PROPERTY TAX IN VANCOUVER 5

Part 5

Misrepresentations of business advocates


As we have noted, the Vancouver Board of Trade [see Board of Trade Events Calendar, published March 16,2005] claims that business was unfairly paying huge subsidies and
we have quoted their bold claim:

"Business has paid huge subsidies in property taxes. Property taxes paid by
business to city government-and particularly the civic property tax on business properties in the City of Vancouver-are badly distorted."


One difficulty with this argument is that nowhere in the business propaganda does on find any explanation of how it comes about there is a disproportion between the business and residential tax share,or how the history of that developed, or why the business share in Vancouver is any more or less unfair than anywhere else in the Province or the Country. In dealing with this matter at City Council over the years, there has been quite a surprising vagueness about this critical historical fact.
At the time when business advocates were particularly vociferous, the Vancouver City Council retained some accountants to make a study. In this study, which was brought to Council at March 17, 1995, the accountants did not state that any particular policy was preferred but simply that there appeared to be some kind of consensus:

"While further work would be required to address these other issues, much of the
impetus for the study has been concern from the business sector that the
present tax rate and consumption ratios are too high. It is not necessary at
this stage, to define the 'ideal' long run relationship so long as it can be
agreed that the preferred long run consumption ratio is no more than 3 to 1."


[Project Report; Study of Consumption of Tax Reported City Services; Volume
1;Main Report; KPMG, Page 7]



As we stated earlier, it was after this report that on five of ten years, the city did effect a systematic shift, loading many millions of the tax onto the residential ratepayers.

We note however that there is an avoidance of any appearance of recommendations in the report. At Page 33, the consultant's comments were as follows:

"The selection of the preferred long-run target policy is a subjective one.
Most of the individuals with whom we reviewed this issue, have acknowledged
that there should be a distinction between residential and business properties.

There is considerable support for the view that the target consumption payment
ratio should be not more than 3 to 1. In the long run, we understand that much
of the impetus for the study has been a concern from the business sector."


It is quite clear from this quotation from the consultant's report, that no recommendation is attached, indeed they have very nearly framed the words in neon lights, that what they are submitting to the Council, is what the business interests have presented to them. And this has to do not with class shares but the tax rate
and what members of each class pay per each $1000 of market value.


All the more strange then that we often find in the publications of the business advocates the constant complaint that the tax is unfair because business does not vote, that business is shouldered aside in the municipal government. The truth, as regards the history of property tax policy, is that a great deal of the adjustment and measurement, and studying, and introduction of delays, caps, three year averaging and continual revisions in the property tax shares (five times in ten years) has been in response to constant self obsessed complaints of business. When one considers the occasions when the residential interest was served, the fact is that the severely skewed distribution of values of residences in Vancouver means once again it was the wealthy rate payers who gained most, just as wealthy business did. Residential rate payers only gained a little bit in what has really been a series of favors mostly to business with a few to the rich residential owners. The same is true of the property tax deferment measures as to amount. Them as has, gets; as they say.

[For the recital of benefits to business, and residential since 1989 see City of Vancouver Report of Finance Director to Committee on CS&B April 28,2005; Appendix E at pages 1, 2]

This is true even in the few cases of relief, supposedly for the benefit of homeowners on fixed incomes, such as three year averaging. It is true that this procedure smooths out a big increase that may come in one year, but the total amount of taxes that needs to be raised in that year (the tax LEVY) is still the same. If one homeowner does not pay as much of it as the system requires then some other homeowner and ratepayer must do so since that is what the city needs to operate, and the Provincial law requires that there be no deficit. If one asks what rate payers will make up the difference it will be all the rate payers who do not benefit, and given the numbers, that means the great majority of rate payers who have property values at $500,000 or less (that is, more than 60% of business and more than 96% of residential at values under $1,500,000).

[Letter from City Finance Department; February 28, response to inquiry re distribution of property ownership]

That is about as regressive as you can get.
"It must also be recognized that many people truly do not care that their
houses have risen steeply in value because they do not have any interest in
selling and moving. In this sense the increase in their wealth is illusory. In
many of these cases, the increase in wealth is not matched by any increase in
income.It is also true however that to soften the blow for those receiving the
large assessment increases means that those whose assessments increased less
will to pay more in taxes than otherwise."

[City of Vancouver; Report of Municipal Taxation Review Commission ; March 1989; Page 22]



It may be noted that the ordinary ratepayers of Vancouver, the great number of residential homeowners, are generous in their disposition of provide for what is needful, while the business people are mostly cheap and constantly complaining:


"Angus Reid reported that 68% of business community members surveyed believe
the current level of property taxes they pay are too high, a full 22% more
than residents. Further, Angus Reid reported that over 60% of residents
surveyed supported paying an additional eight percent in property taxes to help
maintain the level of services they currently receive. This compares to only
one third of all business respondents supporting a 4% tax increase."

