Metro Vancouver and 21 lower mainland municipalities reported total accumulated surpluses of $42 billion in 2021. That was seven times the annual expenses reported in 2021 by the same local governments.
I heard the council of one municipality in the mid-range of surplus to expense ratios is arguing that an 8% tax increase is necessary in 2023 to build its “inadequate surplus.” That reminded me of some time ago hearing a council member agree that no additional property taxes were needed in one particular year, but he was voting for an increase because taxpayers should learn to expect annual increases.
In this time of painful inflation, municipal leaders ought to carefully consider if huge property tax increases are really necessary.
You have to wonder even if they keep the mil rate the same
that would be still applied to the substantial increases the
appraised values of the property tax base we are seeing.
I know it would be a stretch but how about consideration
to a reduction in the mil rate to keep a tax grab from happening?
It almost seems like double taxation when the mil rate goes
up and appraised base values for property taxes also go up driven
by an overheated real estate market, short supply and
Yes Tim. There are better ways to tax, according to need and capacity to pay. I have been conducting a quick knowledge test when I have the opportunity to ask without antagonising the person being asked.
The question is ; do you know the difference between “progressive” and “regressive ” taxation systems? Sadly, most do not, yet immediately when I explain that “progressive” is based on an individual’s financial income and capacity to pay, the penny drops. They then also immediately know that “regressive” taxation is when everyone must pay the same regardless capacity to pay.
There are two “regressive ” taxation systems that are prominent in our economies. The first is property taxation and the second is sales taxation.
Because our central banks held the bank rates so low for so long we have and are struggling to deal with, asset inflation (bubbles) ,which of course means a collapse in asset prices before they rebalance with what citizens can afford to pay while still eating.
What is also confusing around the issue of property assessments is the ignorance of the taxing authorities to the difference between “market VALUE” and “market PRICE”. These two terms have very different meanings and yet the Assessment authorities use them interchangeably. The quickest way to understanding the difference is to apply one’s thinking to any asset other than one’s home. Try looking at ocean freighters for example. We have several parked around us for lengthy periods, in a word, earning nothing for their owners and more likely costing money to look after. When this condition develops they become “stranded” assets , which is code for a liability. Now, a possible buyer looking at one of these “assets” would not pay a price based on even the depreciated value but only a price based on the potential income from ownership. What maybe paid has everything to do with possible and certain future income and nothing to do with the cost to build.
Without altering the property tax system more and more citizens will be made homeless, especially when the “monopoly” feature of property is exploited as Norm has so ably shown us.
That truly is a wack of cash. 7 times you say? Perhaps we could all have a year off from paying property taxes in those cities, well it was a thought however unlikely to happen.
Are we underserved? Given the amount of money in the bank, yes. The money could be used for any number of socially beneficial items. cities with that much cash on hand could/should provide better food programs for children living below the poverty line; although there are regulations against it, I believe, the cities could pay for new equipment in their local hospitals, better hospice care for those dying; more care for the mentally ill–children and adults.
You do have to wonder why the cities have that much cash on hand and still want more. The one good reason a city might have that much cash on hand is: we live in an earth quake zone and if we ever need to rebuild there will be money to do so and not have to rely on the federal government. With climate change upon us, having that sort of money on hand would be good give the cost of relocating people, new infrastructure, etc. If the money is being saved for a catestrophic event, that is a good thing. If its just sitting in the bank to be used by the current counsells to get elected by waving cash around, not so good.
Erick makes some good points, especially the one regarding what a house is worth and what it can be sold for.
Currently we seem to be in a time where you have difficulty selling a home for what you paid for it or what it is worth at the bank or city hall. Then if you go back to the 1970s there was a time when people
had bidding wars on their front lawns. The market fluctuates and trying to set property taxes at a reasonable and fair rate can be difficult.
Setting property taxes at a rate linked to income, etc. may not be the best method. We know many in this country do not pay their fair share of income tax because they can legally place their money so it need not be declared. Every so often we read about cases such as that. Several years ago another blogger wrote an article about the the low income on the DTES, it was the lowest in Canada. We then were advised about an area in Richmond which had the same income as the DTES, but the homes in this area were all new and over a million.
Many who own very expensive homes, condos in B.C. have the ability to “hide” their income and so that method might not work.
There is also the other issue. If I am a renter and can no longer afford the rent, I have to move. What is being proposed, as I under stand it, is accomodations would be made for those who could no longer afford their property taxes. We currently have that for seniors If we were to make accomodations for everyone, we would have a new industry: hiding your income for every one.
