; or it could condone the inflation and speculation going on in land. And in fact it is the latter which it will wind up by doing because of the 10 per cent rule which is being built in. This is neither fish nor fowl and the minister --

Mr. Renwick: Nor clear red herring.

Mr. Cassidy: The minister claimed a virtue in that. I would suggest that it’s a grave defect.

Mr. Lawlor: To coin a phrase.

Mr. Cassidy: Because of the 10 per cent rule, which is somewhere near the long-term rate that property has been increasing in value over the last 10 or 12 years, somewhere near it, you do not effectively profit very much from speculation. That was admitted by the Treasurer when he put a value of only $25 million a year on the revenues from this particular tax. Out of a total value of property changing hands in 1974, something like $12 billion, you will see $25 million, and if my arithmetic serves me correct -- let’s see if I can do it now --

Mr. Renwick: Could I help, I have my slide rule here?

Mr. Cassidy: You do? -- that is two-tenths of one per cent of the value of the property that will change hands in the province this year.

Mr. Renwick: Right on, two-tenths of one per cent.

Mr. Cassidy: Okay. Now, alternatively, what I think the government ought to have done would have been to make either no allowance or a very small allowance for the cost of maintenance.

Hon. Mr. Grossman: The member for High Park said he didn’t have much respect for your economic sense. Do you remember that?

Mr. Cassidy: Well, that’s all right. At that point you would have had the effect of making it extraordinarily difficult to speculate, but we have been through a number of ways in which speculation can continue at a rate of about 10 per cent a year, which is at or above the level that I think anybody in this House would agree was desirable as far as the increase in property values is concerned. If property values go up by two or three per cent a year, nobody is going to complain very much. Traditionally, a bit of inflation has lubricated the market, I guess you can say, and I don’t want to go into a long speech about that --

Mr. Renwick: Why not?

Mr. Cassidy: -- but you are condoning a rapid rate of inflation in property values, and that is not what the government said you intended to do, and you are neither stopping speculation nor substantially profiting from speculation, which is your version of what ought to happen. The final point is simply this, if the Treasurer says that you are innovating, which you are doing, then you ought to be able to have the facts before the House and it’s shameful that you, as Minister of Revenue, should not have gone to all these high-priced experts and brought them in to help on this Act because otherwise the waters are really uncharted.

Hon. Mr. Mean: Mr. Chairman, certainly we have had the benefit in the sense that the government has had the benefit of the high-priced economists to whom the hon. member refers. It’s their view that a tax of this sort, after giving due allowance for what we consider to be modest carrying charges, without letting speculators get in and utilize virtually all their equity against other speculative investments, thereby driving up the prices, including their own, and thereby being able to deal off their property at an enhanced value and so on, the way in which they have been able to spiral this --

Mr. Cassidy: The spiral continues.

Hon. Mr. Meen: -- that the 10 per cent figure for the carrying cost is not unrealistic, and that’s all we are talking about in this subsection. The other allowances for different types of investors are geared to that kind of investment.

Mr. Cassidy: May I ask the minister then, why permit carrying costs at all as far as the financing costs are concerned, this 10 per cent rule? Where it’s rental property the income will basically cover the maintenance cost, the taxes, the fuel, the hydro, the repairs and that kind of thing. Now, why allow, in effect, speculation in raw land and give a 10 per cent allowance at all? Why not just do away with it?

Mr. Renwick: Do away with raw land?

Mr. Cassidy: Then you would bring the speculation to a real stop. But you like the speculation.

Hon. Mr. Meen: No, actually I think that what happens here is that there’s greater incentive for the investor in raw land to bring it into a serviced condition and get it on the market.

Mr. Renwick: Excuse me, Mr. Chairman. I don’t want to interrupt, but I would like to introduce to the House the leader of Her Majesty’s loyal opposition, Mr. Robert Nixon, who is sitting in the upper gallery.

Mr. Chairman: The member for Lakeshore.

Mr. Lawlor: Mr. Chairman, the debate for the past three-quarters of an hour has been, I suggest to this House, rather beside the point. As I wander across the province to speak to my fellow solicitors, they nudge up to me gently and say --

Mr. Renwick: Where? In the line-up at the registry office?

Mr. Lawlor: They nudge you and say, “You know, parliamentarian, this bill is really a bonanza for us lawyers. We are really going to clean up on this one.” It is a cornucopia of good things for the legal profession. If Shulman’s 10 per cent isn’t used up in terms of mortgage interest -- and more than used up, as he suggests -- then in the second part of the clause under the disposal costs, the stretching will be such just to take, curiously enough, just the full 10 per cent. Therefore there’s no mortgage.

If the tax has come to a modicum, a moiety, of the percentage and if the real estate fees come to, say, five or six per cent and that’s a disposal cost, and it doesn’t come up to the $100,000 they are looking for which is deductible, I suggest the legal boys will move in, pick up the other $75,000, very gently, and say to the client, “You are not really losing very much by all this. As a matter of fact, according to the amount of your expenditure and according to the amount of the saving” -- which would be 50 per cent of the $75,000 I take it -- “we can make a deal. We can enrich ourselves at the expense of the province and we’ll see that we get the full benefit of the 10 per cent.”

