Toronto’s Property Taxes Need To Be Increased, But How?

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?

PropertyTaxCartoon

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.”

Great.

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.

“Fairer Property Taxes Would Help Address Toronto’s Revenue Problem.”

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?

Not likely.

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%
Pickering 1.28%
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.”

True.

But does Kingston need to add 20 KM of new subways immediately for fear of their city bursting at the seams?

I digress…

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…

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  1. Bob says:

    Good article.
    Living in Toronto the past 40 years I have noticed that people who pay the least property taxes use the most city services and complain the most. And its not renters because the property taxes the owners pay goes into the rent.
    Also until the billion dollar a year police budget which accounts for half of the property taxes is under control city tax will always be in short at the year.
    Frances below had some great points.

  2. David says:

    Toronto’s tax rate is misleading. If i buy a $500k property I pay a transfer tax of about 1.15%, and if I move every 5 years, that’s another 0.23% per year, or 0.94% total (0.71% + 0.23%). If a city the size of Toronto can’t be expected to generate savings and scale economies over smaller cities like Barrie, Waterloo, Guelph, than we should indeed fire all the bureaucrats.

  3. Maggie says:

    I think the rate should be raised across the board and not linked to property value. As you mentioned – the use of city services does not necessarily increase based on value of the property nor the wealth of the property dwellers. Barrie’s taxes must have gone down since last year. I owned a home up until May 2016 valued at 215k and paid around $3200 per year.

  4. Natrx says:

    Sorry. Bad Idea. First of, Toronto has the MOST Density. Alot of high rise buildings. Lots are generally smaller in Toronto.

    If you’re going to add some kind of sliding scale, than the value should be deducted with the amount of Mortgage you have. People have taken on debt, often to a crippling level. Alot of people buying up 800K homes are doing it not because they have some kind of high income, it’s because they have borrowed alot. Debt to Income is at an all-time high. Now you have economic turmoil looming. Leverage may make it worse.

    Finally, I hope you realize you could give enough money for a surplus for 5 years and after the 5 yrs, only half of what was paid for will get done and there would be an immediate deficit. In other words, its a ever moving target, much like giving someone addicted to gambling. Grow the Money.. grow the beast.

    1. Cool Koshur says:

      @Natrx
      All valid points. There is lot of speculation and hysteria in Toronto housing market. Oil is sliding and CAD is down to below 70 and prediction is it will go down to 59c. We import most of food from south and it will pinch family and standard of living will suffer.

      I see major turbulence and once it hits job market.. You will see housing price correction as well.

  5. Cool Koshur says:

    Perfect timing…Spadina subway extension is $400 million overbudget: TTC
    My tax $$$ at work. Give me more.

    http://www.cp24.com/news/spadina-subway-extension-is-400-million-overbudget-ttc-1.2738817

  6. Frances says:

    I’m willing to pay more in municipal taxes.
    Perhaps we should try an income tax for the city.
    I think we pay too much for policing. The city has been approving the police budget too easily. Yes, I know that the budget is mostly remuneration and that the police can’t strike so it usually set by arbitrators who don’t have to take the city’s ability to pay into consideration – but they should have to.
    Public housing got dumped on us by the Harris government. We shouldn’t have to pay more than our share of that cost, not all of it. I also think TCH has been badly run and we desperately need a way to do it better.
    We already have a program to allow for reduced taxes for low income households. So I don’t think we should refrain from raising taxes for fear of pricing people out of their homes. And with property values as high as they are now, maybe it would benefit a lot of people to sell and use the money to rent or move elsewhere.
    No one has mentioned the education tax. It is a provincial tax but is based on one’s assessment, so some Toronto money is going to support schools elsewhere in the province.
    I’m against the municipal land transfer tax. It’s unfair.
    I think the automobile tax was better.
    A local sales tax puts local businesses at a disadvantage and potentially sends business out of the city. For that reason, I’m against it.

    1. Mike says:

      How on earth is the land transfer tax unfair?

      1. Frances says:

        It loads costs on a few people instead of spreading costs over a whole population. Buying a house is already very expensive, the LTT just makes it worse.

  7. Cool Koshur says:

    TTC (Take the Car)

    This is what auditors have to say about them
    http://www.cbc.ca/news/canada/toronto/audit-finds-unacceptable-spending-practices-at-ttc-1.2967594

    As far as Toronto Police is concerned, 90% of budget goes to salaries and benefits.
    A 2011 Ernst & Young efficiency report found that $35 million could be cut from the police budget with a simple shift schedule change. Read details here

    http://www.thestar.com/news/city_hall/2015/11/12/toronto-police-board-approves-budget-increase-of-276-per-cent.html

    Having said that I will be first to pay $500 for better accountability and respect of taxpayer dollars.

  8. Cool Koshur says:

    @David Fleming
    I like your articles. but you are wrong with this.I strongly disagree with you.

