The Real Tax Bogeyman

June 10, 2013

A local anti-tax advocacy group responded to the news of an updated $248 million surplus as proof that we are ‘very, very over-taxed.’ taxburden1It’s a sentiment that pretty much parrots the thinking of Mayor Ford who saw the surplus as a sign he could begin trimming the Land Transfer Tax in order to make partially good on his campaign promise to eliminate it all together. It wasn’t a promise out of line with most of his opponents. George Smitherman talked of how the city was nickel and diming residents. Joe Pantalone — David Miller’s deputy mayor – hopped aboard the anti-tax boat mid-stream, pledging to ditch the vehicle registration tax he’d helped to usher in.

It’s hard to be a tax-and-spender these days.

Why? BECAUSE IT’S MY MONEY, DAMMIT!! Unlike the streets, the schools, the police, etc., etc. taxationisthefttax money goes to providing for everyone.

This anti-tax pressure is especially acute at the municipal level.

Why? Because municipalities in this province are forced to rely so heavily on one form of taxation as its primary source of revenue. Property taxes.

There’s something really visceral about paying property taxes. It’s like an attack on your home and hearth. An article flagged by Rowan Caister today about the 35th anniversary of California’s Prop 13 which severely restricted the state’s ability to utilize property taxes as a source of revenue suggests to me that it was the source of a generation’s groundswell of anti-taxation fervour. Not to mention an important factor in the steady erosion of California’s economy over the past three+ decades.

(And doesn’t Howard Jarvis, the proposition’s point man, bear the same classic phenotype as almost every other anti-tax, anti-government zealot who has come after him?)

howardjarvis

Since property taxes make up such a big slice of Toronto’s revenue pie, it’s intuitive to then assume we’re paying too much or are being gouged. Nearly 40% of the city’s revenues came from property taxes (page 28 of PDF) in the 2013 budget. That’s a lot of taxes we’re paying, right?

Well…

Here in Toronto we still pay lower residential property taxes than any other municipality in the GTA. Even factoring in property values, the city winds up right in the middle of the pack. (Check out Joe Drew’s excellent analysis.) taxmanSo when someone claims that we are very, very over-taxed, I have to ask: Compared to… ? Not our municipal neighbours, surely. What then? The 1950s?

This is not a call necessarily to raise our property taxes although I will call bullshit on anyone claiming ours are too high already. Property taxes are not the ideal revenue tool for adapting to changing economic situations. They tend to be years behind reflecting reality. They’re relatively inelastic, I think the economic term is.

We need to diversify how we generate revenue. Consider how other municipalities around the world are equipped to do so. Check out Table 2 in Enid Slack’s  A Report to the London Finance Commission. In addition to property taxes, there are sales taxes, land transfer taxes, hotel taxes, beer and liquor excise taxes, income taxes, payroll taxes. Tokyo even has something called a ‘hunter tax’. taxesareevilA hunter tax?!

Of course, for Mayor Ford and all his acolytes, this has never been about reforming Toronto’s system of taxation. We were heading in that direction with the power bestowed in the City of Toronto Act. The Vehicle Registration and Land Transfer taxes (hardly unique by international comparison) took steps toward revenue diversification but were roundly defeated in the 2010 election campaign.

The only good tax is a dead tax, it seems. And I ain’t talking an estate tax neither. Councillor Doug Ford summed up the ghosts of Howard Jarvis sentiment perfectly last year when he declared all taxes to be evil.

Such short-sighted selfishness has held sway for too long now, and much to the detriment of our crumbling infrastructure and sorry lack of recent transit building. It just isn’t good enough anymore to cross your arms and shake your head no. It doesn’t get subways built or roads paved.

texaschainsawmassacre

It simply sponges off the sacrifices made by previous generations and stiffs future ones with the bills we were too cheap to pay.

freeloadingly submitted by Cityslikr


Councillor Clueless

May 2, 2012

OK. Everybody take a seat. I’m about to write something I’ve never written before.

Ready?

I don’t understand what goes on in the head of Councillor Doug Ford.

No, wait. I always write that. Go back to standing. This is a regular thing I write about when it comes to the councillor-brother.

Yesterday he was in the Globe and Mail, leading the pushback to the mayor’s mild musings about modest property tax increases (which if not maintained at least at the rate of inflation actually constitute a tax cut) and the problem for the city’s coffer with any sort of rescinding of the land transfer tax.