Isn’t that in the cards? I suppose all you would say is, “Felix corrupa; these are one of the happy falls that happen in legislation. We can’t prevent everything. If the lawyers, bless them, of all people are going to be the beneficiaries, I can’t think of a better bunch.”

Is that really what you are driven to say? It goes further than that. The minister has all kinds of investigatory sections here which are as punitive as you’d like but what is there really to prevent a deal, a side deal, being made that a real estate firm will charge 7¼ per cent on its real estate turnover and kickbacks take place? What is there really to prevent a move into that area?

Hon. Mr. Meen: The member has referred to what I would consider to be colourable transactions. I think that is section 6 of the bill:

Where the result of one or more sales, exchanges, declarations of trust, or other transactions of any kind whatever is that a transferor has disposed of property under circumstances such that he may reasonably be considered to have artificially or unduly reduced the amount of the taxable value of designated land that he has disposed of, the taxable value shall be computed as if such reduction had not occurred.

There is the section which catches it.

Mr. Cassidy: We have found legitimate ways of reducing this.

Hon. Mr. Meen: Of course, the question is how do we catch these things? We do have inspectors and we do have ways in which to check these out one way and another.

Mr. Lawlor: You will need whole phalanxes of them.

Hon. Mr. Meen: Yes, we have quite a phalanx of staff in one area and the other, including income tax.

Mr. Lawlor: You only have a handful and you only need a handful.

Mr. Chairman: The member for High Park.

Mr. Shulman: Just before we abandon that point, by how many does the minister intend to increase his staff as a result of this particular section and others?

Interjections by hon. members.

Mr. Chairman: Order, please.

Mr. Shulman: Does the minister have any estimates of how many thousands he intends to hire to police this particular thing?

Hon. Mr. Meen: That question was asked during second reading, Mr. Chairman.

We do expect, perhaps, a modest increase in assessment responsibilities in this end of things; that is, assessment of values of properties as of April 9, as the questions come up. But as the general blitz, you might say, on assessment of the province winds down over the next couple of years, there will be staff, who are presently doing that extensive work across the province, who will be released from those responsibilities and will be able to take on these other assignments as the time goes on.

Although we might have had a drop-off in the numbers I don’t expect -- subject to that, and if it hadn’t been for that, we would have had a bulge in employees by, say, two or three dozen; something of that sort. I don’t expect we will have any significant bump or bulge in the number of employees related to this end of things for assessment of real estate; for municipal assessment purposes; for assessment of real estate for this Act and, of course, for succession duty purposes.

Mr. Shulman: I would like under this section to examine one other aspect of the minister’s woolly thinking.

I am referring now to the three-year rule. As I understand the logic the minister used, he said that inasmuch as we are not backdating the speculative tax -- and the minister gave very valid reasons why he couldn’t do that -- therefore, we can’t backdate the ownership. This three-year rule is presumably to differentiate between legitimate investors and speculators.

I would like to give the minister a specific example of John Jones who bought a property 35 years ago, has held it all this time and dies a year from now. The full tax becomes payable on that increased value over the period of a year. By no stretch of the imagination could that man or that estate be called a speculator. The minister has used a very bad analogy. It is not an analogy at all; they are not even in the same direction.

I wonder if the minister has used the wrong analogy or if he has some other thoughts which he hasn’t given to us yet? If what you are deciding here is who is a speculator and who is an investor, how can you possibly take a fixed date, April 9, 1974, and say that even if the man held it for a lifetime before, he is a speculator if he is forced to sell it in the next three years?

Hon. Mr. Meen: The hon. member can call it woolly thinking if he likes, but the fact is that if we are starting off on a programme of this sort, it is appropriate to start from a date for virtually all purposes, and we have done so in this instance.

On the death of an owner of real estate, there is not an automatic attraction of tax anyway, so that problem which the hon. member refers to, in my opinion, doesn’t arise. It does not attract a tax just on his death.

Mr. Shulman: I am sorry, I didn’t hear you.

Hon. Mr. Meen: It does not attract the tax on his death.

Mr. Shulman: Well, it does, because it will have to be sold. He is not to be holding it after he is dead.

Hon. Mr. Meen: If it passes to a beneficiary under his estate for example.

Mr. Shulman: Now surely the minister must have enough legal knowledge to know that on death, most such properties are sold. No? No. All right, let’s leave out the percentages.

The minister has said, and it is quite valid, that if you are going to bring in an Act like this, and God knows why you would, you must pick a fixed date for most purposes. I agree. But there is one thing that you are trying to define here which has nothing to do with the other things at all, and that is, who is a speculator? You define it by the length of time they are holding the land. Now, if the length of time that they are holding the land is three years and that stops them from being a speculator, surely it is completely irrelevant to every other section of the Act whether that time began in 1920 or 1950 or April 1, 1974. You are saying that it doesn’t matter. Just for the sake of simplicity, you will do that.

But, I want the minister to think. What he is doing in this Act is punishing a few people, a few hundred people, or perhaps a few thousand people, who in the next three years will be forced, for one reason or another, to sell land which they have held for many years. You are saying, “Well, we don’t care about them.” You are saying, “Well, for the sake of making the Act simple, to draw it up we are going to use April 1, 1974, for everything.”