    Raising the taxes is not the answer. In last 10 years so many condos came up and brought with tons of $$$ in property taxes to the city coffers. Why is that not counted? Plus land transfer tax was introduced 5 years by Miller. MPAC assessment also increased the home prices and bought additional money in property taxes. Give me one example of major infrastructure change we have seen in last 5 years let alone 10 years…..(nada)…. not a single km of subway was added. Water prices in Toronto has increased at the rate of more than 10% in 10 last years year over year

    Bottom line is there is no guarantee new taxes will improve infrastructure. It will just pay for their pay raises and other benefits. Toronto Police is a white elephant. Toronto has 10 Billion dollar operating budget, yet there is a shortfall. Rob Ford was right about gravy train. Show my me savings first by cutting costs. Raising tax is not an option.

    NO MORE TAXES…City politicians and staff simply have no respect for taxpayer dollars

    1. condodweller says:

      Amen to that!

      1. Kyle says:

        If you’re agreeing that our Municipal Government isn’t spending enough of the money it collects on infrastructure, then i hope you realize that you forfeit your right to ever complain about construction related traffic in this city ever again.

    2. Appraiser says:

      Wow.

      Still supporting the crack-head buffoon who’s claim to fame is a moronic slogan worthy of a bumper-sticker. Have to admit that Rob Ford got one thing right when it comes to Torontonians, keep-it-simple-stupid.

      On another note. It’s amazing to observe a city full of individuals willing to pay $100,000 over asking to buy a house, yet bristle at the thought of dishing out $500 more per year in taxes.

      1. Cool Koshur says:

        @ Appraiser
        I am not supporting him. After smoking whatever… he at least was telling the truth… that there is a gravy train.

        It is not about giving $500 more. Our city lost “trust” by wasteful spending. I see no justification that we can trust them with more $$$ when they cant give accountability of existing spending

        my 2 cents.

      2. Fro Jo says:

        @Appraiser: Exactly!!!

    3. Cedric says:

      Increases in MPAC assessment do not bring in more money in property taxes. Please see link below which has a good explanation of how property taxes actually work:

      http://torontoist.com/2014/01/everything-you-ever-wanted-to-know-about-property-taxes/

      1. Cool Koshur says:

        @Cedric

        Thanks. It is based on average price of “equivalent” properties not average of any property. MPAC has it clearly defined.
        https://www.mpac.ca/PropertyOwners/Diva

        Property prices have increased 18 straight years and so has MPAC assessement. Irrespective of what this article says… MPAC assessment has brought more taxes to city for 18+ years straight.

        Only scenario property assessment will be decreased is when home prices drop substantially like what happened in Detroit, then owner files for adjustment. then City will see less in tax revenues.

        So far this scenario hasnt played out in GTA.

        1. Frances says:

          Nope and nope. The city sets the budget first then it is apportioned according to assessment. If house prices drop, the mill rate will go up – because the city sets the budget first.

    4. Kyle says:

      “Give me one example of major infrastructure change we have seen in last 5 years let alone 10 years…..(nada)…. not a single km of subway was added.”

      This list of infrastructure spending is just randomly off the top of my head:
      – York U subway extension
      – New Eglinton cross town line
      – New Subway cars on Line 1
      – New streetcars on Spadina
      – St Clair streetcar right of way
      – Queens Quay revitalization
      – Front Street revitalization
      – Union Station Renovation
      – Roncesvalles Ave revitalization
      – Bloor streetscaping
      – A bunch of new parks in the Canary District and Don lands
      – Entire new neighbourhoods have been born in the last 10 years, which require new sewers, water, streets, sidewalks, street lights, etc: Canary District, Cityplace, Liberty Village
      – Many schools have been renovated or added on, this is just in my own hood: Garden Ave has a new addition, Keele St Public school has a new addition, West Toronto Collegiate has been gut reno’ed
      – And drum roll…..Shiny new bike lanes!

      1. Kyle says:

        I should also mention that the crumbling Gardiner is also being renovated

        1. Cool Koshur says:

          @Kyle

          Thanks for the compiling the list. These are no major or landmark improvements. All of these were over budgets and behind schedule. e.g Union revitalization, St Clair street car to name a few. New TTC streetcars should have been rolled to all lines by now. There are barely few ou there and Bombardier cant fix the issues and is delivering new street cars in a trickle. My best guess would be that my grand kids will likely see them

          http://www.torontosun.com/2015/06/21/union-station-revitalization-over-budget—but-worth-it

          http://www.theglobeandmail.com/news/toronto/toronto-union-station-renovations-behind-schedule-160-million-over-budget/article24967532/

          http://www.theglobeandmail.com/news/toronto/how-the-price-tag-doubled-for-the-st-clair-line/article4302352/

          1. Kyle says:

            I’m definitely not saying these projects have been delivered well. My point is that the money HAS been spent on infrastructure and improvements. It’s totally dismissive and incorrect to say that it hasn’t. Frankly, I don’t want my Municipal Government to spend my taxes only on “landmark” improvements. That was the Rob Ford strategy, spend nothing on regular maintenance, but throw a shit tonne of money to build a subway few will ride. This is a big reason we have a back log of things that need to be addressed. I much prefer my Government to make sure all city property is in good working order whether that is repairing or replacing the old or building something new and that the services that we expect are delivered.

