Got back home to Campbellville from Ottawa at three this afternoon, turned around and just made it to a 4 pm taping at the CTV studio located in the Globe building in downtown Toronto. The topic was the unfairness of property taxes, and the network was picking up on a column I wrote on this form of taxation a few months ago.
Of course, property taxes are the unfairest of all – a tax levied on the unrealized capital gain people have in their houses. The tax bears no relation to your income, your actual assets, your ability to pay or the amount of services you consume. It is feudal, and it’s indefensible.
And now, at the tail-end of an eight-year-long real estate boom – the greatest, most sustained bull market ever for houses (and Nine Eleven had a lot to do with that) – the system of reviewing tax constantly to factor in current home values has become a killer of wealth. Houses may rise in worth (and will also ultimately fall), and tax levels along with them, but that does not mean homeowners are actually enjoying any increase in cash. In fact, given the recent rise in gas and oil prices, today’s electricity shocker in Ontario, big jumps in insurance premiums and ever-creeping daily costs of all kinds, many homeowners are more financially stressed than ever, no matter what their houses might sell for.
So, along comes the annual assessment notice and suddenly these folks are staring at another government grab. Sadly – in Halton, especially – this ends up being a special tax on the middle class. Houses cost a lot here, and large numbers of people are mortgaged to the gills. It’s hard enough to keep kids outfitted, the mortgage payments current, and $1.08-a-litre gas in the car, without worrying about coughing up thousands of dollars in property tax every three or four months.
Yeah, yeah, I know. Local politicians blame provincial ones for downloading the cost of services onto them. The provinces blame the feds for the “fiscal imbalance†and cry that they, also, have been cheated. Municipalities (at least in Ontaraio) have outsourced their property assessment process, so aggrieved homeowners now have zero political clout when it comes to contesting soaring values.
But the bottom line (I hate that phrase) is that there’s only one taxpayer, while there may be three levels of government (four in Halton, actually, since we also have regional government). And that one taxpayer pays federal income tax, federal sales tax, provincial income taxes, provincial sales tax, municipal property tax, as well as a bevy of user fees that were non-existent a decade ago. At the same time, the cost of home ownership has soared to historic levels, and people today can only still afford to get houses because mortgage rates are near generational lows.
Like I said, this all results in middle class financial tension. So, let’s fix it. The only real solution to property tax is to eliminate it. In a society like ours which values fairness and bases tax on ability to pay, measured by how much you earn or how much you spend, taxing houses is insane. Instead of forcing municipalities to use property assessments to fund schools, ambulances and social service payments, let’s use the existing income tax system to pay for this stuff. That will obviously mean redirecting a portion of existing taxes to local governments, and also (obviously) replacing lost property tax revenue with more income tax revenue.
And this brings me to the fiscal imbalance – the amount that one level of government should subsidize another. Right now the provinces are screaming the feds should hand over another $10 billion, and I say, why not? If that money is then used to subsidize actual services that people use, it should be accompanied by a rebalancing of how citizens pay for what they get. The great fiscal imbalance talks about to start in a few months between the new Conservative government and the hungry provinces (well, except Alberta) should not be a quick political fix, but come with some clear thinking attached.
We need a smart group of people to ask a few questions. Do we have too many levels of government? How much overlap and duplication is there? Do we elect too many politicians? Could we run a better country with fewer public services and more for-profit ones? How can we stop taxing buildings and just tax people? If we replaced the foot-high tax code with a flat tax would people respect it more and cheat it less? And how did we get to a state where 30% of education taxes are not spent on teaching kids?
Okay, so many too many questions for this round of talks. But some day, the answers will have to come. Meanwhile, in Halton, and in middle-class homes across the country, the future of a lot of families is put in peril by a system based on the notion that land equals wealth.
Man, in these parts, it equals mortgage.
16 comments ↓
I think that it would be wise to have a flat tax system. We should also be a userpay system for government services. Other then the roads and Healthcare which I pay into already I can’t think of any other service that I use. There should be no 1200 per year childcare subsidy. Do the parents not already get to deduct the children as dependants? When the welfare system helps to educate people by putting them in school, when they find employment then they should have to pay 5 percent of the costs per year until it is paid for.
