Can Tax Reform Help Young Canadians Afford Homes?

And how the income tax system advantages older workers over the young

Meredith Martin

Mike Moffatt

, and

Sabrina Maddeaux

Aug 13, 2025

Across Canada, young workers are earning more than previous generations at the same age, but are facing higher taxes, soaring housing costs, and fewer opportunities to build wealth.

In this episode, Sabrina Maddeaux and Mike Moffatt examine the structural disconnect between income, taxation, and affordability. They discuss proposals for targeted tax reform, the limits of age-based benefits, and creative policy ideas to support homeownership, renting, and family formation. The conversation also examines how shifting wealth patterns impact social cohesion, political trust, and Canada’s long-term economic well-being.

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Below is an AI-generated transcript of the Missing Middle podcast, which has been lightly edited.

Mike Moffatt: So, Sabrina, you recently wrote a Toronto Star column, which we'll link to in our show notes, and the column argues that young Canadians are facing a perfect storm. They are earning more than previous generations at the same age, but they're also being taxed heavily, while costs for everything from housing to groceries have skyrocketed.

Can you paint a picture of what this looks like for a typical young professional today?

Sabrina Maddeaux: For sure, a lot of young Canadians are making decent salaries. The problem is that everything else has gotten so expensive, and obviously, particularly housing costs have spiralled completely out of control and are entirely disconnected from incomes. So you have young Canadians who already are having a very hard time trying to save for a down payment, or to even just afford their monthly rent, and then you have the tax system taking a huge chunk, sometimes up to nearly half of their salary, away. So, that makes it even harder to save or to pay rent. And young Canadians, as a result, are really suffering here, and they just can't seem to get ahead. Assets are getting further and further out of reach, while income and working on merit to achieve the markers of a traditional middle-class lifestyle are ever more out of reach.

In the column, I talk about how, according to ratehub.ca, you need an income of $205,000 to buy an average home in Toronto. And when you combine Ontario and federal tax brackets, that income is taxed at a staggering 48.28%.

Now, for the average Hamilton home - let's go a little bit further out here - you need an income of about $166,000, which would be taxed at a combined rate of 44.97%. Actually, unless you make less than about $57,000, your combined marginal tax rate is over 25%, and that's even though your income is low enough to qualify for subsidized housing.

And so these rates include Ontario's wealth surtax, which kicks in once you clear about $93,000, and then a second higher one kicks in once you're about $109,000 of salary, and yet there's no city in the entire province where you can actually purchase an average home with these salaries. And even if you go beyond purchasing, to so much as rent a two-bedroom apartment in the GTA, you typically need an income of between $118,000 and $123,000.

So you can see there's this huge disconnect here. You have young Canadians being taxed at rates that were historically like wealth tax levels, where you would be assumed to be able to afford a home, a family, and more than that, a fairly luxurious lifestyle. But now young Canadians, they're making these salaries, but they're being taxed at rates that are very, very high, even as they can barely afford what used to be considered a lower-middle-class … they can barely afford rent. So there's a really big disconnect there.

Part of what inspired me to write on this was a recent tax reform idea from CIBC's chief executive. He proposed that in order to help younger Canadians save for homes, the tax exemption threshold should be increased to $75,000 for workers under 30. So he's basically arguing that they shouldn't be taxed on income below this amount, provided they save at least $15,000 in tax-free savings accounts, or a first-time homebuyer saving account.

Now, I like that he's paying attention to generational fairness in the tax system, and I really do like bold policy ideas coming from someone in his position, but I have some issues with this specific idea. What's your take on it, Mike?

Mike Moffatt: Yeah, I suspect we'll be fairly aligned with this. So I totally agree with the CEO that we have a big problem in this country with intergenerational fairness. That your generation and Gen Z don't have the same opportunities as Gen Xers like me did, that you are facing much higher rents, much higher prices for homes, and higher prices in other areas, which makes it difficult to achieve savings. I do think there is at least some merit to some of these ideas. So, for instance, our tax system has an age credit for seniors, so it wouldn't be that much of a stretch to go, “Okay, that kind of senior's age credit, why don't we make the same thing for people under 30?”

So it's not an outrageous idea, but that said, I would prefer to attack the root causes. I would prefer to look at the things that are making housing expensive in the first place, because this is not completely a housing problem - I would say it’s two-thirds a housing problem. And if you fix housing, a lot of other things will end up fixing themselves.