          2. Joe Q. says:

            “These are no major or landmark improvements.”

            For sure — 8.5 km of subway extension in the north-west of the city, plus a brand new rapid transit line with 10 km of new tunnel serving one of the busiest transit corridors in the city. Not at all major.

          3. Kyle says:

            The added regional capacity that Union station will handle is pretty landmark too

          4. Cool Koshur says:

            May be “landmark” is not the right word. City has to do maintenance work to justify the money they are raking in. How well they are spending that money and where they are spending are key questions? Check this
            https://twitter.com/jpags/status/557560781412515840/photo/1

            Use the left and arrow to browse between between 2014 and 2015.

            Every solution shouldn’t start and end with raising taxes.

          5. Joe Q. says:

            Those 2014 and 2015 numbers seem to be related to the operating budget, not the capital spending plan (which would fund things like new streetcars, subway and RT lines, etc.)

      2. Mike says:

        Bloor streetscaping was paid for by the BIA as it was on Roncy (though track work on Roncy was a city cost)

        New subways are for both lines just that Line 1 has a greater volume so they were introduced their first.

        Parks and infrastructure in new developments are costs paid for by the developers (Cityplace, Canary District) upgrades to infrastructure are also costs born by the developer (Distillery, Liberty, Regent Park)

        Developers also pay into a fund for new schools or refits

        1. Kyle says:

          Completely wrong.

          The Roncy BIA may have paid for street furniture like planters, benches and lamp posts, but they definitely did NOT pay to have the entire road, tracks, sidewalks, sewers and water mains ripped up and replaced (twice in some sections). That was the City.

          Privately Owned Public Spaces (POPS), which are often tiny little open spaces are paid for by the developer. Actual parks are paid for by the City (e.g. Sugar Beach, Sherbourne Common, Orphan’s Green, Corktown Common, Underpass Park) . Section 37 funds are collected from developers, and do not go to infrastructure upgrades. More often than not they go to strange sculptures like Red Canoes, or little bronze creatures.

          1. Mike says:

            Missed this part huh? “as it was on Roncy (though track work on Roncy was a city cost)”. Not like they were going to rip up the road to replace the track and ask the BIA to replace it. You’ll also notice that I did specifically mention “streetscaping” for Roncy and Bloor being paid for by the BIA

            Comprehension has never been a strong suit.

            You will note that none of the public spaces you have mentioned are tied to a residential development. You’re a fool if you think the only surcharge on a development is the section 37 fund. Section 37 funds are usually trade offs for slight zoning alterations. You don’t think that the city actually paid for the Fort York Library, do you?

            .

          2. Kyle says:

            You are right comprehension has never been a strong suit for you. That and your penchant for BS’ing is absolutely relentless.

            The BIA paid for STREET FURNISHING, NOT STREETSCAPING, which would otherwise include things like the concrete paving surfaces, the extra wide sidewalks and bike lane markings, the bump outs, concrete planters, bike locks, TTC shelters, etc. Claiming otherwise is a massive overstatement of the BIA’s contribution and a massive understatement of the City’s contribution (i.e. Pure BS – something that seems to gush out of you like a BS geyser)

            The City paid for the replacement of sidewalks the entire road, the sewers, the water mains. Suggesting they just paid for the “track work” again is a massive understatement of the City’s contribution (i.e. more pure BS – see it old you you’re a relentless BS’er).

            The public speaces tied to a development are known as POPs and can be found here: http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=7b0c1459a55e4410VgnVCM10000071d60f89RCRD

            You will note that these are not parks, these are crappy little bits of left over open space. And it is you that is a fool, if you think Developers are so altruistic that they would anonymously pay for infrastructure that they don’t have to. Section 37 is the pool that they pay into to get extra density, but alas a woeful pittance of it ever translates into infrastructure spending (i.e. the amount of infrastructure spending paid for by Developers is insignificant) “Of the $137 million in cash benefits that have been secured by the city from 2007 to 2011, $63 million has been received, and only $11 million has been spent.”: http://www.cbc.ca/news/canada/toronto/dealing-with-developers-municipal-bonusing-spurs-debate-1.1382669

    5. Joe Q. says:

      Didn’t the City go through a very lengthy and thorough exercise during Ford’s mayoralty to look for the “waste” / “gravy”? As I recall, an outside firm was brought in. The conclusion was that the “gravy” had been vastly overstated by the Mayor.