Garth:
“Municipalities (at least in Ontario) have outsourced their property assessment process, so aggrieved homeowners now have zero political clout when it comes to contesting soaring values.†…I disagree
If municipalities played by the rules assessment wouldn’t be a problem. Property taxes are supposed to be based on a municipality’s budgeted requirements not on assessment. Assessment is just supposed to determine how much tax one person pays relative to another in the same municipality. It’s the mill rate that actually determines how much we pay.
The problem arises when municipalities use rising assessments as a cash cow by not adjusting the mill rate down to compensate. If you see your assessment go up and your mill rate doesn’t drop proportionally then you’re getting ripped off by the local yokels not some other level of government.
It’s happening right now in my neck of the woods. Assessments are rising due to rapid economic development and council is budgeting for massive improvements in culture and recreation (photo-ops and ribbon cuttings for the local cultural elite) while basic services that would benefit all continue to deteriorate.
All that is required to correct this is some political activism at the local level. The reason it hasn’t been corrected is the same reason that similar problems continue at all levels of government. Canadians are sheep. We will just do what we always do, whine a bit then roll over and take it. Voting every few years and patting yourself on the back for being a good citizen simply doesn’t cut it. You have to stay involved in the political process or you will be fleeced by the people you elected.
Changing the taxation system so that a higher level of government does the collecting based on some other formula doesn’t fix the problem. It just shifts it to a higher level. Does anyone really believe that a provincial or federal government will tax us any more responsibly than a municipal one?? Gimmee a break!
You want action on property tax levels. Start a petition at the local level. Picket city council meetings. Flood council members with email. Write letters to the editor. Burn a cross on the mayor’s lawn. Do something! Just stop the whining … it’s making my teeth itch.
…this rant brought to you courtesy of the insomnia fairy.
Your finest Blog entry ever Garth, and hopefully the citizen’s committee you put together can use it as a launching point for some discussions/think tanking.
I have often wondered why property tax became the standard for municipalities instead of income tax, especially since it is a complete layer of bureaucracy (assessments, billing, collections) that would be phased out across Canada if they just set a rate and added it to income taxes the same way federal and provincial are collected together.
Likewise, I’ve never understood why federal governments collect the money for health then send it to the provinces, causing all the arguments, hassles, etc. Why not just have federal governments say “that’s it, we’re lowering federal income taxes, and the provinces can raise theirs, and we aren’t giving them anything for health”. I understand traditionally it was used as a stick for federal politicians to be able to “control” the provinces, but really, what’s the point? If provinces were solely responsible, then voters could very easily let the government know if they were satisfied or not, as it is now, if you’re unhappy with health, who do you go after? Federal? Provincial? They all blame the other guy.
Just an excellent post all around Garth, even if some of the ideas wind up being unworkable, the idea of stepping back and thinking up a better system is always a good one.
Hello,
I don’t agree with the reduction in the GST. To me it would only really seem to
benefit the wealthy of this country since they are the ones making the large
purchases where the reduction would benefit the most. I don’t buy the argument
that this is the best way to give lower income families a tax break. I do argee
with the argument that raising the income tax limit exemption doesn’t help the
low income families because they are already exempt from paying tax.
I believe that best way, and fairest way would be to leave the GST at it’s
current level and remove it from essentials such as home heating fuel, all food,
gasoline, baby supplies, medications, clothes costing less than $100 and other
essentials. This would be a full 7% tax reduction on the essentials all
families need instead of the 1%. This would definitely help low income families
without giving a hugh break on the wealthy when purchasing their expensive toys.
This would also cost businesses less to implement as the point of sale systems
would not need reprogramming twice in two years. The existing inventories would
not cause confusion as to what would need to be charged at 7% and 6%.
I also don’t agree with scraping the public child care plan and giving parents
$1200 per child. I am recently a new parent. I would much rather prefer to see
a fully funded national chilc care program. This for most working parents I
believe would be the most economical way to provide child care. I have check
around and the proposed $1200 will not cover child care for more than two
months. A public system would be able to provide affordable child care. I do
agree something needs to be done for parents who chose to stay at home with
their children. It is not fair to those parents to not provide for them as
well. I don’t have a suggestion as to what is fair for them.
Thank you for this opportunity,
Sheldon Fougere
Lower Sackville,
Nova Scotia
Garth, very well written! You identify the issues and provide the solutions. Please implement!
Dear Mr. Turner,
With all due respect, I think it short-sighted to lower the GST consumption tax. The problem is the add-an aspect at the cashier. Bury it. No more of this: “it comes to…”; post/display the bottom line price.
