Last week I presented an overview of our report on municipal taxation to the Pictou County Chamber of Commerce and I feel your readers may benefit from an expanded version of the story that appeared last week.
In February of 2012, the Nova Scotia Chambers of Commerce released a report that compared all municipal units in the province and their corresponding tax rates for residential and commercial property owners. The result was that on average, commercial taxpayers were charged 234 per cent more in tax rates than residential property owners for the same or less benefits received. In some cases, the ‘multiple’ exceeded 400 per cent.
The N.S. Chamber then partnered with taxation experts Collins Barrow and we released a second report in October 2012. We found that experts from the Canadian Centre for Policy Alternatives to AIMS and the Fraser Institute, as well as noted economists across the country, already have concluded that 19th century municipal taxation is the most regressive form of tax in the land because municipal taxes do not reflect ability to pay, demand on the system nor benefits received.
One can walk down any road or street in the province and find variances in the amount of residential property assessment of 155 per cent or more in New Glasgow for the example I presented last week. This means that those homeowners are paying 155 per cent more or less than their neighbour for the same service. We found that the assessment cap for residential property further distorts this variance and also means a “tax shock” when residential property changes hands. The assessment system itself in 2011 cost $17 million just to keep track of the 600,000 assessment accounts. We have concluded that the current system is unfair to homeowners as they pay differently for the same service and to business owners who pay even more.
Also, our study looked at the value of a business being able to deduct property taxes from net income (assuming they have a net income in the first place). Collins Barrow determined that deduction is equal to a 17 per cent credit from income taxes payable; a far cry from the 234 per cent multiple that businesses pays. In addition, homeowners can sell their principal residence tax free but a business must include capital gains as well as recapture depreciation.
Businesses as well as consumers pay the same for fuel at the pumps or electricity; the same sales taxes are based on consumption. Paying for municipal services based on property value is like paying for gasoline based on the value of your vehicle! It just does not make sense in the 21st century.
The seniors’ population in our province will double over the next 20 years according to Stats Can data. Two thirds of those retiring have not been able to adequately save for retirement. This means that under the current municipal tax system, they will not be able to afford municipal taxes and a cap on assessment will not prevent them from being forced from their homes. That is a clear warning that both the municipal and provincial governments must act now to change how municipal units recover costs. Ignoring the issue now will only serve to amplify its effects later.
We conclude our report with three short term recommendations for government:
— the Province of Nova Scotia should legislate a cap on the multiple between commercial and residential rates (including area rates), this system is used in the province of New Brunswick at 150 per cent or 1.5 times the residential rate
— That the Province of Nova Scotia eliminate the cap on residential assessment.
— Each municipal government should charge the same rates for the same service for all consumers.
And, one long term suggestion:
— The Province of Nova Scotia and the federal government seriously investigate the use of either the HST system or income tax as a means to eliminate property taxes.
Having all taxpayers pay for municipal services according to their ability is the fairest way for any taxpayer to pay for any government service and for municipal units to recover costs.
In the long term, the province must allow municipal units to recover costs in a manner that befits the 21st century; based on one’s ability to pay. “We’ve always done it that way” will not create jobs for our children. Favouring one taxpayer over another will not attract the new immigrants or new businesses we say we want to move here. Using a sub-optimal system will keep your local economy sub-optimal.
In the meantime, rates are still the responsibility of municipal politicians and you must persuade them to lower the cost of providing service as well as the multiple between classes of property owners.
Please visit our website for a complete copy of the entire report (www.nschamber.ca).
Wayne Fiander is Executive Director, N.S. Chamber of Commerce