Hon. Mr. Meen: April 1 is Fool’s Day.

Mr. Shulman: April 9, sorry. You see, actually you should have brought it in April 1. The bill would have sat better.

Mr. Minister, it is a simple amendment to bring in and you have made an error. Perhaps we can’t agree on economics, I know you don’t understand that aspect, and we probably can’t agree on finance because we have different views there. But this is a simple matter of plain common sense. You are going to catch a lot of innocent people, a lot of innocent beneficiaries, and why? For no reason. Just because you won’t bring in an amendment? At least give this some reconsideration. We hate to think we are talking just to a stone wall. Will you respond?

Hon. Mr. Meen: There are difficulties involved in this land of thing, Mr. Chairman. The hon. member, who is a doctor by profession, perhaps hasn’t had access to some of the difficulties that the legal profession encounters when dealing with real estate. There can be equitable interests, there can be all sorts of interests that are not relatable to the registered ownership of the property. There could be ownership in a corporation which might subsequently pass to an individual by the family farm routine or other courses of action.

This is not an easy thing to pin down, and as far as my draftsmen and I were concerned in working on this element, it seemed to be far easier for people to comprehend and far easier to assess in every respect, not just to assess in terms of dollars assessment, but to assess one’s liability, to look at the whole prospect and say that this is a new principle we are introducing as of budget day, April 9, and as of that time these principles are going to apply.

People can judge themselves and guide their activities from here on based on these announcements. Again, if one wants to talk to the Treasurer on something like this, that is fine. But, it is a practical kind of mechanism to date this sort of thing from the announcement of the whole programme.

Mr. Shulman: Sure it is easier; I agree with you that it is easier. Sure it is practical, yes it is simpler, if simpletons have to read it.

Mr. Renwick: Mr. Chairman, on a point of order, is there a quorum?

Mr. Chairman: Mr. Clerk, take the count.

Mr. Renwick: I hate to do this to my colleague for High Park.

Clerk of the House: Mr. Chairman, there are 20 members.

Mr. Chairman: A quorum is 20 members.

Mr. Shulman: Mr. Chairman, the point of this bill surely is not to make it simple for the lawyers to understand. If the doctors can understand it I would hope the lawyers would be able to understand it, too.

The minister has pointed out a number of complications, none of which is relevant to the point I raised to him. He has chosen very arbitrarily, and I don’t quarrel with it, to say that after three years the land is not considered to have been held by a speculator but is considered to have been held by an investor. Since he has chosen this period of time, surely it doesn’t make the bill any more difficult, any more complicated, to say in that case it doesn’t matter when the land was bought? It just doesn’t make sense to say if you own the land for three years starting now you are an investor but if you owned it 20 years prior to this year and have to sell it this year you are a speculator.

Mr. Givens: You are absolutely right. It makes no sense at all.

Mr. Shulman: Why can’t we get this minister to understand that? He keeps saying “Go and talk to the Treasurer.” The Treasurer isn’t bringing in this bill. He’s gone to Cathay. He’s left it to you. You have to accept the responsibility and you can’t shrug it off by saying “it’s easier” or “it’s the Treasurer’s responsibility”; it’s your responsibility.

When we in the opposition come to you with a reasonable amendment, you shouldn’t shrug it off and say it’s not reasonable. It’s reasonable, it’s simple and it isn’t fair for you to punish innocent people in this way. Innocent people are going to be hurt because of your lack of consideration, your lack of thought and your lack of willingness to reconsider.

Again, this is a very simple point. There are going to be people who die this year; there are going to be people who go broke this year; there are going to be people who move to other countries this year and those people are going to be forced to sell their property. Why are they to be punished if they’re not speculators? Will the minister respond?

Hon. Mr. Meen: If the member would care to resume his seat I might just observe this; I think he may have been in the House when I mentioned that in drafting this legislation from square one we have, I think, come a long way. There may well be areas in which it can be improved.

It’s an interesting thought he offers. I would observe to him that it has not escaped our attention; we have not been oblivious of this potential problem with deaths and dispositions in the next couple of years. If he can offer me a suggestion by way of an amendment, certainly I can take a look at it.

One has to recognize in these bills that a very minor amendment in some places can have substantial effects elsewhere. I would want to be sure that any alteration in a section such as that -- it sounds simple and the member can make it sound very simple indeed yet it could well have implications. I’ll take that under advisement. I think there is some logic to it all but we must recognize you don’t just apply it there. There may be other areas in which, with equal logic, it should apply in establishing the distinction between an investor and a speculator. The speculator we want to catch; the investor we don’t.

Recognize, too, that in allowing the capital accretion up to April 9 we are giving them all of that through to that date without any allowance.

Mr. Cassidy: You sure are.

Mrs. Campbell: Why don’t you bring in the bill yourself?

Hon. Mr. Meen: The member for Ottawa Centre and his friend from High Park can argue this out themselves but they are at opposite poles when they talk about this.