So, looking at all of the restrictions we've put on creating new housing over the last 20 years, looking at making sure that our GST housing rebates are indexed for inflation - that's a pet topic of mine. Looking at the fact that development charges on new housing are 10 to 20 times more today than they were in 2004. I think looking at all of those things and just getting a tax and regulatory system that works better across the board, I think, would be a better idea.

I get a little bit nervous with just layering boutique tax credit on top of boutique tax credit, and then the whole tax system kind of collapses under its own weight.

Sabrina Maddeaux: Yeah, for me, I do think that some tax credits and solutions could provide a more immediate relief than some of the larger, more complex solutions. Although you're right, we absolutely do need to address both.

I don't want to go too hard at his idea here, because I do think it's great to have these sorts of really innovative solutions get out into the public sphere. But for me, the idea of basing it on age, that strict 30-year-old cutoff, doesn't make sense for a few reasons.

One, it would disincentivize post-secondary education. Another thing is a lot of young workers don't get anywhere near $75,000 a year by the time that they're 30. That cutoff would leave a lot of Millennials, well, almost all Millennials, and then a lot of the older Gen Z as well, who have been struggling with the housing crisis and affordability for decades now, completely out in the wilderness with no solutions. So there are a few issues here. And I do think that if we want to talk about tax reform that can benefit young people and help them save for homes and families, there are probably better ways to go about doing it.

I mean, he does get that one big thing right, in my opinion, though.

There is this disconnect where politicians are talking about helping young people with housing, but then we have a tax system that's taking a massive bite out of people's paychecks, even as they can afford less and less.

So Mike, how did we end up in a situation where young people are getting taxed as though they're very wealthy, without leading remotely wealthy lifestyles? And, don't you think this is a really problematic disconnect?

Mike Moffatt: Yeah, I do. And I think one of the big problems is that tax brackets are adjusted every single year for inflation, right? So the lowest tax bracket, the kind of minimum and maximum amount, do increase every year, adjusted for inflation, but that inflation is consumer price inflation. That inflation is that sort of 2% inflation. They don’t adjust it at the same rate as home price inflation, right? Because if they did [increase it at that rate,] the lowest tax bracket would extend to like $150,000 nowadays. And I think it's that disconnect where you've got consumer prices increasing 1% to 3% every year. And most of our inflation adjustments are based on that - except for GST rebates, which aren't adjusted for inflation at all.

The cost of living for young people, particularly the cost of home ownership, has been rising several times faster than overall inflation, so it is a problematic disconnect. And I think it kind of shows the second-order effects when you allow home prices to get out of control. It breaks the income tax system.

It breaks all of these other things. Then again, I remind myself that the income tax part of this is visible. What tends to be less visible is all of those hidden taxes on housing, development charges, and so on. And we should understand …we hear governments all the time, and particularly progressive governments, all the time, talk about greedy developers, greedy this and greedy that…But they have to understand that every time home prices go up, it generates more GST for them, it generates more land transfer tax for them, and so on. So on some level, government itself is a big beneficiary of rising home prices, but that comes at an expense. And the expense is the affordability for young middle-class Canadians.

So if we're ruling out age-based solutions, what should be on the table? What do you think smart tax relief for young Canadians would look like?

Sabrina Maddeaux: Yeah, in my column, I argued about putting those age-based solutions to the side and really targeting more milestones where younger people are feeling the biggest pain, but also where broader society and our broader economy could then get the most benefit. So this isn't just about tax relief for individuals, although they'll certainly be helped, but also ripple-on economic impacts, right?

For one thing, I've spoken a lot about how renting doesn't have to be as inherently bad as it is in Canada. And we need a path to wealth and retirement for renters. So one idea would be the government allowing renters to claim some of their rent on their tax return, similar to how mortgage interest can be written off in the United States. I also think there should be a renter-friendly answer to the principal residence tax exemption, something like a universal lifetime capital gains exemption, or more room for RRSP or TFSA contributions.

Something else that I think is interesting is targeting new common-law couples. We know that stable relationships and marriages are great for society and communities at large, and a lot of young couples could benefit from more generous income-splitting opportunities for a designated length of time as they build their lives together. Income disparities between couples tend to be greater earlier in life, yet we offer most income-splitting benefits only to seniors.

And then I think there are opportunities for new parents as well. A big problem is that young people can't afford their first child, or their second or third child. So maybe looking at something like significantly reducing income taxes per child or the ability to write off larger portions of rent or car payments if you have children, those could be game changers.