Thank you for your time and cooperation.
Garth, if the CPC want to obtain a majority and stay in power, then they should concentrate on REDUCING personal tax and the waste in bureaucracy. Put the money in the pocket of the individual and then let them decide how to either spend or save it. The individual needs to be aware that there are also consequences on their choice. Buyer Beware cannot be glossed over by any politician.
Politicians at ALL levels of government must become responsible and ACCOUNTABLE.
“…the future of a lot of families is put in peril by a system based on the notion that land equals wealth.”
And we don’t even have property rights. If the province wanted to build a highway through my lot they could do so without asking me. They would do so by telling me. Sheesh.
TTH,
If the province wanted to take your property and turn it over to a private business they could do so without asking you. They would just tell you.
Good food for thought Garth…remember it was the assessment formula that corrected Toronto (city) underpaying property taxes for over 50 years relative to burbs and rural…..
Just a thought/question…..Do you think it is a good idea to continue Canada’s policy of downloading the majority tax burden on the top3-5%? Wouldn’t your suggestion of property tax reform be yet another de-motivator for personal income achievment?
Just curious….
You note that there are 4 levels of government taxing the residents of Halton. Actually there are 5.
In 2006, Halton Region will send $39 million to Toronto under a GTA pooling program to support Toronto social spending. That is about $200 per Halton household.
That great sucking sound is socialist Toronto pulling our tax dollars from the 2 senior levels of government and its neighbours.
Garth, what do you make of this article…suggests 2 more rate increases are on the way in April/May. Any thoughts?
http://ca.news.yahoo.com/s/13042006/6/n-canada-strong-data-odds-rate-hikes.html
I agree that this is an entirely likely scenario. Economic growth is robust right now, and (ironically) lower tax rates from the feds will stimulate things a bit more. The central bank wants to ensure inflation is contained, and is worried about the effects of a housing bubble – so a steady rise in rates through the summer would not surpirse me one bit. — Garth
To Marc who asks “Do the parents not already get to deduct the children as dependants?”
Sadly, no, at least not for Federal taxes. For some reason the government thinks that kids don’t cost a cent until they start school. We really need a sane, flat, family unit based tax system.
Dear Mr. Turner,
I just saw on CTV the segment about you trying to take on the corruption involved with municipal property assessment. Thank you for your work in this area. I can only hope that you find some success. My personal belief is that the municipalities do not get enough support from the provincial or federal government. However, this does not excuse their greedy and unethical behaviour. The most serious issue in our nation today is the lack of consequences for the corrupt in our government (at any level.) Hopefully you will be able to address this issue and find justice for everyday Canadians.
Yours,
Timothy Veenstra
Mr. Turner,
After watching a recent ‘Whistleblower’ clip on CTV regarding the current property assessments, I became immediately encouraged when I learned that we have an MP on our side. The property assessments that have been made are irrational, and at best, unfair.
In our case, we are a small campground in Clayton, Ontario just outside of Ottawa. Our clientele base ranges from retired senior citizens to casual campers. The majority of the sites on our campground are rented on a year-by-year basis. Our clients prefer to leave their trailers at our campground throughout the year. They have even added personal touches in the form of creative landscaping, decks, and other extras.
In 2004, an MPAC official visited our campground and, based on the criteria he was given, assessed our campers’ trailers based on the following :
Camper size
Additions
Lot size
It is my opinion, and that of other campground owners and campers, that these criteria by which ‘MPAC’ assessed the various sites are flawed.
We believe that such courses of action by MPAC or any other property assessment body are detrimental to the camping industry. This is an industry that provides the public with an opportunity to enjoy the great Canadian wilderness. It is absurd to believe that the public should be taxed for enjoying nature!!
At this point, my partners and I would like to thank you for the efforts you are putting towards the property taxation policies. We believe that more awareness is required on this issue, and a solution is required as soon as possible.
Regards,
Mazen M. Matar
Clayton Lakeside
Ottawa, Ontario
Just who in the hell is going to pay to have all the cash registers in Canada re-programed to reflect the new 6% GST .
Not me that’s for sure .
Once again blind ideology overcomes the facts .
Estimated at $400,000,000 .
Good luck with that Garth .
Actually, the vast majority of cash registers today are electronic, and the sales tax amounts can be changed by almost any operator in a couple of moments – no need to call in external contractors. Where the heck did you come up with $400 million? — Garth