I suspect the member for High Park, in advancing this logic of determining who becomes an investor at what date and who is a speculator up to April 9, would have to concede that if you are going back beyond that date you are involved with potential speculation with the very fellow to whom you’re going to accord an element of investor status -- because it just happens that on April 9 we came in with these announcements that from here on the speculator was a bad guy and the investor was a good guy. That’s one of the intellectual problems one has to wrestle with, in determining whether he goes back to relate to an earlier date when the investor of today was really a speculator last month, and prior to April 9. That is one of the reasons, if not the fundamental reason, for establishing April 9 as the starting date for this kind of programme.

Mr. Shulman: Mr. Chairman, I would like to continue on this point, but I don’t think we have a quorum.

Clerk of the House: Mr. Chairman, there are 17 members present.

Mr. Chairman: That’s not a quorum.

Mr. Chairman ordered that the bells be rung for four minutes.

Clerk of the House: Mr. Chairman, there is a quorum present.

Mr. Chairman: The member for High Park.

Mr. Shulman: The minister has suggested I prepare an amendment and has pointed out the very numerous pitfalls if I do prepare an amendment. Surely if the minister agrees with me, it is his duty to have his experts prepare the amendment, which we will be glad to support. The time to do it is now, not after the bill has gone through.

If this is a legitimate point -- and I don’t think there can be any question in the minds of anyone in this chamber but that it is -- if you don’t do this, innocent people are going to be hurt. The amendment should be brought in now. Surely it is not the responsibility of the opposition to prepare the amendment. It is our responsibility to point out the omission that has been made and the error that has been made. You obviously agree that there has been an error made.

Hon. Mr. Meen: On the contrary, I do not agree that an error was made, Mr. Chairman. I expressed to the member my recognition that he was making a point. What I am saying is that there is considerable validity to the point of taking April 9 as the beginning date for the whole programme. That was deliberate; that was not an error. As far as I am concerned, there is good reason for starting it at that time, when we recognize that we are allowing the appreciation in values up to that date. I don’t think people can suck and blow at the same time on this argument.

You are going to have a starting date of April 9 for the one with everything accumulated to that date, which makes abundant good sense too. When you consider the commitments that might well be made of a fiscal nature with respect to the property values that will have developed to that date, then I think it is equally appropriate that the timing for determination of whether one is an investor or whether one is a speculator should also run from that date.

Mr. Shulman: Mr. Chairman, I always find it difficult comparing apples and oranges. Perhaps the minister can help me. What possible similarity is there between the two? I think this is very obvious to me. I must disagree with my colleague from Ottawa Centre. You cannot tax prior to April 9. The reason for that is quite clear. If someone bought a property 10 years ago for $10,000, and if it has appreciated as of now to $100,000, and he has perhaps put a $90,000 mortgage on it, you can’t suddenly charge him on $90,000 in appreciation. You would have a rash of bankruptcies across the province.

Hon. Mr. Meen: You could, but you would confiscate.

Mr. Shulman: That is quite obvious. However, that has nothing whatsoever to do with the fact of determining who is a speculator and who is an investor, and I think the minister must agree with me that an investor by definition is someone who holds things for a long time. A speculator is someone who picks something up, or gets an option, and turns it over and grabs his profits and steers on. If you want to interrupt me, go ahead.

Hon. Mr. Meen: The point really is that up to April 9, a person who might now look like an investor might very well have been the speculator who was waiting to take his gains at some later time. Now we are saying to him, “Look, friend, if you hold beyond April 9, you are running the risk of a speculative tax at the rate of 50 per cent on any further gains.” Up to that time there was no impediment placed in the way. He could very well have been a speculator but could be running under the cloak of an investor, if you simply take the definition relating back prior to that date. Ergo, it follows that if you allow the capital accretion to April 9, then it is appropriate to run the time for a further definition beyond that date.

Mr. Shulman: Ergo? It is not ergo.

Hon. Mr. Meen: I don’t think the hon. member and I are ever going to agree on that problem.

Mr. Shulman: Well, I am going to try to persuade you. We have lots of time -- until July 8. Let me take a different approach. Obviously, up until April 9 nobody needed to know the difference between a speculator and an investor. You are quite right there.

You have now defined a speculator as someone who buys something and sells it in less than three years. If he holds it for more than three years he is not a speculator, he is an investor. They were both the same thing. But you have chosen your definition. You are the guy who said that a man who holds something for three years is an investor. So, by definition a lot of speculators are going to turn into investors.

Well and good. You can’t do anything about that when you make such a definition and when you pick an arbitrary time like that. I am not criticizing the minister for doing that. I think you have to do that. What I am objecting to is that there are a lot of people who by no stretch of the imagination could possibly be called speculators.

Perhaps they are people who have had land in the family for years or generations. Because of this very rigid stand you have taken, any of those people who in the next three years are forced to dispose of their land, for whatever reason -- illness, death or bankruptcy; and there are always such cases coming up with the thousands and thousands pieces of property in this province -- those people are going to be punished unfairly.

I don’t think that is what you want to do. That surely wasn’t the intention of the Act. It is so easy to exempt those people merely by saying, “People who have held land more than three years are considered investors.” No date on it. Will the minister tell me why not?

Hon. Mr. Meen: I have already said so, Mr. Chairman, but in short, the investor-cum-speculator up until April 9 could not be distinguished.

Mr. Shulman: Still can’t.