      1. daniel says:

        The conclusion of that report was that the City of Toronto (which i’d encourage anyone genuinely interested in such things to read) is actually fairly lean, cost wise. My biggest gripe is with the quality of services and work done by the city. I find the people who say that the city’s problems should be solved by eliminating waste have no real basis for their views. Sure, they can trot out things like union station overspending but, let me tell you, cost overruns on large construction projects happen regularly in the private sector too. If someone has a permanent fix for risk management in construction they’d be a billionaire.

        Running a business in this city is crazy expensive. From the price of office supplies, to rent, to salaries, everything here is crazy expensive. In my line of work we’re paying easy 50% more for comparable labour as we would in ottawa, montreal, vancouver or edmonton. Unfortunately, the city faces some of these same cost pressures.

        Mainly, i think an increase would be money well spent from most torontonians. An extra $500 in property taxes annually would get them, in the long term, a better functioning city (transit, infra, public spaces, etc). The loss in private spending from that $500 is, IMHO, less for most people than the gain (sitting in traffic, easier mobility, stronger economy, etc).

        To the libertarians who want to live in place with less government, i’d say a big city isn’t the place for you. Globally, most big cities have big, costly governments. If you think the only reason are rates are low is because prices are high, check the prop taxes in NYC, san fran, or basically any US city that doesn’t suck. Check out prop taxes in red states – a houston tax bill would shock most torontonians. Lot’s of people in North America who live in ‘regular’ houses in cities pay easy $8-12k in prop taxes a year.

  9. crazyegg says:

    Hi All,

    I disagree. Looking just at the tax rate doesn’t tell the complete story.

    The tax rate (mill rate) is only 50% of the picture. The other half is the total value of taxable properties in the city.

    Even though TO has the lowest mill rate, it collects a disproportionate total amount of tax dollars due to the high value of taxable property here.

    Conversely, Belleville may have a much higher mill rate but, it needs that high rate to offset the lower value of taxable property there.

    As such, you need to calculate the total amount of tax collected and divide it by the population to get a tax base per capita. That would be more fair?

    Or charge taxes based on the number of occupants in the household!

    Regards,
    ed…

    1. Boris says:

      Thank you, someone finally gets it.

    2. Joe Q. says:

      As such, you need to calculate the total amount of tax collected and divide it by the population to get a tax base per capita. That would be more fair?

      Yes, this was my point above. To compare taxation, per-capita tax revenue by municipality is the meaningful figure you have to start with. Then you can start correcting or accounting for things like population density, demographics, service levels, etc.

  10. m says:

    Wholeheartedly agree with raising Toronto’s property taxes. We’re badly in need of infrastructure spending in this city, and our tax rate is ridiculous compared to other neighboring cities. Personally I’d also be looking at whether condos vs apartments vs houses vs businesses are taxed reasonably relative to each other. I’m much more wary about a tiered rate, but could be convinced.

  11. Wut says:

    Progressive property taxes is a really bad idea. People with expensive homes already pay more. And good luck if you’re retired but just happen to live in a popular area. You’ll be taxed out of your home. Then you’ll be stuck like BC who are allowing people to defer property taxes for this very reason. Besides, MPAC does not have a good track record of fair property values, and really, how does one really come up with a fair value without doing a complete inspection. And for the tree hugger environment commissioner, it would have the opposite effect of what she wants, in her utopia the downtown dwellers should pay the least property tax because they are not ugly urban sprawl. Clearly this would make them worth even more.

    If you elect social activists who believe that taxes should regulate behaviour this is what you get. Some idiot taking selfies while the dollar and economy dies. Some other idiot talking about open government while the OPP investigate deleted emails and can’t understand why the AG would have a problem with hundreds of billions wasted on electricity. And you think the 1% are going to empty their pockets to save you? Good luck with that.

    1. Appraiser says:

      @ Wut:

      All things being equal, I don’t see how a progressive property tax is inherently a bad idea, while a progressive income tax regime is widely accepted.

      The notion that retirees will be “taxed out of their homes” is completely overblown and largely a myth.

      What evidence (besides anecdotal) do you have that MPAC has a poor track record of property valuation?

      As for the rest of your rant, you lost me at “selfies” – an already overused and totally worthless meme, meant to malign the Prime Minister in the most childish manner. Unless of course you believe that a government elected 3 months ago should be able to wave a magic wand and make everything right in land.

      1. Boris says:

        you’ve fallen into the cognitive fallacy that because something exists, another thing that can be changed to make it more similar, and the idea that this is a ‘positive’ event in isolation of the merits of the proposal. This is poison. The incentive system you are creating is an abortion.

        The income tax code is a joke. We are facing a capitalist strike in Ontario, and likely Canada. Using this framework that pulls talent and capital away from Canada to another country is idiocy.

