Raise your hand if you do not agree that Toronto needs to increase its property taxes?
To be honest, if your hand is raised, then I’d love to know why.
Nobody likes paying taxes, including myself. But if we’re going to be honest about the future of our city, the budget shortfall, and where the money has to come from, should we not talk about the fact that we have the lowest property taxes in Ontario?
There’s a cool cartoon!
But judging from the looks of those two gentlemen, this scene is set in the 1950’s.
Has the use of our collective property taxes changed in the last sixty years?
Do our property taxes pay for all those items listed?
Do they pay for more?
Toronto’s 2016 budget shows a projected shortfall of as much as $124 Million, and our city council has to find a way to fill that gap.
Firing public sector workers isn’t on the table, so sorry to those extremely-right-wing folks who feel that should be first on the agenda.
How about a third land transfer tax on the purchase of residential resale properties? No?
Ah yes, remember those days when we used to dream about eliminating, or even reducing the Toronto land transfer tax? Remember when Rob Ford said he would eliminate it as soon as he was in office? Remember when the term “he must be on crack” was something you jokingly said in reference to a person who said something ridiculous?
In early December, Toronto city manager, Peter Wallace, lectured city council about the city’s reliance on land transfer tax, and how grim things would be without it.
Said Mr. Wallace: “In very practical terms, the city of Toronto has been a free rider on a real estate boom. If that tax did not exist, the city of Toronto would have gone through the fiscal wringer a long time ago.”
And despite the $500 Million that the city is going to take in this year from real estate transactions, there’s still going to be a massive budget shortfall.
So where does the city make up the difference?
There was an interesting read in the Toronto Star yesterday, and while I’ll be the first to admit that when I see the words “tax” and “fair” and “Toronto Star” used in the same sentence, I start to get a bit cynical.
If you haven’t read this piece, then you should. Because whether you lease or own, and whether you make $38,000 a year or $3,800,000 a year, this is a topic that everybody is going to want a say on.
The article was written by Myer Siemiatycki, who is a professor of Politics & Public Administration at Ryerson University. So take the article for what it’s worth…
An excerpt that demonstrates the theme of the article:
How the property tax is levied is overdue for change. It’s time to replace our “one size fits all” property tax rate with a variable rate tied to a property’s value. Doing so would allow us to both lower property taxes for many, and increase the overall amount raised by the tax.
Currently, all properties in the same class (e.g. residential, commercial, industrial) are charged the same tax rate. This means that the lowest valued home pays the same tax rate as the highest valued home.
This contrasts, of course, with our income tax system where different tax rates are applied at different income levels. Currently there are five federal tax brackets, ranging from 15 per cent to 33 per cent depending on income. A variable tax rate allows a lower tax “bite” on the less wealthy as the more prosperous shoulder more. With a bigger bite on the wealthy, it also allows more overall revenue to be raised.
This would also be good public policy for a city concerned with budget shortfalls and rising income inequality. Yet we have never applied different property tax rates to different values of property. We should.
So let’s take one step back, and ask, “Is the current income tax system fair?”
Because this opinion piece relies on the assumption that the income tax system is fair.
Do we all agree with the theory behind tax “brackets” on a sliding scale?
What if, for argument’s sake, everybody paid 30% in income tax, from $0 to infinity?
Is that “fair?”
The argument for tax brackets has always been, “The people who make more can afford to pay more.”
But is that fair? Or is it just easy?
What if the highest tax bracket was 70%? And a person making $10,000,000 paid $7,000,000 in taxes. You could easily say, “Oh boo-hoo for you, you only have $3,000,000 to live on!”
And the person making $100,000, taxed at, say, 30%, gets “only” $70,000 on which to live.
So the person making $100,000 says to the person making $10,000,000, “Of course paying taxes on a sliding scale makes sense! I only have $70,000 to live on and you have $3,000,000! You have far more than I do!”
But maybe this trite example misses the point?
What is “fair” and what is “reasonable?”
At what point do you raise taxes so high that it encourages high-earners to take their businesses elsewhere? Or find tax loopholes and shelters with better accountants? Or simply move to another country?
When it comes to property taxes, it’s very easy to make an argument that we “should” have a sliding scale, and brackets, just like with income taxes.
The argument is incredibly simple: “We have it for income taxes, so why not property taxes?”
