Fairness and Farewell
The Free Press had an editorial yesterday on the issue of property taxes which advocated higher payment rates for businesses than for homeowners. What the editors fail to see is that a tax on business is ultimately a tax on consumers anyways. The costs associated with taxation are simply passed on to the end consumer under the guise of higher prices. If the Free Press was as interested in the notion of fairness as they purport to be, perhaps they should call for the eradication of all property tax in favour of allowing the City of Winnipeg to levy a consumption tax. In that way, people consuming goods (thereby using finite resources) are the ones paying the taxes. Should you elect to buy a Mercedes instead of a Cavalier, the City gets more tax revenue.
As an aside, does the Free Press’ altruistic stance means that they have NEVER appealed their property tax bill for 1355 Mountain Avenue? One would hope that given their staunch convictions on this matter, they are not displaying intellectual dishonesty by trying to cheat the taxman they seem to so vociferously support on their editorial pages. Remember dear editors that property tax appeals are a matter of public record – if the folks at the Black Rod made their way downtown would they be able to call shenanigans on your “principled” stance?
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A fond farewell to Curtis at Endless Spin. As the voice of reason when the blog rhetoric heated up, his insights will truly be missed. He was also one of the few bloggers that managed to raise the ire of supporters of ALL the political parties. You know you are doing a good job when you are simultaneously labeled an NDP, Liberal AND Tory apologist. Curtis, I hope you will still see fit to come by the Blogger sandbox and give us your non-partisan take on matters.
And welcome back to the Hack – I never took down the link on the hopes you would someday return. Now if only we could get Rasky back too!
Motivational Tunes:
Def Leppard – Tear it Down
David Bowie – Diamond Dogs (an Orwellian reference for the Manimal, wherever they may be)
Sons of Maxwell – Farewell to Nova Scotia (Curtis, I hope you got to see them on the Halifax Waterfront – maybe at The Lower Deck or the pub from which their name is derived?)
posted by Unapologetic Ex-Winnipegger @ 11:28 AM
15 comments
15 Comments:
Completely agreed with the Freep editorial. Blending the business tax with the commerical property tax will provide several benefits, including: a) allowing for more fair copmparisons of the cost of doing business in Wpg versus other cities; b) encouraging owners of vacant buildings to work harder to get tenants; and c) discouraging land speculation.
Partially agree with you on the consumption tax, although property taxes are a valid and fair way to pay for services that directly impact the value of a property (access to streets, proximity to park space, police and fire services, etc.).
Since a consumption tax isn't going to happen here anytime soon, we'd be better served pushing for the province to remove education property taxes instead (which is the real problem around here).
I would like to see the education component of property taxes removed with a corresponding increase in the PST. The current system allows lots of finger pointing with no accountability. The province blames the school divisions, the school divisions blame the province and taxpayers blame the city.
Property taxes are an inefficient way for cities to generate revenues. Think of all of the money wasted on property assessment departments, the appeals process, etc.
I don't see how blending the taxes would help in the ways you proposed. If I pay $2.00 of tax with two loonies, how does making me pay with a toonie (i.e. blending) alter the economic incentive to rent my property or make this a fairer comparison?
Because (and anyone can correct me if this is wrong) the business tax is not assessed on vacant land or empty buildings, just on actual businesses. Blending the two rates will decrease the overall tax burden for existing businesses and increase the burden for owner of vacant land or empty buildings. Furthermore, having one tax instead of two will reduce some of the city's administrative costs.
Oh, and we don't need to increase the PST to eliminate the education component of school taxes. First we need to eliminate the idiotic "you pay your taxes now and we'll rebate a portion of them later" system and its associated admin costs. Increased provinicial revenues can more than cover the rest.
As an interim step I'd suggest eliminating the ability for school boards to assess their own taxes and moving to a single province-wide rate that would be phased out completely over four or five years.
