International Trade Committee on June 5th, 2023

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Do you know where in the U.S. such vacant home taxes do exist?

[Dr. Thomas Davidoff]

Just off the top of my head, my understanding is that Florida has preferential rates, and maybe Hawaii. There may be preferential rates for the U.S.

Again, I'll re-emphasize that for many years Americans with high incomes were able to deduct state and local income and property taxes, whereas overseas, non-U.S. taxpayers were not. That could be a significant preference. In Oakland, if I'm not mistaken, I was paying $10,000 a year on property tax. Between California and the U.S. pretty close to 50% of that was deductible. I was getting a $5,000 advantage that a Canadian trying to buy would not have received.

[The Vice-Chair, Conservative, Kyle Seeback]

That's all of the time we have today.

I want to thank both of our witnesses today for some very interesting testimony. I would invite both of you to submit briefs to the committee so that we can consider them when we do a draft report on this issue. You both raised interesting and significant issues.

We are going to briefly suspend to allow for our next witness: Congressman Higgins from New York's 26th congressional district.

We'll be back in a few minutes.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll call the meeting back to order.

I just want to welcome Congressman Higgins. It's nice to see you again. I was in Washington, D.C., a week or two ago. It was great to chat about issues and the friendship between Canada and the United States.

Congressman Higgins serves on the House Committee on Ways and Means, where he's also a member of the subcommittees on health, trade and social security. In addition, he currently serves as a member of the House committee on the budget. He is a co-chair of the northern border caucus, from which he advocates for federal policies that recognize the unique needs of northern border communities.

Congressman, we normally give five minutes for an opening statement, but I'm more than happy to give you the latitude to make the statement you'd like to make. Please go ahead.

[Brian Higgins, Member of Congress, NY-26, House of Representatives of the United States of America]

Thank you very much.

I appreciate very much the House of Commons Standing Committee on International Trade calling this meeting as quickly as you have in the aftermath of the meeting we held in my office in Washington, D.C.

I want you to know that I was at a groundbreaking today for the new Buffalo Bills National Football League franchise stadium. It's a $1.5-billion project, but the owner of the Buffalo Bills and the National Football League commissioner thanked the people of Canada for providing the significant ticket-buying fan base for our professional franchise.

The point he was making was that Buffalo is a relatively small market, and it's very difficult to sustain a national football league franchise. However, our friends and fellow Bills fans in Canada, in part, made possible this day and the building of a new stadium, which will keep the Buffalo Bills in Buffalo for 30 years, so we want to thank you for your friendship and for your most recent contributions to the viability of our economy in Buffalo and western New York.

I want to especially thank Mr. Tony Baldinelli for offering the motion to convene this meeting and study. As a representative of Niagara Falls, I appreciate Mr. Baldinelli's continued friendship and partnership.

As you know, there's a unique relationship between the United States and Canada. I'll just quickly tell you my story, because it's not unique. It's a story of Buffalo and western New York as relates to southern Ontario, and more specifically the Niagara region—places like Bay Beach, Crystal Beach, Thunder Bay, Sherkston and all of those areas that historically we call “cottage communities”.

I grew up and spent my summers along the Canadian shores of Lake Erie. I played ice hockey up in Fort Erie, Ontario, at a place called “The Barn”, which is no longer there. It was very easy to traverse the border, and that ease of travel accrued, economically and in terms of quality of life, to the benefit of people within the Niagara region both in southern Ontario and in western New York.

As you know, in 2021 there was a budget proposal to create a tax on vacant and underutilized properties owned by foreigners. My understanding was that it was put in place to address a problem specific to Toronto and Vancouver, where international interests were buying large swaths of property and then keeping them vacant for long periods of time, perhaps speculating in terms of real estate investment. The problem, as it related to Toronto and Vancouver and the country as a whole, was that it was taking supply of housing off the market for a period of time, and that would create a demand issue such that property costs were rising for Canadian citizens.

