Municipal taxation is the most regressive form of tax

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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

Organizations: N.S. Chamber, Pictou County Chamber of Commerce, Canadian Centre Fraser Institute

Geographic location: AIMS, Nova Scotia, New Glasgow New Brunswick

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Recent comments

  • taxpayer
    February 20, 2013 - 15:21

    trenton is a gost town nothing here now but high taxes and nothing to show for ir to many work in the town office at 1 time there were only 2 people to look after the town office at that time there were more people living in trenton then now they also looked after the school teachers pay besides the town workers they had to go to the bank to get the money and do the pays(thats with2 people) up now its done somewhere else.look how many works in there now join the county we be better of get lower taxes just maybe things will get better maybe some busseness will come into trenton

  • Henry G
    February 20, 2013 - 14:34

    Talk about being taxed to death just take a look at the town of Trenton starting with the salaries paid to their employees for the town office alone some where in the ball park figure of $200,000. Then lets take a look at our town park which is the range of another $170,000 to run in salaries... I vote to get rid of them all the red noses and big shoes sitting around the town council table and go with the county so we can pay taxes the same as everyone else in rural areas without gas stations, grocery stores, liquor stores and banks. We have slipped to new lows and it is high time the council and mayor were held accountable by resigning!

  • Pi in the Sky
    February 20, 2013 - 08:53

    Mike there are never cost savings with combining civil units . You can never lay off these public service union types and then there are pension bombs those staffs have created. AS you get larger municipal units you get larger compensation for the Staff. The HRMs CAO flies home on the weekend to Toronto. In regards to unfairness to business Arthur you should try business out sometime like retail in Downtown New Glasgow . Believe me many in retail have homes on the line praying to have good months to cover expenses. The credit lines afforded to business from Governments effects positively and negatively economies but the clear fact is if a government does not act in one province or state then business walks to the open cheque books of another.

  • Terry
    February 18, 2013 - 07:38

    Canadians everywhere are taxed to death. If you eliminate the cap on residential assessments. with the existing high assessments on houses in Nova Scotia, I am sure that most people, working or retired will be forced out of their homes.

  • arthur sinclair
    February 18, 2013 - 07:25

    What Mr. Fiander is saying let people who are barley getting by pay more taxes ans let business of the hook. There is already an unfair burden on the everyday taxpayer and we dont need more. It is clear from Mr. Fianders statement he is out of touch with the reality of the everyday person. Did he not read or hear in the media the rate of indebtness of the average Canadian whil Canadian business has billions in their pockets in this country. Business tax in this country is much lower than it is in the USA while we pay 40% or more on a lot of goods. You cant get blood out of a stone and the average citizen is bottomed out as ability to pay any more money in taxes. Look at waht the N.S. government is handing out to business in this province. High costs in the retail and energy sector are crippling the economy as it is. Mr. Fiander come on get your head out of the sand and look around and see what is really happening.

  • Mike from Reality
    February 16, 2013 - 12:18

    Lets start with municipal reform first ie get rid of the majority of municipal units in this province. Lets get from 54 municipal units down to the 18 counties. There has to be savings with a more streamlined approach to municipal services. Than we can straighten out the tax system.