Harvey Enchin
Sun
Your home is your castle. Councils’ tax policies should be changed so it doesn’t become your poorhouse. Photograph by : Stuart Davis, Vancouver Sun, Files
When British Columbia homeowners opened their letters from BC Assessment this month their first reaction might have been delight at seeing the increased value of their investment.
But a moment of reflection would have led to a more appropriate response — fear that property taxes will go up.
There’s no law that says municipalities have to hike taxes to match the rising value of real estate, but they will because they can and there’s not much you can do about it.
While property owners who realize they are about to be fleeced prepare their appeals, politicians at city hall are writing their bloated budgets based on the extra revenue the 23-per-cent, provincewide, year-over-year jump in assessed value will inevitably raise.
Because the assessments come out in January and local budgets aren’t delivered until spring, councillors and bureaucrats have plenty of time to figure out how to spend all the additional money they will be able to extort from taxpayers.
Our property tax regime is not markedly different from the one in force in Britain in the 14th century. The king’s tax assessors used ownership or occupancy of property to estimate a taxpayer’s ability to pay. Value was determined on the basis of the annual rent from the property.
Our political system has evolved, but our tax policies have not. The only difference between now and then is that property ownership has lost its connection with the means to pay. The average Vancouver property owner paid $2,210 in municipal taxes last year, up 6.4 per cent from 2005. Inflation was running well below two per cent.
Why did the taxpayer get hit for so much more? For new and enhanced public services? Nope. For a major citywide beautification initiative. Nope. Aggressive road repair? Again, no. It was mainly to pay municipal workers more money for doing the work they were already doing.
There may be some who cheer “make the rich pay” when property taxes soar, but property owners aren’t necessarily rich. They may very well be poor. Vancouver is Canada’s least affordable city, according to the RBC housing affordability index. The costs of home ownership consume 68 per cent of the average income. An elderly couple living in Kerrisdale may have a valuable home, but little income. To impose taxes based on its estimated value is unfair and punitive.
Besides, market values fluctuate. Can anyone remember the last time assessments were lowered and municipal taxes went down?
What’s more, the assessments are not conducted by a professional real estate appraiser who visits each property to determine its proper value. Rather, they are fictions developed by bureaucrats toying with statistical models, forecasts and historical data. They haven’t the slightest idea what your house is really worth.
The property tax is essentially a tax on capital, the most regressive, destructive tax there is. It takes from rich and poor alike, irrespective of age, family status, health or income.
The system is so unfair and arbitrary that support programs have had to be introduced by other levels of government for the poorest of the poor to mitigate the deleterious impact of the property tax.
The current situation is not only unfair, but it turns the budgeting process upside down.
After seeing the assessments, politicians make a wish list and determine a mill rate that will raise the revenue needed to make their dreams come true. Budgeting should be about frugally allocating resources, not spending increasing amounts of taxpayers’ money every year.
Municipal councillors should be focused on fiscal restraint and accountability. Instead, they are driven by polls they commission that ask loaded questions like this one from 2004: “What would you prefer, an increase in taxes or a cut in municipal services?”
How about neither? Why not just deliver municipal services more cost-effectively? Both federal and provincial governments are subject to the scrutiny of an auditor-general. Municipal governments should face the same kind of review to encourage fiscal discipline.
It may be unrealistic to suggest this archaic tax be eliminated, but it should be amended to contain its damage. It’s not often the New Democratic Party has sensible ideas, but a party committee in Ontario has come up with something called the “freeze-til-sale” model, under which the assessed value would remain unchanged from the date of purchase until a property is sold. Municipalities would still determine tax rates on the total value of property in the community, but the process would become more predictable and our elderly couple wouldn’t have to fear losing their home to the tax collector.
An even better suggestion is to limit the increase in taxes to the rate of the consumer price index, a proposal championed by the Canadian Taxpayers Federation. It argues that not only would homeowners benefit by knowing with some certainty what their tax bill will be, but that municipalities would also gain from a stable revenue stream.
Reform of the property tax system is 700 years overdue. Let’s fix it — now.
© The Vancouver Sun 2007