Hon. Mr. Meen: Now, we think they can be by their actions. It’s appropriate that we cannot try to distinguish them. From here on, the person who holds, if he holds for three years, will have met the commencement of the test at any rate. And of course if there has been a substantial gain in value in that period of time from April 9, then perhaps he should pay part of that. He is not being penalized on anything that accumulated up until April 9, only on any increase after that date.

Mr. Givens: You’d better not buy within the next three years.

Mr. Shulman: Mr. Chairman, what the minister is ignoring or missing or doesn’t want to see is: There are no more speculators in this province. No one is going to buy and sell land within a period of three years. No one will voluntarily. Why should they? They would be crazy to. They would have to charge so much for it. If we really do have speculators left, it means the inflation in this province for the next two or three years is going to be out of control.

Mr. Givens: You’d better run for cover.

Mr. Shulman: If, in effect, you catch any speculators, it means that things will have gotten so bad, and prices will have gotten so high, that in spite of your confiscatory tax there is still going to be selling. Because nobody is crazy.

Mr. Givens: You’d better put them all on the parkway --

Mr. Shulman: People who buy land or property are not out of their minds. They are not going to go and buy a property today and re-sell it six months from now at a profit, and give the profit to the government. Why should they? Of course they are not going to. They are all going to be investors. You won’t have any more speculators. The only people you are going to catch are those who are going to be forced to sell, for whatever reason. And most of these are not going to be the people you are after.

It really bothers me, Mr. Chairman, how little thought the minister, or whoever is responsible, has given to this. Because it should be obvious. It is obvious to the real estate community, it is obvious to the lawyers, who are delighted. They are the only group. The real estate people are appalled. The lawyers are the happiest people in the province because they are going to have six times as much business; it is going to be six times as complicated; nobody can really understand the numerous sections in here, not even some of the lawyers.

I had the pleasure at the dinner hour of sitting with half a dozen lawyers and going over this section by section. One of the sections we have just passed they read and reread -- (d) I believe it was. There were, I guess, six lawyers there. Two said they didn’t know what it meant, four thought they knew, and each gave a different interpretation.

Hon. Mr. Grossman: And it was written by a lawyer.

Mr. Shulman: I doubt it. I think it was written by a doctor, from the sound of it.

Hon. Mr. Mean: It’s a prescription.

Mr. Shulman: It’s a bad prescription, a very bad prescription.

Mr. Chairman, before this particular clause, or sub-clause, or sub-clause of the sub-clause of the sub-clause of that clause, goes by, I want to make one more effort with the minister. This clause is a horrendous error. It is going to produce inflation; it is not going to catch any speculators; there are no speculators. It is going to catch a lot of innocent people, and the minister’s name is going to go down in history as the man who brought through clause one, subsection 1, subsection 1(1), subsection (c), sub-subsection 4, subsection (b) which begins the aggregate of.

I have stood here in this House and I have sat here, and I’ve seen dozens of bad bills come through. I have never seen one quite so ill thought out, which was going to produce quite such bad results. In all the bad bills, and even in this bad bill, this particular section has to be one of the worst.

No consideration of inflation; it doesn’t exist in Ontario. No consideration of maintenance costs. No consideration of mortgage costs. No consideration of the effect this is going to have on mortgage money and the increased demand. No consideration of the effect this subsection is going to have on the rents in this city, since you can’t get mortgage money any more because the competition is going to be so high. No consideration of any of the effects that this is going to have on housing -- the increased costs, the unavailability, the stopping of building. All this will be done because of one little subsection, on which four lawyers can’t even agree as to what it means.

I really must congratulate the minister. He will be well remembered for this bill, long after all the other bills in this session have been forgotten. Art Meen and -- what is it called? -- An Act to impose a Tax on Land in respect of certain speculative Transactions affecting the Control or Ownership of Land --

Mr. Givens: The Meen tax.

Mr. Shulman: The Meen tax? That’s good. It’s a mean, mean, Meen tax. It’s really bad, Mr. Minister. I am embarrassed for you. I like you. I really like you, and I am embarrassed to see you go down in this way. You know, we may have True Davidson sitting over there at the next election.

Hon. Mr. Meen: Well, I will tell you, you won’t be over here anyway.

Mr. Shulman: No, I am not running, but there’s an outside possibility my colleagues maybe will. And if they are, a great deal of the credit will go to you. Or the blame, I am not sure which at the moment. But whatever it is, as the member for Ottawa Centre sits over there as the minister of finance and he brings in his various bills --

Hon. Mr. Meen: Heaven help him!

Hon. Mr. Grossman: Good God!

Mr. Shulman: -- and he brings in his various bills, and you come to my office complaining, I will say, “You did it, Arthur Meen, you did it.”

Mr. Chairman: Does this particular section carry?

Mr. Cassidy: Mr. Chairman, I just want to know what section we are going on to.

Mr. Chairman: The member for St. George has the floor.

Mr. Cassidy: That’s fine. What section are we on now? I don’t think we have carried anything, have we, Mr. Chairman? Still on 4(B)1?

Mr. Chairman: We went up as far as 4. At the bottom of page 2 and the top of page 3.

Mr. Cassidy: That’s fine.