The problem is that it also included the Niagara region. As I said, a cottage is usually a small home in close proximity to a beach or a park, and it is used seasonally. It's not underutilized. It's used fully for the seasonal purpose for which those homes were built.

We have heard from more than 400 constituents who have owned property in Canada in the Niagara region, in many cases for 30 to 40 years. It's multi-generational.

I appealed to the members who came to visit me in my Washington office, and I appreciate very much this follow-up. I would ask you to consider possibly providing a carve-out for a piece of property that is considered to be a cottage near a lake or a park, which is seasonal in nature, because, as I said, these properties are fully utilized during that season. Americans will typically go to Canada on Memorial Day, which is our unofficial start of summer, and they will stay in their Canadian cottages through to Labour Day. Now they're being taxed at 1% because of this vacant and underutilized housing tax.

That's the purpose of appearing before you today.

Again, I appreciate very much the long, historical ties economically and in terms of life quality between the United States and Canada. I remember fondly that on September 11, 2001, when the American airspace was shut down, 38 passenger planes were forced out of the air and landed in a small town called Gander, Newfoundland, and stayed there for weeks and, in many cases, months. They were treated as friends and family, and I think that is typical of the relationship that has occurred between the United States and Canada.

With that, I would be glad to take questions to provide whatever additional information you may need relative to our efforts to ask for a reconsideration of the vacant and underutilized property tax.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Congressman.

We'll turn to our rounds of questions.

The first round will be Mr. Baldinelli for six minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Representative Higgins, for joining us this afternoon. Thank you for all you do to promote the binational region and the strong ties that bind our countries and the residents who live in our communities. As I said earlier, it's not an international border for those who live in the area. It's just a river that divides friends and families, in fact. Thank you for everything you've done.

We had the pleasure of meeting several months ago at your Buffalo office as well as recently in Washington to discuss several binational issues and, of course, the underused housing tax issue came up. For a little information and perhaps some history for the committee, when were you first apprised of it? When were you beginning to get contacts? How many contacts have you had?

What have been some of your efforts working with your American colleagues to notify Canada of the concerns you have?

[Brian Higgins]

Thank you, Member of Parliament Baldinelli.

People started to get contacted, as you know, when the original bill was proposed. Again, it was explicit in what it was attempting to mitigate or to fix, which was, again, international interests purchasing large swaths of property in big cities and driving up the costs of those properties. The evolution of the bill was moving. It began to define what other properties would be included there, and it kept getting closer and closer to southern Ontario and the Niagara region.

It was about the midpoint of last year, and we made efforts through the ambassadors' offices, both the U.S. Ambassador to Canada and the Ambassador of Canada to the United States, to note that this was a concern and that we needed to watch it. We began to make the distinction between a seasonal cottage and large apartment buildings being purchased for different purposes.

Yes, it was the middle of last year.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

I found it interesting, when I was reading up on some of the efforts you've done, that you undertook an online survey with the residents who would contact your office and some of the notions about the long-standing relationships these residents have had. I believe it was over 160 people who responded, and nearly 30% of responders have owned their Canadian property for over 50 years, with close to 40% owning their Canadian home between 20 and 49 years.

Going back to that relationship that exists, people come and they don't come for just a finite vacation period, because we're so close. People can stay in Crystal Beach, for example, and then go to work in the morning in Buffalo and in western New York, so they have those long-standing ties.

I talked earlier about Cherry Hill golf course, which was established in 1922 by nine Americans. I talked about the one Roman Catholic church, St. George's, that celebrated its 100th anniversary and, in the summertime, the congregation swells because of our American visitors.

People don't understand, when the government tries to take an overarching policy with a broad brush, that sometimes they miss the intricacies and the carve-outs that need to be done. I wonder if you could comment on that.

[Brian Higgins]

Tony, I think you nailed it better than I could have.