And then I think you need to look at other benefits as well, like Ottawa should consider making maternity and paternity benefits non-taxable, and also something like removing the sales tax permanently on baby-related items.

Do you have anything you think could be effective?

Mike Moffatt: Yeah, so I certainly think those are worth looking at. And the tax system does some of that already. Children's shirts don't have tax on them, but adult shirts do. But I do think looking at increased savings vehicles is important.

As you point out, a lot of young people just don't have the money to save, so you can increase those caps, but it doesn't change much. It tends to benefit, you're right, the wealthiest and highest earners.

Sabrina Maddeaux: And then there's the question, too, when I was talking about the CIBC executive's idea about saving, he said, ‘Oh, then young people will be able to afford that $250,000 down payment in 10 years.’ Well, down payments probably shouldn't be that much to begin with. It's not a productive use of income, right?

Mike Moffatt: Well, absolutely. And I'm really glad that you mentioned the down payment point, because one of the things that we see with young people is often that inability to save up for the down payment - even a 5% down payment is a real challenge to home ownership. And a lot of times that you get young people who are actually paying more in rent than they would in a mortgage if they went into a new ownership-based home, but they can't qualify for the mortgage. I think we need to look at that for young people and say, ‘Hey, if you are paying $3,000 a month in rent, we should make it easier for you to qualify for a mortgage where mortgage plus property taxes and so on, you're only paying $2,800 or $2,700.’

Oftentimes, the system forces younger people to make a more expensive choice. So I think maybe looking at lowering minimum down payments for first-time home buyers, with the qualification that the monthly payments can't be more than the rent they're paying now, things like that, I think could be helpful.

And I know the pushback I'll get is saying, ‘Well, you're just juicing demand for ownership housing.’ Let's say, ‘Okay, then fine, just apply it to newly built homes.’ If you just apply it to newly built homes, then it creates an incentive to construct new homes.

So I think looking at things like that, little creative solutions like allowing people to move into ownership-based homes, would actually save them money. And the only reason they can't do it is because of a regulatory requirement. Well, let's loosen that regulatory requirement, but doing so in a way that doesn't cause harm or doesn't inflate the housing market.

I think a lot of the problem that we have is that we have these well-meaning regulations that don't really work for people in their 20s and 30s, and we've got to look at reforming those. So the obvious political challenge here on some of these ideas - tax cuts and rebates for young people, and those could be hyper-targeted - says, ‘Okay, you’ve got to be under 30 to qualify, or ones where it's just obvious that younger people are going to disproportionately benefit’ - is they sound like they benefit a narrow group. This issue is really about economic mobility. It's about making sure that people can stay in Canada. It's about making sure that young people have a little bit of money left over at the end of the month so they can start a new business or that kind of thing. So how do we make sure that these policies are seen as helping the young middle class and not just the top one or 5%?

Sabrina Maddeaux: You have to sell it as the broader economic and social benefits, getting young people to a place where they have financial futures, where they have hope for staying in Canada, and they can build families and own homes or rent with stability and spend time in a community that they love. Those, yes, benefit the individuals, but they benefit really everyone else as well. Everything from brain drain - whether that's losing people from certain provinces or municipalities, or Canada. Certainly, brain drain of important areas like nurses, doctors - we need to stop that because that hurts everyone.

So you look at older Canadians who are staring at our health care system, saying, ‘Oh, I can't get in for appointments or I'm worried about what this looks like in 10 years.’ Well, you need to keep those younger workers here to be able to support you in your senior years.

But on top of that, communities benefit from people being invested in them in the long term. Everything from safety to volunteering and just having that support system that people are craving, but is missing from a couple of decades ago. And you lose that community feel and those values and that connection when people feel they're not bought in, and when they're just there for a temporary amount of time.

And then you look at being able to afford having children and raising a family and being able to raise that family with a certain quality of life, which also benefits everyone. Not just right now, but long-term economically and socially.

Socially and politically, you have younger generations who are so incredibly frustrated, for good reasons, and they feel the social contract has been broken. And part of that is, it's one thing to be taxed at a high rate if you can afford a home and you're getting services back and you can start a family. But when you can't do any of those things and you're watching half your paycheck disappear every pay period, that breeds even more resentment.

So I think if you want to stop young people from going to fringe political movements and opting out of the system and really just voting with anger or not voting at all, you need to offer them a way to buy back in, long-term. And I think that's how you start to sell this to the broader population, some of whom won't benefit from actions like these. And you know, here's something else that really gets to me.