“Councillor Doug Ford, the vice-chair of Toronto’s budget committee,” the Globe’s Kelly Grant wrote, “said Tuesday that he is ‘absolutely, 100 per cent’ in favour of holding the line on property-tax rates in the future.” And as for the LTT? “We have to look at the upcoming budget. And if there’s room to look at a little bit of the land-transfer tax, we’ll look at it,” the councillor said. “Eventually, [it should be] phased out. I don’t think we can afford doing it all in one shot.”

We can’t currently afford to phase out the LTT but sometime in the future we’ll be able to. What will have changed between now and then, I wonder? Oh yeah, further reduction in the role of the municipal government in our lives.

That’s what this is all about. A slow but steady erosion of the services the city provides to the population with an equal measure of tax cuts and elimination. Hell, while we’re at, why stop with the LTT? Instead of freezing property taxes, why not plug away at doing away with them altogether too?

“It’s the taxpayers’ money,” Councillor Ford said. “It’s not our money. We should give it back to the people that gave it to us.”

As usual, neoconservative/libertarians like Councillor Ford conveniently only make half the argument. They claim taxpayers fork over their hard-earned money and receive little in return. Government’s so-called ‘spending problem’ delivers few benefits and usually amounts to what the councillor likes to call a boondoggle.

But as Trish Hennessy highlighted yesterday, government spending actually translates into major benefits for taxpayers. Median households earning $66 000 annually receive $41 000 in public services. That’s what I would call getting a bang for your buck.

More intriguingly, in Councillor Ford’s arena of municipal government, it seems higher income households garner more benefits in public services than lower income households. From the full report:

The pattern of benefit from the spending of local governments is quite different from that of both the federal or provincial governments. The per capita absolute dollar benefit from public services delivered by local governments actually increases as household income increases…For higher-income households, local government is actually more important than it is for households with lower incomes. [bolding mine] In fact, measured benefit from local services for high-income households exceeds the measured benefit from federal government services.

I’d like to think that Councillor Ford rails about municipal taxation from a redistributive standpoint, calling to spread the wealth of public services the city provides a little more evenly. My guess, though, is that it comes from a complete lack of knowledge of the job he was elected to do. Respecting the taxpayer means actively supporting policies that, in fact, diminish the returns they receive for the taxes they pay.

In an Institute on Municipal Finance and Governance paper (page 7) last year, Toronto was compared to 3 other cities in terms of the sources of revenue generation available to them. Only London, England had fewer. By comparison, New York City levelled 13 different kind of local taxes. Toronto now has 3. And Councillor Ford advocates freezing one and the eventual elimination of another.

How exactly does he expect the city to function properly?

My guess is he doesn’t actually care, or doesn’t comprehend the importance in our lives City Hall plays. All taxes are evil. End stop.

I’d probably be less offended if the councillor was more upfront about his intentions than he is. Rather than blowing smoke about giving back money to the taxpayers (we already do in the form of public services), Councillor Ford should just come out and say what he’s really thinking. He wants to reduce government.

Unfortunately, to do so, he’d be advocating reducing the services the government provides to us like transit, libraries, programs, various forms of social innovation. Elect me and I will make your city less liveable and equitable!

That tends not to be a winning campaign platform.

finger to the nosingly submitted by Cityslikr


It Couldn’tve Worked Out Any Better

March 24, 2011

If he were alive today, think of what a proud papa Mike Harris would be of the municipal government in Toronto that he sired. Maybe he’s smiling down beatifically from Heaven upon his progeny and all the conservative goodness he helped wrought… Mike Harris is dead, right?

(Sorry. Can never passed up the opportunity to pilfer that bit from Stephen Colbert. A few years back, he joked about something that would have ‘Lou Dobbs rolling over in his grave.’ He then turned to ask his crew, ‘Dobbs is dead, right’?)

I was thinking of this as I read through an article Ben Bergen linked to from 1998. Megacity: Globalization and Governance in Toronto by Graham Todd in Studies in Political Economy. Of the many reasons the Harris Tories rammed through Bill 103 in the face of widespread opposition to it throughout the entire 6 cities facing amalgamation, one was particularly nefarious if highly speculative and largely restricted to the old city of Toronto and the borough of East York. It suggested that the neo-conservative Harris was looking to smother the more liberal downtown tendencies under a stuffed suburban pillow that was more closely aligned to his politics. Such thinking gained a degree of legitimacy when the mayor of North York, Mel Lastman, defeated Barbara Hall, Toronto’s final mayor, in the first election of the new megacity.