From the www.winnipegassessment.com site:
Business Assessment is the process of determining the Annual Rental Value of any space occupied by or used for conducting a business. In determining the Annual Rental Value of premises, the City Assessor must take all factors into consideration so that, as far as possible, premises similar in size, suitability, advantage of location, and the like, are equally assessed at fair annual rental value, based in general on the rents being paid for similar premises.
As such, a major input into the business tax is market rents, as is the case with property taxes. Therefore the actual admin costs associated with the Business Tax are only incremental since the city assessors can use market data in their possession gleaned for levying property taxes. I therefore think that the savings you are talking about would be negligible at best. Negating the need for the assessment department and the appeals process would result in far greater savings.
Rebates are a small portion of the overall educational component of property taxes. Provincial revenues won't keep increasing. If you were to eliminate the educational component of property taxes, what cuts would you make to provide for the inevitable funding shortfall?
I am also at a loss to understand why you have it out for land holders. What do you think is a person's preferred outcome: owning a surface parking lot or owning a 50 storey office tower?
Any rational person would try to maximize the utility derived from their land. If the surface parking lot or the vacant land is the best economic outcome for the asset holder, then I would suggest that there are structural problems with the market and not the developer.
If I were holding a vacant parcel of land, I would love to squeeze millions of dollars out of it, not Blue Loonies from the Downtown Biz...
The Education Property Tax Credit is worth $184.3 million in the 2006 budget, and the additional tax credit for seniors is worth another $2.6 million. That would cover about 25% of the total currently raised by two educaion levies.
And provincial revenues have gone up by by some $2.5 billion in the past seven years. Surely the government could have phased out the remaining $500 or $600 million over that time, knowing full well they would have recovered a portion of it through increased consumer spending.
And while reveneues may not increase to the same extent over the next several years, I do believe a similar phased approach could be accomplished without making significant cuts.
The Education Property Tax Credit is available only to Manitoba tenants & homeowners - not Manitoba businesses. Therefore, your 25% number may be true for individuals but not for businesses. As the Free Press acknowledged, property taxes for businesses are higher than the few thousand dollars paid by homeowners. As a percentage of OVERALL ESL & school division revenue, the tax credit would be nowhere near the 25% you mention.
The NDP have managed to overspend even in the face of windfall revenues and transfer payments - what would you propose cutting in order to allow for the shifting of $500-600 million in tax revenue to the school divisions?
In your original post you mentioned that increasing taxes via blending would encourage landlords of vacant buildings to work harder to get tenants. Using the same logic, would you support increasing the income taxes of someone on Employment Insurance to encourage them to find employment? If you truly feel this is an economic incentive, surely your carrot would work in both instances...
I believe (based on a quick look at the most recent FRAME report and some FCPP propaganda) the OVERALL ESL & school division revenue is in the range of $700 to $800 million,. So yes, the property tax credit would pay for about 25% of the OVERALL number, and would likely eliminate some unecessary admin work.
Beyond that, the province could easily accommodate a $500 or $600 million phase out of the remaining education amounts over a four or five year period. In fact, even the mediocre current government has reduced taxes by over $600 million since taking office, in addition to increasing spending by $2.5 billion. Furthermore, do you not think there's at LEAST $500 million in efficiencies (not "cuts") that could be found within the province's operations? And let's not ignore the probability that the province usually recovers some portion of any tax cut through increased economic activity and consumer spending.
As for your comment about employment insurance, I would argue this is already happening. People can only earn 55% of what they made when they were employed, and they are taxed on their benefits. That's a fair bit of incentive to find another job.
Unfortunately, some property owners do not take steps to maximize the use of their properties. Some properties may be used as a tax write-off, some heritage buildings are kept empty in the hopes that the owner can justify tearing them down, and some land sits vacant as the owner speculates about future riches. In all these cases the owner is making a decision based on their own financial self-interest. SO why shouldn't they have to pay taxes at a similar rate as an operating business?
Blending the two taxes would level the playing field for all commercial property owners, and would discourage behaviour which I personally believe is bad for the city as a whole. Further, it would remove -- at least in name -- one entry from the lengthy list of taxes that Manitoba businesses must pay, and allow for a more fair comparison with other jurisdictions.