A generation or two ago, wealth was largely built on salaries. You could get a good job, do the right things, get a promotion and start to succeed in life. But the last decade or so has flipped that script completely. You know, wages don't even come close to keeping up with asset inflation. And I'm not just talking about housing. Equities enjoy really preferential tax treatment and are disproportionately owned by older, wealthier Canadians. So you have young workers who are stuck earning and not really getting anywhere, while older Canadians are accumulating more and more.

So I'm wondering what your take is on this fundamental shift in how wealth gets built in Canada. And is there any realistic path to improving this imbalance?

Mike Moffatt: So I think that is occurring. And you know, there are pluses and minuses to it.

One thing that we have to understand is, it is helpful that there is capital available to companies that want to expand. It is helpful that entrepreneurs are able to start companies with either debt or equity capital and build these great companies. I think where the disconnect is, is like, are you getting rich from building something, creating something or helping somebody else build or create something? Or are you getting wealth by just sitting on an asset for 40 years, doing nothing?

And not only doing nothing, but preventing others from creating their own assets. You know, going to community meetings and saying, ‘Okay, I've got my house, but don't build any others near me.’ The unstated part being that if you do, my home will be [less] valuable. So that is a problem.

There tends to be two schools of thought on this. One school of thought is that we should just be taxing wealth more. I know one topic, and people write to us a lot. And if you want to write to us, we'd love to get your email, - is that we should be putting a capital gains tax on primary residences. And you know, that would slow this down, provide money for social housing or whatever. And Generation Squeeze and others are advocating for that. And you know, I think they're coming from a really good place where they recognize a problem and say, ‘Okay, this would solve it.’

In my mind, that is just such a political non-starter that you can debate all you want about the theoretical benefits…

Sabrina Maddeaux: It's just not practical.

Mike Moffatt: You know, I think we should focus on the other side of it, where we look at it and we go, ‘Okay, let's, let's actually help make it easier to create new assets. Let's make it easier to create wealth.’ We should be looking at bringing people up, not pushing people down.

I think the realistic path is to make it easier to build housing, to make it easier for young people to become entrepreneurs, to create great companies. I'm thinking of guys like my former student, Michael Kachin, who created Wealthsimple and all the wealth and all the jobs and all the opportunities that Michael and his cohorts have built. I want the generation of students I teach, I want them to be the next Michael Kachin. I want them to be able to create these great companies.

So that's what I think we need to focus on - not trying to restrict wealth out of existence, but rather shift our system to a system where you get wealthy by actually creating things that people value, not just by hoarding assets.

Sabrina Maddeaux: Right. Yeah. It's about shifting that wealth and incentivizing it to be used in productive ways. Like you said, to build, to invest, because we need that in Canada.

I want to get a bit more into the psychology of this though, because for me, there's also this very frustrating political dynamic where those who benefited from policies like quantitative easing during the pandemic, which essentially redistributed wealth to asset holders, now cry “socialist wealth redistribution” at any attempt to undo this damage and help younger workers or even have the conversation. And they don't seem to understand that the playing field isn't a free one, but it was fundamentally, deliberately changed - and I'd say rigged - in their favour.

So, as someone a bit older than I am and a homeowner, do you think there's any way to have these discussions without sparking this kind of incredible defensiveness?

Mike Moffatt: Yeah. So first, thank you for putting that qualifier “a bit older.” I do appreciate the minimization of our age difference.

And second, this feels a little bit like Freaky Friday. I feel like I'm coming a little bit more to the right, and you're coming a bit more to the left than we usually do. And I'm enjoying that. This is fun for me.

So, as somebody who is, if not old, older, yeah, my cohort, some of my cohort don't get it. And then some of my parents' generation doesn't get it either. And how I often talk about it is I try and frame it around their kids. This is the challenge that their kids are facing.

And the pushback that you always get is like, ‘Well, I bought my first home in 1982 and interest rates went up to 17%.’ And I think we have to acknowledge that, but we've done work in the Missing Middle showing that, yeah, that was a real issue, but as bad as that was for you - and that was truly awful - it's actually harder today.

And our goal should not be to have some kind of suffering contest like four Yorkshiremen from Monty Python. Rather, it should be like, ‘Okay, how can we make life better for younger people?’ Because that should be the goal of humanity. I want my kids to have a better life than I have. And I want my kids' kids to have an even better life than my kids are going to have.

