Is the tax shift about to get the shaft?

Post by Daniel Fontaine in

4 comments

shopkeeper
Seriously, if you raise my taxes again, I'll bean you with this Jonagold.

There are a lot of mom and pop store owners throughout Vancouver that are watching closely what will be included in the City's 2009 Budget. Their interest lies in whether some civic politicians will honour a commitment to essentially cap future tax increases for commercial property owners in Vancouver.

Each year, as part of the budget making process, the City must determine what types of programs and services they want to fund. They must also determine whether they are going to raise taxes to cover any budget shortfall they might have. Having been through developing three civic budgets, I can attest to the fact it's a grueling process that I wouldn't wish upon even my worst enemies.

In Vancouver, business owners pay approximately 5.5 times the rate that residential property owners do for property assessed at the same value. This imbalance is what convinced the previous council to initiate the Property Tax Policy Review Commission. The Commission was headed by Dr. Stanley Hamilton, a well respected expert from UBC in the field of property taxation.

In past years, Vancouver Council has recognized the tax imbalance between residents and businesses. It adopted an informal policy of shifting about 1% of that tax burden from homeowners to commercial properties on an annual basis.

Unfortunately, this ad hoc process was far too often impacted by the whims of nervous politicians who, although they understood business taxes were too high, were simply afraid of facing the wrath of residential taxpayers. So the gap between businesses and residential properties continued to grow.

When I worked in the Mayor's Office, we decided to go beyond simply shifting 1% from residents to businesses and we actually froze tax rates for all commercial properties. This had the net effect of passing along approximately a 2% increase in property taxes to residents.

When the decision finally went public, I told my staff to brace themselves for what I thought would be the onslaught of phone calls from the public.

Much to my amazement, we barely had any calls. No outraged voters. No nasty voice mails. Silence.

This public's reaction surprised me, but it didn't surprise representatives from Vancouver's Fair Tax Coalition. They're a group of volunteers who for years have been advocating for tax reform at City Hall.

In their presentations to me, they argued the public was light years ahead of the politicians on this issue. The public understood that if mom and pop stores started closing down due to high property taxes, it would mean their local neighbourhoods simply wouldn't be the same.

In his report, Hamilton recommended that Council consider building into the next five budgets a 1% tax shift that would begin addressing the imbalance that had built up over the years. It was supported by the NPA majority and voted against by both COPE and Vision.

The opposition councillors argued that by providing tax relief for all businesses, corporations like the big banks and forestry companies would also reap the benefits. Their preference was to provide no tax shift unless you could exempt big corporations from the mix.

During the last civic election, both Mayor Robertson and Councillor Ladner supported the five-year 1% tax shift policy. This came as welcomed news from Vancouver's business community.

The Vancouver Sun reported on October 22nd:

Robertson said he would follow the tax-shift policy during a first term as mayor, but "beyond that, it's how we continue to make the tax system more fair for business."

However in a post-election interview with the Vancouver Sun Editorial Board, Robertson seemed to waiver somewhat on his previous tax shift commitment.

Now that we're on the eve of Robertson's first budget, it will be interesting to see if he is able to keep his promise to Vancouver's neighbourhood businesses.

His former leadership rival, now senior policy adviser, Councillor Raymond Louie, has been one of the most vocal opponents of the current scheme. During his failed leadership bid, he campaigned against the small business tax relief plan adopted by Council.

This will be the first real test of Robertson's leadership now that he's Mayor. Will he be able to convince all nine of his left-leaning caucus members to support tax relief for Vancouver's small business communities?

If he does, I'll applaud the efforts he's made at taming a few civic politicians who in the past have appeared hostile toward Vancouver's business community.

4 Comments

So what would be the right multiplier of business to residential taxes be and how do we stack up against other similar sized cities? What do the staff on the 21st floor suggest?

Jim,

Our crack research team has discovered the following:

According Hamilton "The City should reduce the tax share borne by business by one percentage point per year in each of the next years until the 48 percent share is achieved.
Prior to our appointment in 2006, the non-residential tax share was 55%. If the City
accepts and implements the proposed goal of 48%, the business community will benefit
from a 7% reduction in tax share over six years."

Probably the best way to determine if Vancouver's tax system is out of whack is to compare it to neighbouring municipalities. For example, in Surrey their split is 70% residential, 25% businesses and 5% other. In New Westminster it the breakdown is 59% residential, 29% businesses and 11% other.

In Vancouver, it's 45% residential, 52% businesses and 3% other. Clearly Vancouver businesses pay a much higher percentage of taxes than in neighbouring municipalities.

Maybe City councillors should realize something Vancouver residential taxpayers already understand, if we continue to lose industrial and commercial taxpayers to more accommodating communities, our residential taxes will have to go up anyways to fill the gap. Which usually means more userpay fees for community resources like libraries and swimming pools.

why dont we think a little outside the box...what about "gambling" revenue...Our City of Vancouver has missed out on this big time compared to other gvrd cities...in coquitlam the boulevard casino provides millions of dollars to the city....over and above...so much so that it paid for 1 new fire hall / 2 trucks and crew!! Remember a few years ago when there was a proposal for a huge destination sytle casino around the foot of Main in the DT eastside...it was vigorously opposed..."could ruin the neighborhood" and "attract the wrong type of people"!!?? Has any of these neigh sayers driven through that arear.,.or has anyone thought what it could be like if we had something similar....look around every other city did this after vancouver said NO....Now I dont gamble but the DT East side would be drastically different with such a project..currently its one of the worst areas in a major city in North America...it could have been saved / rejuvinated with some of this infrastructure and the city of Van could have asked for "blank" amount of dollars from such a project....Now in Vancouver we have minimal casino revenue yet the casinos have gone up everywhere lately...richmond burnaby coquitlam surrey and New West..to name a few...Vancouver ...your tax whoes could have been greatly assisted by such revenues...not to mention the spin off improvements and tourism...dollars...Is it too late? ...Instead we ourselves are building an even bigger project along false creek to house a few athletes next winter....I think that will work out...but I cant help but think about some such projects that were voted down when I hear about potential tax increases..Now I dont even gamble but its time to look outside the box on many issues..and once again be innovators ... not go keep going back to already cash strapped and over taxed citizens and businesses..

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