Mrs. Campbell: Mr. Chairman, to the minister, following what has been said by the member for High Park, this is the point at which I have the gravest concerns over all, because I think as I said to you before rather privately, it seemed to me that you had cast a net for the barracuda and you had succeeded in picking up the minnows and the barracuda came out of the top of the net.

There is no doubt in my mind that the speculator, the very person that this bill is designed to catch, is the one who will be able to hold in any way he can for as long as it is necessary for him to avoid the tax and will make any arrangements he needs to make to avoid the major effects of this particular tax. Surely that was never the intent. It was not the principle that I supported.

Mr. Cassidy: Oh.

Mr. Shulman: Oh.

Mrs. Campbell: As I said when I spoke to this bill --

Mr. Cassidy: The Liberals are deserting you one by one.

Mrs. Campbell: I wonder if I could speak? I didn’t interrupt you, the member for Ottawa wherever. I would like to continue if I may. I have been quite quiet and you have held the floor pretty well.

When I spoke in this House on this bill, I stated that I did approve the principle of a tax on speculative profits, and I still do. There is no waffling on that point. In fact, I begged you to bring in your amendments, if not line by line at least in principle so that I would understand just wherein your principles were going, because you had indicated that there would be major amendments. Is that not so, Mr. Minister?

Hon. Mr. Meen: Yes, that’s so.

Mrs. Campbell: All right. Now, I spoke to you afterwards about this matter as a concern of mine, and in speaking in the House I used the analogy of the umbrella which has caught the wrong people. I am now asking if the minister would not give an undertaking to go back on this portion of this bill and consider an amendment which would protect the person who obviously has had no speculative intent, if you like, in the acquisition of property.

I know what you are going to say about April 9, and I understand your point, but one of the problems you’ve had in this House has been that degree of inflexibility that has made it very difficult for us to communicate even our concerns.

I am pointing out this one area to you now and I am asking if you will not at least go back and look at it again to see if it cannot be rephrased in order that we are talking about the speculator who has been unscrupulously driving up land costs in this province and not the person who has bought land or has inherited land, or whatever else he has done, who simply happens to have it and who has for some reason been forced to dispose of it, for whatever reason.

I recognize and I am not quarrelling essentially with the April 9 date and your reasoning on it, but I do believe that if you take this back and discuss it with your experts you surely can come back with an amendment which would assist all of us who are concerned in this area. I had never intended or wanted to see the little investor hurt, and mostly this will mean, as I say, the minnow, not the big person, will be caught.

I would ask, since it’s growing late, if you would not at least reconsider this point. It’s quite possible, surely, with all these experts, that we could come up with something that would indeed indicate some degree or concern for the small person in this area. Thank you, Mr. Chairman.

Hon. Mr. Meen: Mr. Chairman, I have a great deal of sympathy for what the member for St. George has been saying. She and I did talk about this, and I recognize this problem. I am pleased to see that she does recognize that there is some validity to the argument that I have been advancing as to the fixing of the date of April 9.

The big problem we have had has been to try to identify in the form of a statute just what does constitute intent. Intent prior to April 9 is the subjective assessment, just as it is today and tomorrow and the next year and so on, and it just isn’t something where you can say, “Well, if they had the intent to hold it then they should be free and clear of tax.”

Mrs. Campbell: I recognize that.

Hon. Mr. Meen: Okay, so how do you assess intent? We have wrestled with this. If I had a nice pat answer to that one I would be delighted to know what it was,

I don’t know how we distinguish the little fish to which the hon. member and I have alluded when we have been talking about the wide net that I cast, and perhaps too fine a mesh that I had in that net, and how in trying to catch the barracuda you wind up catching the minnow. Yet at what size do you set your mesh? Just how do you identify the little person who shouldn’t be classed as an operator?

At some stage you have a person who falls into that net and gets caught by it. It has to be an arbitrary kind of thing. I have no answer for that, and I can tell the hon. member that although I have every sympathy for it and I am grateful to her for her observations, the fact remains I just don’t know at this point how we can accomplish that. After we have worked with this legislation for a while, perhaps some way will develop in which we can identify that sort of person.

That’s about all that I can offer at the moment. We work with this and it is one of the reasons why the bill is as complicated as it is, inasmuch as we have tried to direct its attack in the area we were trying to reach without catching up everything in the course of the sweep.

Mr. Chairman: The hon member for Ottawa Centre.

Mr. Cassidy: Just very briefly, Mr. Chairman the tragedy about what the minister has been saying is that the government stood idly by while the speculation or investment or whatever it was drove prices sky high in the period prior to April 9, 1974.

Hon. Mr. Meen: You are still opposing what we are doing.

Mr. Cassidy: We oppose what you are doing now because of the fact that you allow most of this kind of activity to continue without effective check by the government. That was made very clear in the debate.

I find it exceptionally difficult to see any distinction between most of those so-called investors and the speculators because it seems to me that, as the member for High Park says, there is no difference. But the mills of the government are grinding to try to find out what the difference actually is.

I have just been making some calculations here that if property values continue to rise by 15 or 16 per cent a year, a $100,000 investment property today sold in 10 years’ time would fetch $300,000 and the gain from that would not fetch a penny in this particular speculative land tax.

In the case of land, raw land --

Hon. Mr. Meen: What kind of accommodation, what kind of investment?

