PROPERTY TAX IN VANCOUVER 9

Part 9 Other Taxes Collected by Vancouver


We add that it is not the City of Vancouver that sets certain other elements of the total amount of taxes paid based upon the property tax notice that comes out yearly from the city. Provincial taxes relating to education are collected by the city and appear on the tax notice but the values that are claimed, the method of claiming them, and specifically the amount of these "taxes" are set completely independent of the City by the Province. There are also the other classes of the nine listed in the Assessment Act of which Vancouver derives income from seven as is stated in City Policy reports. Some of the minor ones are set by historical tradition, it seems, some by a formula in a Federal or Provincial law, and with some it is not clear if there is any set rate and it maybe whatever and whenever the Federal Government pleases, (revenue from the Federal business of the Port of Vancouver). Since the proportion of the class shares are fairly close as between business and residential, it may be useful to review the extent to which Residential or Business include items that are perhaps, not really either, and as to the exact amount of the rest, other than residential and business, is it 2% or 5% or what. Should something be added to business, or taken away, and vice versa as to residential,. However, it seems unlikely that the answers to these points will substantially change the tax rate.



Cross-Subsidization Claim


Not only do the advocates of business complain about property tax ratios without any attempt to expain why a difference should exist, they try to introduce, by implication, the argument that there should be no difference at all. They do this by complaining that there is some sort of a cross-subsidization when the ratios of class shares, of business to residential are not equal (1:1) in the different municipalities, although they mean tax rates, not shares. For instance we find the CFIB producing a report complaining about tax inequities and the "tax gap" in Saskatchewan in which they reason that such differences are not equitable and that therefore "...a cross subsidization results."

[Property Tax Inequities in Saskatchewan, publication is CFIB,December 1,2003,page 7]


When tax rates between business ands residential properties are not equitable a
cross-subsidization results. This means that if businesses are paying for more
than their share of services consumed, they are sbsidizing residential property
owners."


A little earlier they say that there should be a "relationship" between the amount of tax paid by business and the costs of the services received by the business. They state:

"When this correlation exists, the tax is fair , based on the benefits received
and accountable, as the consumers of the services know their true cost."


We note the sneaky presumption contained in the statement. They do not say exactly what the relation should be (1 to 1, 7 to 1, 3 to 1?) just that there should be one. Nor do they say why there should be any particular one, just the prim and totally false claim that the consumers will know their true cost. Why? Were they, the ratepayers going to set up their own fire hall? A tax ratio does not imply any particular class share, or vice versa, so how would they know what either is until there has been some experience anyhow? The deceptive intent is clear to see. It is also rather silly. Is business subsidizing residents if more residents call for police help than businesses do? Won't business brag to lure employees or customers that Vancouver is a "safe" city to live in, which it is, or that in Vancouver "crime is going down" which it is in terms of violent crime. But is that not business as a "consumer" of City services? What shall we call it then, one of those Free Riders? Can we abandon efforts to move quickly on "domestics", calls for police help usually from wives with complaints about their spouses, because business is being unfairly taxed for this? If there are lots of fire calls from one neighborhood but very few from the few remaining businesses there, should the business "consumption" be a reason to reduce their property tax? Will business in Vancouver improve the City or the business image of the town when the news goes out that Vancouver has dropped the "zero tolerance rule" for sex or marital assault? Is it useful to try to distinguish between immediate and ultimate consumers of City services?

Shall we have Pay or Burn as a user pay principle for the Fire Department? Can a ratepayer decide to swear off using the sewer, the water lines, the roads, the political acitvities of the Mayor and Council they do not like? Do the dollars paid in property tax by any ratepayer have any direct relationship at all to "consumption"?

Has any user fee ever been set on the basis of true cost or has it been set to raise a revenue to help pay a service, and sometimes to mollify these business advocates? If so that is assuredly a wrong use of Property tax. But that is what is done.




Suppose the residential owner in Vancouver said, well it appears that business does pay the property tax at the beginning but it is all recovered from its customers, and even if it was not business can and does deduct the full value of the tax from the taxes it pays to the Federal Government, so they really cannot lose. It seems to us that we are subsidizing business by nearly $240 million a year (2005) and we think we are entitled to a level playing field, so business should pay off all that, with the individual payments based on the whole amount spread over the class and rated to each member proportionate to their property value as a proportion of the whole, same as the tax rate. This subsidy must be recovered (although it is hard to see how we can get one step ahead of Revenue Canada). Business has been babied too long and it is time it stepped up and paid its share.




The argument actually made by the CFIB was that if the tax gap is between 2.9 for one community and 1.3 for another regarding an imaginary property worth $100,000 as it will be taxed in each different community, that this was some sort of a cross-subsidization of residential property owners. The argument is a clear case of special pleading. Any business coming into one of these communities could readily determine what their property tax was before the located there. And if they thought it was too high in one community, they could relocate to another. With nearly as many different rates as there are communities in BC (153) they have their choice, if we assume the basis of location is property tax. As we have mentioned earlier, the likelihood is that the property tax is a small amount in the consideration of the firm's costs so that not much attention will be paid to it. It would not be a factor in location at all. The economic verbiage around this argument about location, cross-subsidization, inefficient use of resources, opportunity cost, unknown cost-of-service and so forth is simply posturing and has no real commercial value. Whatever happened to competition anyway, since there really should be a bunch of rates with the buyer of City services and locations (business) free to shop around.



Part 10 to come