I'm familiar with St. George's church because I used to go to church there when I spent my summers in Canada at Bay Beach and Crystal Beach. Again, as you point out, this is a way of life. I can remember as a very young kid through to adulthood spending summers at Bay and Crystal Beach. We always were and are greeted as friends and neighbours. When people are living in Canada on a seasonal basis, we feel as though they are net contributors to the economy, and we welcome our Canadian friends into western New York in the same way.

There is a ski village 60 miles south of Buffalo called Ellicottville, and a lot of Canadian citizens own condominiums there. The way you know that is that during December, January, February and March, when you go into the town of Ellicottville, half the town has Ontario licence plates.

I think that is the great benefit, for both Canadians and Americans, of living in a border community. To promote that I think is in the best interests of both countries. There are 120 land ports of entry. The second-largest crossing between the United States and Canada is the Peace Bridge, and that connects Buffalo to Fort Erie in southern Ontario and through the whole province of Ontario. There are a lot of common interests, a lot of common history and a lot of common culture, and we want to preserve that and strengthen it moving forward.

I was talking to some of my folks today about how we're surrounded by friends and fish, not by hostility and not by instability. We're trading partners. We're friends. Our economies are deeply integrated. I think what we learned during the pandemic for 36 months.... My federal government did not handle that issue well, and the United States and Canada, the federal governments, should have been working more closely and coordinating the communication strategies and policies as they related to COVID. I just think that we should learn from that and bring our ties closer together.

[The Vice-Chair, Conservative, Kyle Seeback]

That's great. That's the time.

Now I'll turn to Mr. Virani for six minutes.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Representative Higgins, it's good to see you so shortly after we just saw you in Washington. Thank you for your hospitality. I was sitting on one of the couches in your office very recently. I recollect you telling us a lot about Canada-U.S. relations. I don't recollect you describing it as “friends and fish”—I would have added “snow and sports”—but that is a pretty apt description.

Representative Higgins, again, let me echo what Mr. Baldinelli said in terms of your own leadership with Canada-U.S. relations, your own hospitality to us and your trying to constantly advance what is an important relationship and has been historically important in ensuring we deal with any obstacles or challenges but also in taking it to the next level.

What I'd say is that we know there is obviously the nation-to-nation interest. There's Canada and your state. There's even Canada and your district. We know about some of those extensive ties. I was actually digging up again the extensive connections we have with the 26th district, which you represent and where 6,200 people are employed at 163 Canadian businesses. Your district exports $1.1 billion into our country and receives $484 million from our country. That's quite staggering.

What we're trying to do, I guess, Representative Higgins, is just figure out how to calibrate this as best as possible. I just wanted to ask you.... I am on the trade committee, obviously, and I work with Minister Ng as her parliamentary secretary. We chatted briefly in your office. We're just trying to get this right for the benefit of addressing what you identified as a fair rationale but one that doesn't disproportionately impact the important residents that you represent or people who are coming over and shopping and purchasing in places like Tony's riding, etc.

I understand right now, Representative Higgins, that if the location, let's say.... We've talked a lot about Crystal Beach. If the location at Crystal Beach is not a year-round location, that property that's owned is not subject to this tax. That is one of my understandings. I also understand that, if the location of Crystal Beach hypothetically is used for a resident of western New York who is actually studying at Brock University in St. Catharines and is living there, it's also not subject to the tax.

Do I have that understanding correct, Representative Higgins?

[Brian Higgins]

My understanding is that all of the cottage communities that have cottages or homes owned by Americans are subject to this tax.

[Arif Virani, Liberal, Parkdale—High Park, ON]

What we have with us here is some information that talks about some of the exemptions. We can make sure that we get it to you, but there are some exemptions that are based on who's using it, when they're using it, the type of occupant, etc. A place that's not being used year-round—it may not be winterized, for example—is not subject to the tax as it's currently contemplated. Secondly, a place that might not necessarily be used by the couple who owns it, but by their child who's studying in Canada, would also not be subject to it.