      2. Wut says:

        The PM is childish by his actions. If I saw a CEO of a company in rough shape doing selfies I’d have the same criticism, and it certainly wouldn’t make me hopeful they had the intelligence to make good decisions. People with substance don’t make a big production out of everything they do, they just get things done. But maybe I don’t give him enough credit, maybe selfies and legalized pot keeps the sheep quiet, so it’s the best plan for now.

        MPAC has been terrible from the beginning. They were slammed by the Ontario Ombud, and laughably even the Ontario Government is complaining about MPAC assessment on their buildings as being too high. It’s arbitrary, even if you have a recent sale they base it on their assessment and not the actual price. Makes no sense. And if you actually managed to get your assessment lowered 4 years later it will be too high again and you have to go through the same lengthy process again.

        Progressive tax on incomes make sense because you’re still making money and only those making lots of money pay more. In the case of a house you could be a pensioner but live in a house worth a lot of money just because you’re in a prime location. Not every area in Toronto has appreciated at the same rate. In a progressive system pensioners would have a much better chance of being able to stay in a low appreciating house vs a high appreciating house. Does that seem fair? I would say no.

  12. Liberatarian says:

    I agree with many of the comments already made – a lot of good points. Whenever someone criticizes the salary of public-sector workers, those on the proverbial “left” say that the anger is pointed in the wrong direction. We shouldn’t criticize the public sector, but should instead criticize the CEOs who make 200 times the average employee. I like to criticize both! They are not mutually exclusive.

    I’d love to discuss teacher salaries, but that’s provincial, not municipal. Let’s use cops and firefighters as an example. There has been a movement the last few years to overhaul these services. Even Rob Ford wanted to shut down a fire hall. Of course, the union fights these efforts and claims that cops and firefighters are the best at what they do and undergo extensive training. As such, they deserve the high salaries, and the salaries go up, up, and up.

    Here’s my controversial take on this – if cops are so highly trained, why did the cop should the kid on the streetcar? Where was his extensive training? What was so complicated about how he handled the situation? If cops are simply allowed to shoot citizens as they see fit, I’d rather hire security guards from the mall. At least we could pay them half as much, if not less. Budget problem solved. We can get on with building subways, roads, libraries, etc.

    Cutting costs is about reining in salaries, not “finding the waste.”

    1. Joe Q. says:

      I don’t think the streetcar shooting example is relevant here. For every dramatic police shooting there are probably hundreds more potentially violent incidents that the police manage to “de-escalate”, in which no-one gets hurt.

      1. Libertarian says:

        According to this article, there have been numerous shootings/killings.

        http://www.thestar.com/opinion/commentary/2015/12/03/its-time-to-disarm-the-police-cole.html

        But my larger point was about how wage increases in the public sector have greatly outpaced inflation and GDP growth. This article refers to the “leap frog” effect.

        http://www.theglobeandmail.com/globe-debate/whos-guarding-ontarios-public-purse/article28156375/

        So, my point remains that there isn’t any “waste” in the public sector, rather they simply earn a lot of money. The question is, should all of these employees receive increases in wages and benefits when the economy is performing poorly? A continually expanding public sector cannot exist with a shrinking private sector. The money has to come from somewhere. There is that cliche about socialism….the problem with socialism is that you eventually run out of other people’s money.

        Unfortunately for us, it appears that the socialism is currently increasing at all three levels of government. This will likely not end well.

      2. Libertarian says:

        According to this article, there have been many other shootings/killings

        http://www.thestar.com/opinion/commentary/2015/12/03/its-time-to-disarm-the-police-cole.html

        But my larger point was that the problem isn’t “waste” but rather that public sector employees make a lot of money. This article refers to the “leap frog” effect.

        http://www.theglobeandmail.com/globe-debate/whos-guarding-ontarios-public-purse/article28156375/

        The question is, why do public sector employees keep getting raises above the rate of inflation and growth in GDP? We can’t have a continually expanding public sector supported by a shrinking private sector. Just like with socialism, you’ll eventually run out of other people’s money to spend.

        Unfortunately, all three levels of government are increasing their socialist tendecies. This will likely not end well.

  13. Paully says:

    It should be law that no public sector worker can have a pay raise until the budget is balanced. Period. Suddenly the big unions would want to be more efficient at delivering services, so that they can facilitate future wage gains for their members.

    Nobody in Government seems to have the cajones to stand up to the big unions. They just raise the pay and kick the deficit can down the road.

    1. condodweller says:

      This is one of the best ideas I have seen on this blog. With skin in the game, they just might make some right decisions that benefit the public vs. them.

    2. Teegee says:

      Municipal governments are required by law to have balanced budgets each year.

      So, bring on the raises!

    3. AndrewB says:

      Depends on what you define as “public service worker”. Nurses are public service workers by technicality of hospitals getting funded by tax dollars and private donation. Without the nursing union (ONA) nurses would have even more dangerous patient care ratios, which affect the quality and safety of the care your loved ones receive. Do you think nurses are overpaid? Because it’s quite the opposite actually.

