All mayoral candidates running in this municipal election, except possibly Tuxedo Stan, are talking about making municipal taxes more fair. And who would want to argue with that?
But fairness can mean very different things. As you will see, sometimes “fairness” is code for a tax system that sees the poor pay more and the rich pay less.
Don't think that property tax is just an issue for wealthy homeowners. Many elderly citizens are cash-poor and property-rich. Many of the rural poor in HRM are homeowners.
A report commissioned by the Canadian Council on Social Development tells us that “[g]iven the lower incomes in rural areas, many homeowners are unable to keep up with the regular maintenance required. The result is long waiting lists for grants for repairs, while people live in houses that are poorly heated or unsafe.”
And renters may not realize it, but they too pay property tax. Landlords simply factor property tax into the rent they charge.
Michael Bradfield is an economist who thinks there’s lots wrong with the way municipalities collect taxes, and that there must be a better way. Bradfield is one of the co-authors of the HRM Alternative Budget, launched in August by the Nova Scotia chapter of the Canadian Council for Policy Alternatives (CCPA).
HMC: How will the CCPA proposal make the municipal tax system more fair?
MB: The current municipal property tax is problematic because how much tax you pay is based on the value of your home. And the value of your home doesn't necessarily reflect your ability to pay very well. For example, you may have lost your job. More important, under the current system the poor spend a larger portion of their income on municipal taxes than the rich. This is what makes the current tax system a regressive system.
In contrast, collecting this money destined for the municipal coffers as part of the provincial income tax would be much more fair. After all, the income tax system is progressive, meaning that when you are rich you pay relatively more in taxes than when you are poor. And when you lose your job your tax bill would reflect that you now have less money.
HMC: How would these principles of fairness be applied to our real-world situation in HRM?
MB: In the Alternative Budget we propose a surcharge on your provincial income tax that is then transferred to the municipality. This surcharge will be partially offset by a reduction in property tax. Only partially offset, because when all is said and done we strongly believe that municipalities need more money. In our scheme 45 % of HRM taxpayers would not pay any municipal income tax because they are in the lower tax brackets, and the top 10% of income earners would be proportionally most heavily taxed.
HMC: A couple of years ago HRM council looked into what was called Tax Reform. That proposal was narrowly defeated. It also claimed to bring fairness to the municipal tax system. And it also stepped away from property tax. How was that initiative different from yours?
MB: With that initiative homeowners mostly paid for just those municipal services that were directly received. That is what they considered fair. We believe that to be based on faulty thinking. For instance, even if you live downtown and walk everywhere, you still benefit from our transit system. After all, fewer cars on the road because there are buses will increase your quality of life even if you never take a bus yourself. A service-based approach to taxation is simply too shortsighted. It also results in a very regressive tax system. So in that sense it isn't fair at all.
HMC: Your ideas seem to be very novel. How has the CCPA proposal been received?
MB: In Scandinavia property taxes represent less than 11% of municipal funding; in Sweden it is as little as 3%. So in that sense it isn't novel at all.
There are lots of details to be ironed out. Reaction since we first started talking about it in 2010 is becoming increasingly positive, and I am very encouraged by this. I do get frustrated though, as politicians seem not to want to think deeply about this. Ultimately we believe this should be a federal initiative. But we push where we can.
This interview has been lightly edited for clarity.
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