We had some discussion, just in the hour before you came on, Representative Higgins, about how you define this urban-rural divide. You put your finger on it when you said there are acute problems in places like Toronto and Vancouver. I'd say to you that it actually extends a bit beyond Toronto and Vancouver. It applies to many large urban centres like Calgary, Montreal and Halifax, etc.

It seems like Crystal Beach and other areas are caught up in what we'd define as “urban”. Is that the tension that you're identifying? Is it how we define what is urban versus what is rural?

We feel a strong necessity to target urban properties that are driving up the prices for rentals and for purchasing in urban centres. Can you give me your feedback on this urban-rural definition as it's contained in the regulation so far?

[Brian Higgins]

Based on my American experience—my western New York experience—I wouldn't characterize places like Bay Beach and Crystal Beach, Thunder Bay or Sherkston as rural areas. I think what I have been conditioned to view them as is cottage communities. They're interconnected. They're typically in close proximity to the water. These homes were built to be seasonal homes.

Cottages are, by their very nature, a vacation destination used on a seasonal basis. I wouldn't necessarily, from my own experience, make the distinction between Toronto and, let's say, Crystal Beach, Ontario, as urban versus rural.

My view would be that it's very different. Perhaps it's its own categorization of a cottage community, because historically, that's what Americans have viewed places like Crystal Beach and Bay Beach, etc., to be.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Could I ask you one further question, Representative Higgins?

Right now, as the regulation stands, there are certain exemptions, but the exemptions don't apply, meaning that you are subject to the tax if you own multiple properties. I presume you don't have any issue with people who have multiple properties being subject to this tax. You're talking more about that mom and pop who have one property in Canada in one of these more remote locations, which they are actually using.

Is that fair? Do I have your position accurate?

[Brian Higgins]

Who we have heard from are citizens of the United States who have, for generations, been going to Canada. The issue of multiple ownership doesn't come up. We're primarily advocating for people who have a new tax being imposed because of this vacant and underutilized....

It's not for an investor who would be buying a lot of properties. It's for the individuals who own a cottage and use the cottage themselves, and for those who have had cottages in their families and turned them over to future generations. There's a great tradition there.

It's primarily for the owner-occupied cottage owners in those areas we spoke of.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you.

We'll now move on to Mr. Savard-Tremblay.

Representative Higgins, to be clear, the translation button on your Zoom is down there. I assume Monsieur Tremblay will be speaking en français.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Yes, Mr. Chair.

[The Vice-Chair, Conservative, Kyle Seeback]

On the globe on Zoom, it will say “translation”.

[Brian Higgins]

I have it.

Go ahead, sir.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I am pleased to see you again, Congressman. We see each other often at your office in Washington. We have seen each other twice in the last month, as I've been on two missions in Washington, one week apart. I think I'm about to buy a cottage in the Washington area because I go there often and it would make my travels easier.

We know about your commitment to Canada-U.S. relations. You sent a letter to the U.S. trade representative in which you mentioned that the tax did not comply with the rules of the Canada-United States-Mexico Agreement. We know that this agreement is probably the main node that unites the two countries, the two states.

Could you tell us more about that? The Bloc Québécois had looked into the matter and, even though we agreed in principle, we were a bit annoyed by the encroachment on an area of provincial jurisdiction. This is another area, but it would seem that it would also be a problem in terms of international trade law. Is that right?

[Brian Higgins]

Yes, we're talking about the Canada-United States-Mexico Free Trade Agreement. There is a provision relative to non-discrimination against member countries as it relates to taxation. This is what I have cited in communicating with the United States trade representative, Katherine Tai, through a letter, but also within the context of the House Committee on Ways and Means, on which I serve, including the trade subcommittee.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Of course, that is your approach. Are you certain that, legally speaking, the tax violates the non-discrimination clause? Is there no doubt about that?

[Brian Higgins]

We're asking that the trade representative initiate a consultation with our Canadian counterparts to determine whether or not this would be in violation of that provision in the trade agreement.