Mr. Cassidy: This would be an investment property. Not a penny -- and surely that increase of $200,000, the tripling of value, would represent --

Hon. Mr. Meen: Apartments haven’t gone up at that rate.

Mr. Cassidy: They have gone up at that kind of rate in my area, they go up at that kind of rate in all the residential areas, and it has been one of the chief reasons for the escalation of rents. It has been capitalization of rising rents that has been permitted and condoned by the government.

There is a saying, Mr. Minister, that property is theft and it is obviously something that is still subscribed to by this government.

Mr. Chairman: The hon. member for High Park.

Mr. Shulman: I want to take a different approach again, I am going to try the minister on another tack if I may. The tack is that of distortion. I am sure he must be aware of the dangers that occur in any system of free enterprise -- and we still have such a system -- when you begin to distort the financial markets. What you have done is exactly what the Americans did a year ago with their stages two and three of controls. They made an attempt to keep down the price of certain specific items, especially cattie and hogs, thinking they would keep down the price of food. When the smoke cleared, the first thing that happened was a shortage, but the price of cattle and hogs, of course, was considerably higher than when they first attempted to control it.

You are doing exactly the same thing here. You are distorting the economy by bringing in a bill which in effect penalizes people who own land if they sell it within the next three years. There is no question that everything is going up in price, not just land. Our salaries are going up, everybody’s salary is going up; the price of goods coming into the country is going up so the price of everything else is going up. There is no way anybody in this room is going to stop that; there is no way this government can stop it.

When you attempt to do what you are attempting to do, what you are going to do is produce a strange distortion. I don’t claim to say where this is going to end but I do know that within months or within a year you are going to have the same result up here as the US had a year and half ago when it attempted to do exactly the same thing in the food field.

You are going to have a scarcity as people pull their land off the market, and then when the lid comes off -- and the lid always comes off, and I suspect it will come off in one of two ways -- a year or a year and a half from now when the election campaign comes up, I suspect you people will repeal the bill; if you don’t repeal the bill I suspect the Liberal Party will campaign on a policy of withdrawing it if and when they are elected. If they do, and you stand firm, they will be elected.

Hon. Mr. Grossman: You don’t give the NDP a chance, eh?

Mr. Shulman: It is not an NDP issue, really.

Mr. Cassidy: We’ll bring in an effective tax.

Mr. Shulman: It is a financial ploy which has been tried in other countries very recently. That is what bothers me. I see the same thing happening just across the border from us; apparently the minister’s advisers haven’t looked. Or if they have looked, they haven’t told you. Or if they have told you, you haven’t understood. You know, if we had a socialistic government here, you could do it. You can do anything in a socialistic government. You pass a decree, and that’s it. But in this system that we have today, you can’t do it. We have got a free-enterprise system, with the interplay of all sorts of financial things keeping things on an even keel; and when you start to distort, as you are going to do now, there are going to be horrendous things happening.

Hon. Mr. Winkler: Are you saying that you are in favour of the free-enterprise system?

Mr. Shulman: I am in favour of the best of both.

Hon. Mr. Winkler: Do you like it as it is?

Mr. Shulman: No. I want to improve it. But I don’t want to see it ruined.

Hon. Mr. Winkler: Oh, I see. You want to improve the free-enterprise system.

Mr. Shulman: Yes.

Hon. Mr. Winkler: That’s fine.

Mr. Shulman: I don’t want to see you people ruining it. You are supposed to be exponents of free enterprise, yet you bring in a bill like this, which in effect is --

Hon. Mr. Winkler: Certainly not your colleagues, my friend.

Mr. Shulman: My colleagues all agree, we want to improve the free-enterprise system.

An hon. member: You’re kidding.

Mr. Shulman: We don’t want to see you ruin it.

Mr. Cassidy: We are going to revolutionize the free-enterprise system. We have total unanimity.

Hon. Mr. Winkler: No wonder you never go to caucus.

Hon. Mr. Grossman: Everyone wants to be a Tory.

Mr. Chairman: Order.

Mr. Shulman: Well, except the Tories. That’s, what bothers me. Perhaps the people over here want to be Tories, but over there, you are behaving like Red Guards, with about as much sense.

Mr. Givens: That’s what makes your bill so weird. You guys are going for it.

Mr. Shulman: If this had been brought in by that fellow, Mel Watkins, I could understand it. It’s the type of thinking that we had before we got rid of those people. It’s a lack of thinking. It’s a lack of looking ahead. This is what really disturbs me. The implications are evident to anyone who is involved in the field -- and by that I mean the two fields, the economists on the one hand and the real estate people and the lawyers on the other -- they are aware of what you are doing. I find it hard to believe that you are not aware of what you are doing.

It looked so nice on the front page of the Star, the headline that read, “Tax on Speculative Profits: 50%.” Then they have to pay another 30 per cent to the federal government “We’ll fix those guys,” the government seemed to be saying. But you can’t just stop there. You have to look at not what is happening in April, 1974, but what is going to be happening by October, 1975. And by October, 1975, you are going to have 15 months with only distressed property coming up for sale, because no one who doesn’t have to sell is going to sell. He would be crazy if he did. And the big land owners are not crazy. You’ll get distress sales. You’ll get people who are forced to sell.

