Property tax assessment windfall should lead to lower tax rates

I sympathize with municipal governments. They are almost totally reliant on property tax revenue and sometimes on transfers from the provincial government to fund services and invest in infrastructure but, in most cases, when there is a windfall increase in property tax assessment, it should lead to municipalities lowering tax rates. I’m not suggesting this is universal – there may be some municipalities that are struggling to offer good quality services.

It is likely if you have ever spoken to anyone who has moved here from elsewhere in Canada they will complain about property taxes. I have had people tell me they were shocked at how much property taxes they had to pay.

In reality most of them haven’t thought about the issue enough. They just think “the assessed value of my house went from $1.4 million in Toronto to $290,000 in Fredericton but my tax bill is the same!” “How is that possible!”

But if you think about it for a moment, the services your taxes pay for in Fredericton cost a similar amount as in Toronto – maybe more or less but – the salaries of a police officer are not 80% lower than in Toronto. On a per capita basis, the cost of local services might be modestly lower in Freddy than Toronto but actually could be higher if the larger cities benefit from economies of scale.

So a better measure would be property taxes as a share of household income or something.

The Globe and Mail has great examples: $1.8M property in Toronto, $6k taxes. $1.5M 1,800 sq. ft bungalow in Etobicoke, $4.5k taxes. $700K condo, $2k in taxes. Poor old David C – $4.5K taxes on an assessment in the low to mid $200s.

So give municipalities a break.

But at the same time, if assessments go up well above a ‘normal’ increase, that should not have councillors salivating – it should force a sober conversation about tax rates. Maybe you could even bring them down once in a while.