  14. condodweller says:

    Wow David, this is such a huge subject we can debate the various points you listed for weeks.

    The question of where our property tax dollars go is a big one alone. My understanding is that property taxes are the only income source for Toronto. It logically follows that it goes to things not related to your home and its services.

    Once you go province-wide then as has been pointed out economies of scale come in, in the form of cost per capita as well as the more murky issue of transfer payments. Is there anyone who really knows how the various transfer payments work between municipal/provincial/federal governments?

    I’m the first one to ask for elimination of waste but unfortunately existing waste is hard to eliminate as it comes in the form of salaries and expenditures to private companies which in turn affect salaries of the employees of those companies. I think there is lots of room to cut public service salaries where people are drawing well over $100k incomes vs comprable private sector jobs with much lower salaries.

    To even begin a debate like this we would need to have so much information on where and how our tax $$ are spent that I don’t know where to look and even if it is available. Someone mentioned that the police budget is the largest item, which is good to know but even if the city budget is publicly available, which I hope would be, I wouldn’t expect to get detailed budgets for all departments to come to educated and rational conclusions.

    Regarding paying fair amounts for services received, talk about condos. A high rise condo with say 300 units at $2000 taxes per unit will pay $600k. Is that proportional to servicing single detached homes for the same area? I have a feeling condo owners are over paying if you talk about pay for service, however if you take everything into account like roads and schools perhaps not.

    The 124 million shortfall doesn’t seem like much, maybe 1% increase would cover it but what about next year? I suspect the government will waste it and we will be short again the next year. Infrastructure like roads and subways hopefully have money allocated already and therefore should not be net new expenditures. It’s funny that everytime politicians tell us if we want proper service it always has to come from new money. I wouldn’t mind paying a bit more in taxes if I know whe had responsible money managers managing the budget and allocate existing revenue for future improvements.

    To continue the above point, we are told of 100k new people moving to the GTA each year and many of them are buying houses/condos etc. All this extra revenue can’t be put towards improvements? Why is it that everytime we want adequate service we are told our taxes have to go up to accommodate them?

    1. @ Condodweller

      I know. It’s a debate that would/could/should rage on.

      I think my only mistake in this piece was not opening the door to a discussion about how to cut costs at city hall, in efforts to guide a debate about raising taxes.

      The two go hand-in-hand.

      Or at least, they should.

    2. Joe Q. says:

      A quick Google search brings up a very detailed Toronto budget document for 2015.

      http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=ce9bbd5e9ef2a410VgnVCM10000071d60f89RCRD

      The PDF linked at that page is fairly big, but full of details on where the money comes from and where it goes.

  15. Lisa says:

    I think you are misunderstanding how income tax brackets work.

    In the marginal tax system, you pay different tax rates on different portions of your income. In Ontario, the top tax bracket *only* applies to the portion of your income over $220,000.

    So even if you make $10 million a year, you and the guy making $100K will pay the same amount of tax on the first $100K that you make.

  16. johnnychase says:

    I don’t buy your argument that the Toronto Police is too powerful to cut costs. In fact, I would only agree to an increase in property taxes – or any new “revenue tools” for that matter if the police budget is cut. For every 1% increase in taxes, I want to see at least 0.2% cut in costs. The City needs to meet us part way.

    And another question – off topic – but why does a $1.5M condo pay half the tax as a $1.5M house? The first thing the City should do before they adjust taxes is fix the condo / house tax discrepancy.

    1. Appraiser says:

      @johnnychase: Properties with the same assessed value pay the same property tax, regardless if they are freehold or condo.

      1. Joe Q. says:

        I think johnnychase may be obliquely referring to the idea that assessed value often lags “market” value by a significant margin.

    2. AndrewB says:

      I can see the disparity of condo and home by actual land space. A condo on a specific piece of land collects a lot more property tax than filling that land with SFH, townhomes, etc. I feel that condos should get property tax cuts when you consider it actually saves the city money by intensifying infrastructure thus decreases sprawl and cost.

  17. Kyle says:

    Do taxes need to be raised? Yes. Are there inefficiencies in Government that need to be addressed? Yes. Despite what Politicians claim, these things aren’t mutually exclusive.

    The only way to have a mature discussion about it is to leave the politics out. It’s pointless talking about left and right or red and blue. Let’s acknowledge that there is a short fall, and that not raising taxes until all waste is eliminated, is not a viable solution. As well let’s acknowledge that there is waste that needs to addressed starting with some of the larger more obvious line items: Police, TTC, TCHC, TDSB, etc.