I still question your number. If the total ESL tax revenue is $1.00 with 40% paid by homeowners and 60% paid by businesses, how can you argue that 25% OVERALL is being rebated if ONLY the homeowners are getting 10 cents back?
I would argree that "efficiencies" could be found. However, a $500.00 efficiency PER MANITOBAN will lead to some semblance of disturbance to the status quo. Which political entity would you provoke the ire of?
Regarding the EI example, the individual receiving the benefit would likely be in a lower tax bracket for the taxation year in which the benefits were received. I am asking you if you would support taxing that individual at their HIGHER "gainfully employed" tax rate used in prior tax returns. Using your reasoning, ALL PEOPLE should actually be taxed at the highest tax bracket in existence. After all, why should some people work hard and earn lots of money (thereby paying the highest % of taxes) while others choose to focus on their families and not earn as much as they could (thereby putting themselves in lower tax brackets)?
If a person is choosing to speculate on land, there will be tax revenue generated in the future once the financial opportunity they are holding out for actually arises. Why would you force someone to pay taxes if a project is not yet economically viable? If a property is not generating revenue, how do you propose getting blood out of the proverbial stone? As a business-minded person I can assure you I (as well as my bankers) would take a steady & stable revenue stream over a "tax write-off" any day of the week...
I don't think you're following me. The total amount of property tax revenue collected from ALL sources for education funding is $700 to $800 million.
The province then turns around and rebates (yes, just to homeowners) $184.3 million through the Education Property Tax Credit.
So simply eliminating the tax credit could allow the province to reduce taxes at source by 25%. Yes, this initial step would likely only apply to homeowners. However, you asked me how I'd pay for eliminating education taxes and I have shown that a 25% overall reduction is as easy as a few penstrokes.
As for the business tax, I guess we'll have to agree to disagree. The reality is that the City of Winnipeg's commercial property tax rates are relatively low compared to other jurisdictions, while we continue to maintain a business tax that many jurisdictions have eliminated. I beleive that property taxes should be assessed on all property owners, not just operating businesses. Blending the two taxes will eliminate a tax, eliminate the bureacracy associated with that tax (and yes, there is one), reduce (slightly) the overall tax burden for those businesses that currently pay the business tax, and will make for more fair comparisons with other jurisdictions. Plus we'll never have to hear politicians or business advocacy groups talk about it again.
Where are your numbers derived from? The Winnipeg School Division budgeted $280 million in expenditures for 2005/2006. If we are to assume that $140 million came from property taxes (i.e. half), that is 19% of your entire property tax pool of $737 million for just one school division. That leaves 81% of the remainder going to the other school divisions within the province.
The major difficulty in these discussions is getting a handle on the numbers. If you want a snapshot of a company, you simply go to the Investor Relations section and download their annual reports and/or filings. Governments seem much more preoccupied with budget numbers than actual performance.
On the other matters, I guess we will indeed have to agree to disagree. Thanks for stopping by, though - it was interesting banter!
I checked some more numbers and Winnipeg 1 does in fact represent 1/5 of all education expenditures in the province.
I still have a tough time digesting the 25% number seeing as how businesses don't get the credit and still pay the lion's share of the education levy. I'll try digging deeper on this one too.
I'm looking at the FRAME budget now. It would seem that although the homeowners get the tax credit, the Province still pays the school divisions the $184 million. So in essence they will pay for this "credit" under some other form of taxation.
OK I get what you are saying now on the 25%. When I give my Customer A a "credit", I take a pecuniary hit that doesn't get offset by revenues from Customer B. It seems that school divisions are able to take a haircut while having the province grow it back for them.
The lesson in provincial revenue shell games was interesting, to say the least!
I still don't agree with penalizing developers for vacant lands or surface parking lots, mind you. If we had a more fiscally responsible government, I agree that the education component could have been eradicated. Now, tough choices would have to be made...
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