Now a third administration in and it’s interesting to note that the mayor and his most trusted advisor, Councillor Doug, are from Etobicoke. The Deputy Mayor is one Doug Holyday, the last mayor of pre-amalgamated Etobicoke. The Council Speaker is Frances Nunziata, the last mayor of pre-amalgamated York. The Executive Committee is made up entirely of suburban councillors save Cesar Palacio whose downtown ward butts up against suburban York. A certain pattern emerges regardless of how intentional.

Of course, if we want to dwell on the damage inflicted upon this city, both downtown and suburban, by the ill-thought out amalgamation, there would be worse examples than those currently at the helm. Not a whole lot worse, mind you. But most definitely worse.

To lay the blame for our current fiscal crisis solely on the profligacy of the Miller administration, to spuriously point to the big budgetary numbers that grew during his 7 years in office as even the moderate councillor, Josh Matlow, did on Newstalk 1010 last Sunday, as proof positive of waste and gravy at City Hall, is to suggest that only what happens in the last two years or so matter. It denies history, really, or at least, your grasp of it. Or it suggests you’re just an ideologue.

The provincial Tory view of the reduction of costs through an increase in efficiency with amalgamation was suspect to many from the very beginning of the exercise. (Enid Slack, current Director of the Institute on Municipal Finance and Governance, wrote back in the early days of amalgamation: “It is highly unlikely, however, that the amalgamation will lead to cost savings. On the contrary, it is more likely that costs will increase.”) Most studies since have backed that view up.

In fact, how the Tories went about amalgamating flew in the face of the neo-liberal world view they were espousing. “Flexible forms of governance,” Todd writes, “it is thought, are more consistent with the reality of and necessity for competitive, export-oriented, knowledge-based, whiz-bang approaches to economic development.” So the Harris government replaced 6 smaller municipalities with 1 big, lumbering behemoth and claimed that it would be somehow more efficient? More cost effective? They seemed to have mistaken having fewer local governments for flexibility.

Or maybe they were just using a different definition of the word ‘flexible’. Todd suggests in the paper that unlike previous municipal governance reforms that had intended “…to consolidate the role of local government and the public sector in regulating development…”, the 1998 amalgamation was intended to do just the opposite. It was never about dollars and cents. That was simply a red herring to make the process more palatable. There was still going to be the same number of people demanding the same level of services whether they came from 6 governments or one. At some point of time, economies of scale simply don’t work.

It was all about control of how the city functioned. One government over a wider area was politically more pliable, flexible if you will, and easier to deal with than six. There were more differences of opinions, a wider area of dissension to exploit. Imaginary savings were offered up in exchange for the keys to City Halls. By the time we realized that, what were we going to do, de-amalgamate?

Add to this loss of local control and inevitable rise in costs of running a bigger city, there was that whole downloading/offloading of services onto Ontario municipalities by the provincial government. Cities told to cough up portions “… of provincially mandated social services such as social assistance, public health care, child care, homes for the aged, social housing, disability and drug benefits”. Some, I repeat some, of which have been uploaded back to the provincial government, slowly and on their time line. A $3.3 billion gap according to the Association of Municipalities of Ontario estimated back in 2007.

Of course let’s not forget the de-funding of their half of the TTC annual operating budget that the Harris Government undertook and that has never been reassumed by Dalton McGuinty. Call it $200 million/year that Toronto property taxes must come up with. Add to that the hundreds of millions of dollars foregone by Mel Lastman during his property tax freeze during his first term. A brilliant fiscal move copied by our new mayor on his first budget cycle, along with eliminating the vehicle registration tax and any other form of revenue generation the province had given the city with the City of Toronto Act. No, no. We don’t want that on our hands. We didn’t ask for that responsibility.

Instead, we’ll blame the last administration for our financial woes. We’ll blame the lazy unions and other special interest groups that are looking for handouts. The Gravy Train has stopped, haven’t you heard. The time has come to privatize anything that isn’t nailed down. Sell off lucrative assets too if we have to. Maybe even if we don’t. Everything is on the table.

Yeah, it’s hard not to view our new mayor as the inevitable outcome of decisions made nearly 15 years ago. The offspring, the love child of our former premier. Too bad Mr. Harris didn’t live long enough to see the success his political son had become.

condolencely submitted by Cityslikr