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Why a capital gains tax on principal home sales could do more harm than good

Article content Rapidly escalating housing prices, mostly in southern Ontario, have led to calls to reconsider the exemption of the capital gains tax (CGT) on the proceeds from principal residence sales in the belief that it will slow or even reverse the current trend. Eliminating this exemption is one of several recommendations advanced by many economists and market watchers, even though research on its possible effects is not widely available. What impact will revisiting the CGT exemption have on housing prices and sales is the first question that comes to mind. Equally important are concerns about the effect on consumption, savings and the welfare of diverse groups, such as seniors, who might have a significant segment of their wealth locked up in their principal residence.

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