    Overall i think the current use of market assessments roughly factors in someone’s wealth, so i don’t agree with using a sliding rate, but i do think the residential rate needs to be raised, such that we are at least meeting our costs. I also think more diversified taxes applied judiciously make sense too: highway toll lanes, congestion taxes, sales taxes, block a lane of the road to build your condo taxes, movie film shoot taxes, etc

  18. Boris says:

    The idea David postulated that ‘cutting public employees’ is ‘extreme right wing’ is beyond comprehension. Do you even know what ‘extreme right wing’ means? Google Golden Dawn. Tory is a left wing mayor, although people have called him a red Tory.

    The worst allocator of capital in the world is government. Empowering them with more capital only feeds the issue. David, what do you think happens when ‘revenues’ (ie extortion) increase by say $150mm? New spending increases by $200mm. Public officials jsut cant help themselves and there is no accountability for bad allocation decisions.

    The timing on a regressive tax increase on assets could not be worse. We are already in deep recession, as it will be determined in future months.

    You also have to normalize the tax rate for property values. You must look at absolute levels of tax bills across these cities, the rate only tells a part of the story.

    1. Joe Q. says:

      “You also have to normalize the tax rate for property values. You must look at absolute levels of tax bills across these cities, the rate only tells a part of the story.”

      I kind of agree with Boris’ argument here. I don’t think a table of property tax rates is particularly meaningful in isolation. What matters more is the aggregate property tax revenue, expressed per capita (or maybe per sq km for some considerations).

      1. Kyle says:

        Fair point, Toronto Commercial property taxes make up a lot of our revenue and lowers the burden on residents. Other cities can’t lean on this revenue and therefore have to charge their residents a higher rate.

    2. @ Boris

      Okay, maybe “extreme right wing” was in itself, extreme.

      Maybe right wing?

      Or maybe just NOT left wing?

      I figured if I suggested that there are a lot of inefficiencies at City Hall, and that in a recessionary period, it’s amazing to see unions driving wage increases, people would label be as right wing. Then again, a friend of mine in Alberta calls us socialists…

      1. Boris says:

        Your friend is correct David.

        More importantly, I am not sure why or how reducing inefficiency or useless expenditures has become something that is associated with the right. Isn’t it just common sense? If I said “I am going to start donating money to build ant farms for the homeless ants, to the tune of $50mm per year”, and someone opposed that notion, that makes them a right winger? That’s the tone that I see out there from people like Bernie Sanders and Wynne.

  19. hoob says:

    Of course, the elephant in the room no one ever seems to want to discuss is to have sliding tax based on… Adult headcount in the taxable domicile, based on number of registered adult voters:

    No registered voters: 110% of mill rate
    First adult: 80% of mill rate
    Second adult: 40% of mill rate
    Additional adults: 20% of mill rate

    Of course how would you keep track for sure, pretty much impossible and unfeasible. But anyway..

    1. Joe Q. says:

      Why tie taxation to the ability or desire of people to vote?

  20. Marina says:

    I like the tiered tax bracket system for property taxes BECAUSE you can’t “shelter” your property values. It’s a truer fair contribution. And you can still stay within reason.

    UNLIKE Income tax, it won’t take 50% of your income, like the combination of provincial and federal tax, but rather .8% of your property value rather than .7% (as an example). On a 3 million dollar house, that’s an extra $3K in property tax (not an extra 1.5 million in income tax).

    I do think we need to pay more property taxes. And if poverty is a concern, then raise taxes on properties over $600K. That will give first time buyers and lower income areas a bit of a break.

    But mostly we need to get over ourselves. A .1 % absolute increase in taxes (from .71 % to .81% say) will not break the bank, but will completely change the city’s finances. I’ll gladly pay an extra $500 per year in taxes to get better infrastructure!

    1. condodweller says:

      @Marina, I like your line of reasoning however, the issue is how do you measure that your extra $500 turns into better infrastructure? I also think fixed $ thresholds for taxes are a bad idea as evidenced by the land transfer tax. Anything over $400k is considered luxury and taxed higher even though average house prices in TO are over a million. A tax tied to economic success should be tied to an average price not fixed price.

      1. Marina says:

        I love it! Tax brackets should absolutely be tied to relative tiers – i.e. relative to average price, average income, etc. Sorry, but I’ll now be using this shamelessly at dinner parties 🙂

        As for $500 turning into infrastructure, my comment was simplistic. I just mean that if the city needs additional funding (and it absolutely does), kicking in an extra .1% of property tax is doable for most of us.

        As David said above, government efficiency is a whole other story. I’m usually rabidly anti-union and I have friends working for the government whose stories are just horrifying. But as I said, separate conversation.

  21. Appraiser says:

    Former mayor John Sewell was on TVO with Steve Paikin last night advocating for a 1% Toronto Sales Tax, payable on all goods an services purchased within the city, in order to make up the budget shortfall.