Hon. Mr. Grossman: A lot of repetition.

Mr. Shulman: You will produce what you are producing in Toronto right now. There are a tremendous number of properties that are not selling -- the prices are too high -- and the reason you have that is they are adding in to make up for what they have to pay you as a result of this tax.

The distortions here are not going to stay just in land. They are going to spread into all sorts of fields. The first place you are going to see it is in the money market, and the money market within this province is going to be in such chaos by fall that the hon. minister is going to be written up in Time magazine. In fact, I suspect you will be written up in Fortune as the man who produced chaos in the money market for the first time, I think, since the panic of 1929. You are going to get a fame which I don’t really think you want.

Hon. Mr. Grossman: He’ll write a book.

Mr. Shulman: Yes, he could I call it “The Meen Tax.”

Mr. Chairman: Let’s get back to the bill.

Mr. Givens: What is going to happen to industrial and commercial land while this is going on?

Mr. Shulman: Well, industrial and commercial land is exempted, but they still have to compete for mortgage money -- and the demand for mortgage money is going to grow incredibly.

Hon. Mr. Meen: You said that earlier.

Mr. Shulman: Yes, I am replying to the hon. member for York-Forest Hill. I am coming to a different aspect of that, if I may, which is the effect on industrial and commercial land.

As a result of industrial and commercial land having to compete for mortgage money, the price of industrial and commercial land is going to go up and the rent on industrial and commercial land is going to go up. What that is going to lead to is to higher costs to manufacturers. And what that is going to lead to is higher costs for everything they produce. And what this is going to lead to is the difficulty for our manufacturers to compete with other provinces --

Hon. Mr. Grossman: Henny Penny, the sky is falling.

Mr. Shulman: Well, if the sky does fall, it is going to fall because of this section of this bill.

Hon. Mr. Meen: What section are we on? I would like to know what the hon. member is talking about.

Mr. Shulman: We are on section 4.

The minister sits there and smiles, and says, “Oh, let’s get this over with; let’s carry it. You have said all this before.” But this bears repeating -- and I am not repeating, but it bears repeating.

The implications here go far beyond what you are attempting to do; and the results of this are going to go far beyond what you intend to do. You are now going to produce chaos in so many fields which have no relationship to this bill and which no one has given any consideration to.

I look at it again and come back to sub-subsection (a), the 10 per cent -- where I started this whole dissertation. If the minister can’t understand that problem and if he can’t understand how to define a speculator, who may be someone who dies today who held land for 20 years; if he can’t figure some way of getting those people out of it, this bill is in sad shape, and the economy is in sad shape and ultimately the government over there is going to be in sad shape, because we are all going to have to pay the piper with this bill -- and nobody up there is listening. They don’t care. And nobody over there is listening. I have the feeling they don’t understand.

Hon. Mr. Winkler: The member for High Park has got his own newspaper column. He can write anyway: it doesn’t matter.

Mr. Shulman: I’m not sure anybody reads that except the member for Grey South (Mr. Winkler).

Hon. Mr. Grossman: The member is going to write a book, “How To Lose a Million.”

Mr. Shulman: Next Tuesday the column is about the Chairman of the Management Board.

Hon. Mr. Winkler moves that the committee rise and report.

Motion agreed to.

Mr. Cassidy: We agree on that one, Mr. Chairman.

The House resumed; Mr. Speaker in the chair.

Mr. Chairman: Mr. Speaker, the committee of the whole House begs to report progress and asks for leave to sit again.

Report agreed.

Mr. M. Shulman (High Park): Very little, very little, Mr. Speaker.

Hon. A. K. Meen (Minister of Revenue): More progress than Tuesday

Mr. Shulman: Not much.

Mr. Speaker: I beg to inform the House that in the name of Her Majesty the Queen, the Honourable the Lieutenant Governor has been pleased to assent to a certain bill in her chambers.

ROYAL ASSENT

Clerk of the House: The following is the title of the bill to which Her Honour has assented:

Bill 54, An Act to amend the Land Transfer Tax Act, 1974.

Hon. E. A. Winkler (Chairman, Management Board of Cabinet): Mr. Speaker, before I adjourn the House I would like to say that tomorrow morning we will return to the consideration of the estimates of the Ministry of Government Services.

On Monday, we will discuss the budget and on Tuesday we will return to the consideration of item No. 2, Bill 25. Following the consideration of that bill -- if the members opposite would like to take these numbers -- I will call first, item No. 10, Bill 51; second, item No. 11, Bill 52; third, item No. 5, Bill 35; fourth, item No. 6, Bill 37; fifth, item No. 7, Bill 39; sixth, item No. 4, Bill 9; seventh, item No. 8, Bill 44.

This will continue through Thursday, if necessary, and a week from tomorrow we will continue on the consideration of estimates. The House will sit Monday, Tuesday and Thursday evenings.

If I may add to that, Mr. Speaker, following the consideration of the estimates of the Ministry of Government Services, I anticipate calling the Ministry of Agriculture and Food. Following Natural Resources, I anticipate calling the Ministry of Community and Social Services.

Hon. Mr. Winkler moves the adjournment of the House.

Motion agreed to.

The House adjourned at 10:30 o’clock, p.m.