One need not say any more than that eleven-word sentence, and it’s the best argument one can make.
But when it comes to property taxes, ask yourselves, which of the following two statements is true:
1) Property taxes should be paid in proportion to the services that the property owner uses.
2) Property taxes should be paid relative to the property owner’s wealth.
The article from the Toronto Star essentially argues point #2, and it would be tough to convince me otherwise.
Again, agreeing with point #2 doesn’t make anybody wrong, since that’s the argument for higher income taxes on the wealthy.
But then let us ask: what is the purpose of property taxes?
Are property taxes paid by a home-owner, for home-services?
Or are those taxes expected to pay for other city expenditures?
Should each dollar of property tax revenue trace directly back to a service or expenditure, by the city, that benefits the home-owner, or relates back to a home?
If that’s the case, then the idea of a sliding scale makes no sense.
Does a person in a $3,000,000 house create more garbage for pick-up by the city than a person in a $600,000 house?
Does a person in a $3,000,000 house drive on city streets more than a person in a $600,000 house? Or use highways more? Or visit more parks? Or attend more street festivals? Or call the police more? Or have more house fires?
But this might not be important if you believe that taxes should be paid on the basis of wealth, as opposed to proportion of city services used.
If you believe in the former, then what do you say to people who rent? They use city services, but they don’t pay for them via property taxes.
Again, the argument is never-ending, and I don’t expect to solve it.
Another argument, or conversation, that needs to be had is with respect to the overall Toronto property tax rate, irrespective of the potential for a variable rate or sliding scale.
I have long-maintained that the property taxes in Toronto are too low, and if anybody disagrees, then I challenge you to look at this list of tax rates in twenty-five Ontario cities and towns, and explain to me how our taxes aren’t too low:
Belleville – 1.58%
Oshawa – 1.57%
St. Catharines – 1.49%
Peterborough – 1.43%
Kingston – 1.40%
Niagara Falls – 1.39%
Hamilton – 1.38%
Whitby – 1.30%
Ajax – 1.29%
Guelph – 1.25%
Kitchener – 1.18%
Waterloo – 1.16%
Brampton – 1.11%
Ottawa – 1.09%
Barrie – 1.00%
Newmarket – 0.99%
Mississauga – 0.89%
Burlington – 0.89%
Oakville – 0.85%
Vaughan – 0.84%
Richmond Hill – 0.83%
Markham – 0.81%
Milton – 0.76%
Toronto – 0.71%
Yes, I actually sat at the computer last night for an hour Googling tax rates.
It was addictive.
I intended to come up with ten, but then ten became fifteen, and fifteen became twenty. So alas, I tapped out at twenty-five…
But I did not do this strategically. I didn’t find anything lower than Toronto, and leave it out. In fact, if you know of a city or town with a lower tax rate than Toronto, please provide a link below.
So as you can see, out of twenty-five cities and towns, Toronto has the lowest tax rate.
We are the biggest city, and need the most infrastructure, and yet we have the lowest taxes.
Some will suggest, “House prices in Toronto are too high to charge a tax rate similar to, say, Kingston, where house prices are maybe 1/4 on average.”
But does Kingston need to add 20 KM of new subways immediately for fear of their city bursting at the seams?
Whether or not the city councilors decide to implement a variable property tax rate remains to be seen, but for the love of God, why are our taxes so low?
On December 15th, 2015, Toronto’s preliminary budget for 2016 called for a 2.17% increase in property taxes, and with the rate of inflation for 2015 at 1.08%, the real increase is only 1.09%.
Last year’s 2.75% increase in property taxes, coupled with a 1.91% inflation rate, resulted in an even more modest 0.84% real property tax increase.
And who would forget 2011 when Rob Ford froze property taxes, and Canada’s inflation rate was 2.91%, meaning the city would automatically be short.
The last thing I want is for the city of Toronto to start making up taxes. We leave that to Provincial Liberals…
But if this city really wants to build subways, fix the crumbling Gardiner, clean up the waterfront, and undertake major, multi-billion-dollar infrastructure projects, then people are going to have to pay more in property taxes.
I like paying taxes as much as the next person, but when I see TWENTY-FIVE cities and towns listed above, and Toronto has the lowest tax-rate, and needs the most infrastructure, I wonder how we can all be so stupid…