We should be trying to improve the material conditions of humanity, generation to generation, along with the social conditions, the environmental conditions, and so on. So acknowledging the challenges that older generations had, because they did have those challenges, but pointing out, sympathetically, that things have become more challenging - frame it around their kids and going, ‘Okay, this is how things are making life difficult for your kids.’

But also, try to find win-win solutions. So one win-win solution I talk about a lot is: let's make it easier for seniors to downsize. That's a pro-seniors policy, because it gives them the option. We're not forcing them out of their house, but say, ‘If you want to downsize, you want to go into something smaller, we're going to make it easier for you to do that.’ Then what that does is that it frees up their current family's suburban-sized home for the next generation.

So I think that's the other thing that we have to do is look for win-win solutions rather than some of the zero-sum kind of thing where we're saying, ‘Okay, let's put a tax on primary residences and, you know, flow the money to younger people,’ you know, this kind of zero-sum distributional thinking, let's create some win-win solutions.

Sabrina Maddeaux: Yeah, I agree. And I think that when you have those conversations and when leaders invest in talking to people in that way, it works.

You know, I saw this when I ran for the Conservative nomination in a GTA suburb, and I spent a lot of time knocking on doors to constituents who were wealthy homeowners. And when I talked to them about housing, the best way to go about it, and what really connected for them was when you started to talk about their kids, some of whom were still living at home in their basement, struggling, thinking of moving outside of the country. Or their grandkids. And you have those really personal conversations, but you also talk about downsizing. That is a big worry for seniors.

And I think when we have these conversations, whether it's on X or other forms of social media, they can become overly combative, and you get into generational warfare. But that's not the way through this. And I think that it would be helpful if we, especially our political leaders, invest more of our time and capital in approaching these conversations. It can be difficult, but I think they are worthwhile because you'll find if you talk to people face-to-face, or in formats that allow for broader discussion, like this, you can get everyone to come on side and maybe not agree on everything, but certainly have more of a willingness to work forward together. And have more empathy for what each side is experiencing.

Now, you know, my column focused largely on income taxes and rebates, but there are other types of taxes that are helping to push markers like homeownership and family formation out of reach. So to close this out, what are the other areas where we should be looking at reforming or eliminating taxes to keep up with the times and help younger workers?

Mike Moffatt: Yes, I think there are a few areas. Development charges, all of these construction taxes on new housing, are a big, big issue. The fact that we don't have GST-new-housing rebates that go up with inflation is a big, big issue.

One thing that a lot of folks, your generation, might not know is that back in 2004, when I bought my first home, there was no provincial sales tax on new housing. It just didn't exist.

Sabrina Maddeaux: I did not know that.

Mike Moffatt: Yeah, it was before that was before the HST. You know, back when dinosaurs roamed the earth.

And then in 2010, we got the HST and to harmonize things, the provincial rules went with the federal rules. They tried to create a rebate to make sure taxes on home prices wouldn't go higher. It worked back then. But we didn't adjust it for inflation.

So, we've created all of these restrictions. We've also, in many ways, created a tax system that benefits seniors. Those benefits are not extended to other generations. So you mentioned earlier, income splitting for seniors. You know, only seniors get that, but not people in their 30s who could absolutely use it. Right? Because you have people in their 30s, where, you know, one partner is working and the other is in grad school or something. And, they're trying to survive on a single income.

So, looking at creating fairness to that system, where I go, ‘OK, like why?’ Why is it that only certain cohorts get this benefit when other cohorts could benefit from it just as much, if not more? But they're excluded.

So I do think we need to look at this. I do think we need to look at creating savings vehicles for young people. So there are solutions out there.

And, you know, I really appreciate that you asked a question that extends beyond income tax. We tend to really focus on the income tax system, but there are so many taxes and fees and other things that fund important government programs. But the way that they're designed advantages some groups over others. And frankly, a lot of them advantage people who are my age and older at the expense of people who are in their 20s and 30s.

Sabrina Maddeaux: Well, it's a lively topic for sure that we could keep going on about for a while, but we're at time, and I hope that our audience really gets into this in the comments because there are just so many ideas and debates to have around this. And I think that's really healthy. Thank you, everyone, for watching and listening. And to our amazing producer, Meredith Martin.

Mike Moffatt: And if you have any thoughts or questions about why I'm wrong about capital gains taxation on primary residences, please send us an email to [email protected], or comment in the comments section.

Sabrina Maddeaux: And we'll see you next time.