In this type of situation you could have renters paying much more in rent than home owners paid in mortgage payments or taxes because they had an “out” if they didn’t have the money. Unfortunately life is not fair. So if you can’t’ afford your property taxes it might be time to sell your home and purchase something you can afford.
Given all those cities with all that cash sitting around, they could pool it, build affordable housing , so the citizens of their cities were not subjected to the markets fluctuations.
Erik please consider setting me straight on the following:
With the hotter real estate market on the west coast verses inland I
feel there is a bit of a play being made that has a bearing on smaller
communities east of Van and the lower mainland. Smaller homes in the western hotter market have considerable trapped equity value that can
not be realized through buy and sell and stay there. Principal residence
gains are one of the last tax free gains we have.
Therefore some consider to try a lateral size move or down size to a
residence in a smaller community to tap into this trapped equity by moving
further east out of the hotter priced zones and make a purchase there. However that has a fairly wide audience now pursuing that play and consequently reflects in the increase selling/buying price in those smaller communities to some degree.
Developers are even scanning the smaller communities for fixer
uppers or tear downs to stay ahead of the crowd and rebuild those spec
purchases at today’s high construction costs and some are still sold site unseen.
This buying activity is one area BC assessment takes into consideration when setting property tax values for properties in these smaller communities I think.
Long term residents can get included into this inflated mix of the “free up their equity” portion purchasers of this segment of real estate activity and thus it can become a real hardship if on a fixed income pension.
Hello Tim. The always present reality is that the real world is non-linear. It is a comfort to many to expect linearity, in fact most do just that. In the course of my working life I had to create “forecasts” for airports in BC that the Treasury Board could accept. I also had the task of making recommendations to the UN on how to get increased international air travel to and from South America.
The first task was easy because I stayed away from anything long-term. The second task was a washout because I was not allowed to disclose the financial condition of citizens of South America. They had no where near the financial capacity for the consumption per capita of international air travel that prevailed in Europe and North America. This was a political matter governed by the degree of economic inequality prevailing in these countries.
What you are describing is the result of “regressive” taxation over decades. All the trusting citizens are now struggling with having to leave shelters ,they may have even personally built, as they are forced to move on.
Investment money is not stupid money. Investors like certainty of income and a sense that it can be increased. This has resulted in a lot of Canadians and others identifying shelter ownership as fitting what kind of investment almost monopoly they want. All financial institutions and governments like this model because they all have their own horse in the race. They are therefore not objective commentators.
Asset bubbles have occurred throughout human history and almost always end in tears for many.
To understand just how vile borrowing using properties as security can be ,you need to use the rule of 72 . Example could be a borrowing at 6% compound interest. Divide 72 by 6 you get 12. That means that $100,000 today at 6% compound interest, the loan will need repaying in the amount of $200,000 twelve years from now. That is how fast the unsuspecting can be dis-homed.
The government, whether it be civic, provincial and/or federal is addicted to spending. To continue spending, higher taxes are needed and that means our archaic tax system, made more unfair with tax breaks for the rich, creates massive burdens for the poorer lot of us.
In today’s politic, it is the bureaucracy that runs government and politicians more and more become puppets of the bureaucrats and bureaucrats live in fine feathered nests, almost with jobs for life and handsome retirement packages.
We have people living in tents in most cities in BC, yet TransLink has over 1,000 employees who earn over $100K annually.
The same can be said for almost all bureaucracies and the public, the voter has lost all rights in questioning government and god help us, never ask a bureaucrat a question, because you will never get a straight answer.
The end result, the government and bureaucracy flips the bird at the taxpayer and demands more and more money.
Example, the Carbon Tax: The Carbon Tax is a just a general tax pretending to alleviate Global Warming and climate change, but it doesn’t, rather it is an insidious tax on the poor who cannot afford to pay. The government is addicted to the carbon tax because it is good for 10 second sound bites on the evening news.
The Carbon tax has nothing to do about the environment, rather it is all about fattening the government’s election war chest to bribe voters with goodies at election time.
I know global government central bank rates are not the topic here but I wish to draw your attention to the current posted rate for Argentina. It is 78% , which is to say all commercial matters must be frozen in this country.
This condition comes from at least 5 decades of wealth concentration and regressive taxation. In the 70s I was asked by the business development executive at CP Air to give an assessment of a route between western Canada and South America. I said it was very poor because the population who could afford international travel was much too tiny. They went ahead anyway and that contributed to their subsequent bankruptcy.
I believe the case could be made that Canada is now on the same path.
In discussions of this type I happen to think that personal and national “sovereignty” is critical and at stake , especially for property taxation where the law is 100% against the individual (monopoly power).
Norm’s posting of municipal surpluses is evidence of the abuse of monopoly power.