Architeconometrics
When they are at their best, consultants can be indispensable purveyors of great advice. Their narrow range of expertise far exceeds that of any generalist businessperson. But some consulting professionals fall victim to the false assumption that their wealth of knowledge in said narrow area makes them experts in issues beyond their field of training.
This segue brings me to Steve Cohlmeyer’s editorial in Sunday’s Free Press. His fundamental premise is that the glut of downtown parking lots are the reason for the downtown’s moribund state. Methinks the celebrated local architect has erroneously attributed the effect as the cause. That’s what happens when you mistake your architectural prowess for strategic business thinking.
My. Cohlmeyer laments the fact that in
“Landowners are able to operate surface parking lots at a reasonable level of profit, and pay taxes based on low use of their lands. The framework is ideal for sitting still until some far-off day when real profits can be made.”
This is a primary example of the ‘limousine liberal’s’ fundamental misunderstanding of the businessperson. If a rational person has the choice between making a larger profit now or a future profit that may or may not materialize, what do you think the choice would be? If it was possible, I’m sure these landowners would have already built skyscrapers that make First Canadian Place on Bay & King look like
His solution to the problem is higher taxes on vacant land:
“In a land-tax system, building owners must still pay significant taxes. The difference is that vacant-land owners must pay taxes based on the real value of their lands, and they quickly find that "sitting" on vacant land is not such an attractive proposition. They are forced to sell their lands to those who are prepared to build and truly use their lands, or they are forced to build and become real participants in the economic life of downtown.”
Does he honestly believe that if the same vacant downtown land was available in
I propose an alternate solution. I hereby decree that all
posted by Unapologetic Ex-Winnipegger @ 12:39 PM
4 comments
4 Comments:
Actually a land tax (with some small technical adjustments) would be a fantastic idea in Winnipeg. Encourages density, encourages parkades instead of surface lots, encourages investment, discourages land speculation, and doesn't penalize owners for improving their property.
Just because you don't like the source doesn't mean you should discredit the idea.
My post wasn't a matter of liking or disliking the source. My disdain was reserved for the way Cohlmeyer would have us spend other people's money via punitive taxation while still expecting them to be change agents. Nothing is stopping HIM from capitalizing on a market opportunity if one is indeed present as he asserts.
I don't think the abundance of parking lots in Winnipeg is due to land speculation. With the right economic conditions in place, 'highest and best use' would be something other than a barren land parcel. An astute speculator looks for the quick flip sale, not one that may take generations to transpire. I ask you again - why is this not a problem in Hong Kong, London, or New York? In those cities, I don't think a land tax has ANYTHING to do with the "encouragement" of investment.
I just can't buy into your increased-taxes-encourages-investment logic. If that were the case, the Province's Capital and Payroll taxes would already have put Manitoba in a state of economic nirvana. Any form of taxation not predicated on consumption and/or profits acts as an impediment to economic development.
Implementing a land tax has nothing to do with increasing taxes, it has to do with redistributing taxes. The same amount would be collected as under the current system.
If my neighbour and I have identically sized lots, why should my tax bill go up for building a deck or garage on my lot? I take up as much space as he does, I use the same roads/parks/police/ fire/etc..
Why should I be punished for investing in my property (and improving the neighbourhood), while the neighour lets his house fall apart (becoming an eyesore in the neighbourhood) and sees his taxes go down as a result?
By the same token, why punish the developer who is willing to invest millions into building an office tower or apartment complex, while the owner of the surface lot next door pays next to nothing in tax? Treat them the same. 100 feet of frontage on Portage Avenue should be assessed at the same value whether it has a parking lot or 40-storey tower.
Your comparison to the payroll and capital taxes is completely backwards. Just like the current property (land + improvements) tax system, those taxes penalize a company for making a private investment. Getting rid of them at the same time as shifting to a land tax would create a positive environment for investment.
(Note that my explanation of the land tax is rather simplified. In actual practice, some sort of deductible should be brought in during implementation to moderate the tax shift.)
I still fail to see your logic. Using a 2 parcel example, if one developer owns a 40 storey tower paying $3 million in taxes and the other owns a vacant parcel paying $100,000, you would advocate that EACH party would pay $1.55 million in taxes?
My understanding is that the commercial property tax base is currently predicated on the earning power of the property. Therefore, the 40 storey building owner is better able to service the property taxes levied. Your system would increase barriers to entry into the real estate market.
In any event, I personally would prefer that all property taxes be eliminated and replaced with a municipal sales tax.
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