  22. Toronto Taxpayer says:

    Happy New Year David!
    If you and any others such as Joel feel strongly that the tax rate should be increased did you know there’s a program where you can make a Voluntary Contribution? You can even specify which program or service you’d like your money to support as well as get an income tax receipt for your donation. Joel already said he can easily donate another 5% and you if you make a 1% contribution you can rest easy knowing you’re paying more than Belleville residents. This way you’ll both be happy and the seniors/lower income homeowners can maybe pay their hydro bills.

  23. James says:

    Sorry David I normally agree with everything you write but on this I can’t.

    You say we can’t cut any waste on city workers, but we can and we should. We have some of the highest paid police in the entire country, yet one of the lowest crime rates. The police budget is the single biggest line item in the overall Toronto budget and it needs to be gutted. How do I know it needs to be gutted? When police boats have enough time on their hands to go out and save stranded raccoons on the lake, I know things have gone overboard.

    1. @ James

      I definitely did not say we can’t cut any waste on city workers.

      In fact, I am all for it.

      I just tried to keep this article strictly about taxes, because if we turn this into a conversation about public sector employees, unions, job security, et al, then we’ll stray so far off point.

      Toronto Police will never accept wage freezes, downsizing, or cost-cutting measures. They’re far too powerful.

      There are tons of cost-cutting measures the city can enact. Why haven’t they privatized garbage collection on the west-side of Yonge Street, as Rob Ford did on the east-side, saving $12 Million annually? Why did John Tory defer that decision until late 2016?

      Put together ten of these measures, and there’s your budget shortfall.

      And now, I suppose we’ll shift the conversation from taxes to public sector workers. It was inevitable…

    2. Mike says:

      @ Not to move off topic here but I’m trying to understand your example here. The police budget is bloated because the marine unit rescued a raccoon? You are aware that if the marine unit was busy for their entire shift they wouldn’t have any time for emergencies, right? It might come to a shock to you that the majority of a firefighters shift is spent sleeping, cooking or playing video games. This happens because they work in emergency services, if there’s no emergency, they have to find something else to fill their time.

      I’m pretty sure if a call came out for a rescue of a boater who had fallen overboard that raccoon would be SOL.

    3. Duncan Bray says:

      Maybe the reason our crime rates are so low is because we have a well trained, well paid police service.

  24. Joel says:

    I don’t like the paying property tax based on wealth as most wealthy people have their money in incorporated companies and pay themselves low yearly dividends. These people would avoid a large portion of the taxes they should pay.

    I do think that the overall tax rate should be increased. An additional 5% on top of what I am currently paying would be hardly noticeable and would help to provide the city with a great deal of money that they need.

    Perhaps if the city needs to raise money they could look at fee based applications for upgrades to ones home, such as adding parking, or creating legal downstairs apartments.

    1. Joel says:

      After reading the article I do like the way they have their tax brackets laid out…

    2. Boris says:

      Joel, you dont understand how taxes work. this illusion that has been postulated by our child PM that small business are solely used to reduce effective tax rates on business owners is at best wildly inaccurate, more likely just plain dangerous nonsense.

      Do you understand what the top tax bracket is in Ontario? 53% on income over $220k. That is in addition to EI and CPP. For small business owners they also must pay their portion of CPP and EI to employees, plus WSIB, plus EHT, which is another 1.95% on all income – even on their own salaries drawn from their companies.

      Now, the dividend tax rate has increased in recent years. That combined with the small business corporate tax rate has been modified to create zero arbitrage between taking out capital as ‘salary’ and paying the 53% top rate, or paying corporate tax and then paying dividend tax. Read that again – you pay over 50% in taxes to pay yourself out of your own company.

      Now combine this with soaring energy prices, utility prices, an economy in the toiler and getting worse, increased regulatory costs and fee based government services and you have an environment that is repelling business faster than even the Alberta NDP. Give your collective heads s shake here folks.

      1. Fro Jo says:

        Society doesn’t owe small business owners success. If they can’t make it, they should be working for somebody else. That’s capitalism.

        Or am I missing something?

      2. Joel says:

        I do understand how taxes work and work in field in which I am frequently in contact with small business owners and medium sized business owners. There are many tax shelter in place and many business owners work for cash, to reduce the amount of tax they pay.This in turn causes the rest of us to have to pay more tax in order to subsidize them.

        1. Boris says:

          There are very few tax shelters. Almost zero to small business that are meaningful. Our tax code is very unlike the US.

    3. michael Berkeley says:

      Canadian cities property tax rates are minuscule in comparison to the US. I have a property in the Chicagoland area, that is 1800 sq. ft, sits on an acre lot and yet the taxes are $15,000.00 a year with a home value of $187,000. I handled a deal recently whereas a property changed hands for $3.75 million and the property on a half acre property with 4300 sq. ft. with taxes of $39,000 per annum. Torontonians, Vancouverites, Montrealers, should consider themselves lucky compared to those living in the states with the exception of cities in California whereas taxes are artificially low but home prices are astronomically high.

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