[City of Vancouver; Director of Finance Report to Committee on CS&B April 24, 1997. Page 1. See also Ipsos Reid poll reported March 31,2004, Residents Prefer Property Tax Increase over Municipal service Cuts; Press Release.This latter
survey is residents, but does not report business].

And this conduct, as indicated in the Angus Reid survey, is despite the fact that there is no doubt the property tax is severely regressive. The regressive structure of the tax has been noted in several studies of the property tax in Canada:

"A comparison of the results of the different models generates some useful
observations. Regardless of the model, each suggests that the property tax is
regressive at the lower levels of the income scale."

[Property Taxation in Canada; Harry M. Kitchen; 1992; Canadian Tax Foundation; Page 52]




The same hands-off theme that we noted in the accountants' report when no opinion supporting the claim for business tax relief was offered, has been echoed in the comments of the City Manager of the City of Vancouver over the years, most recently in a policy report relating to property taxation. This policy report was presented by the Direct0r of finance to the Standing Committee on City Service at April 28,2005.

[City of Vancouver Policy Report--Property Tax; April 28,2004, CS&B Committee)


In this report we find the following at Page 2:


"The city manager notes that establishing property tax policy, is one of the
most difficult decisions a council must make. There is no formula and no right
or wrong answer to the question of how the cost of the city's tax report
and services should be distributed among the various property classes. Every
municipality throughout the Province must determine how their taxation
objectives should be reflected in tax distribution."

The city manager's opinion, so far as one is stated in this report, is shown in the next two paragraphs:

"The business community argues that the taxes on business classes are
inequitable compared to the residential classes and proposes a major change
in how tax rates are calculated and in the distribution of the LEVY. The city
manager is not supportive of this approach, noting that the proposal could
result in considerable instability in the distribution of the tax LEVY from
year to year, a result that council would be unable to control."



"As to the question of whether the business sector is bearing an unreasonable
share of the tax burden, the answer is not so straightforward. In the mid 1990s
the Council acknowledged an inequity and in five of nine years in 1994 to 2003
approved shifts of the tax levy totaling $15 million from the business to
residential classes. However, no target distribution was ever established."



The report goes on to note that what business was proposing as of 2005, was a whopping 18% increase to the residential class or $82 million shifted from the business class. The clearly excessive character of this claim shows a lack of good faith by business and their advocates. The point we make here is, is that there has never been, and there is not today, any justification given for such a massive change in tax policy, which already favors business to an extreme degree. And we maintain that the already existing tax policy is to be found right across the country.


Returning to some of the representations made by the business propagandists, we have noted that in the submissions of the Canadian Federation of Independent Business
and the Vancouver Board of Trade, we have seen no mention of the transfer of the business tax, the fact that any comparability of Vancouver with other western cities has to start with adding their business tax to their property tax, or the full appreciation of the advantages of passing on a tax, and tax deductibility that go to business.

To the contrary, where they mention tax deductibility at all it is for the purpose of complaining that many small business have a hard time making their way, as though there was any relief at all for the residential homeowner. Of course there is not, in the great majority of cases, and after three years of non-payment (with interest added every year) the property will be posted for tax sale. Why does the same CFIB which is constantly complaining about the myriad subsidies it sees everywhere, calling for the small business owner to be subsidised to the amount of a tax it passes on, will deduct, and therefore does not finally pay? Such an argument would be contradictory but it would make about as much sense as many of the propositions one can find in the arguments of the business advocates, that is, no sense at all.


Accordingly, there has been a standard and well-established history of a disproportion in property tax between business and residential shares for many years in Canada, affecting thousands of municipalities, at least 153 in BC alone.
There is further reason for an extra element of disproportion in Vancouver noting the the cancellation of the business tax in 1983. The very recent comparisons with other Western cities show that Calgary collects even more than Vancouver from business (at 2001 according to the figures published by a business advocate) when the merger of the business tax is taken into account. Also there is the critically important fact that the Federal and Provincial tax treatment of homeowners and business is unequal for good and necessary reasons in Canada. Compare the US homeowner who can make all the deductions. None of these matters are reflected reasonably (or at all, for the most part) in the propaganda of the Vancouver downtown business interest.

One has to wonder what would happen if the Federal government stopped allowing any of the various deductions that business can claim on property, such as the property tax, as it now forbids homeowners. Would business seek to recover it twice? It has already claimed the property tax now is an unfair burden on business, and that is under present conditions when deduct can deduct it.


Part 6 to come