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


Cities In Ruins

July 17, 2010

The specter of bankrupt cities begins to hang above us. News from south of our border is unrelentingly grim; the pictures grimmer still. Los Angeles, the second largest city in the U.S., like much of the state it operates within, has apparently run out of money. Detroit looks like it’s in the middle of a war zone.

Such financial contagion has yet to surface here to any degree but the rumblings can definitely be heard. Growing debt. Out-of-control spending. City employees with fat salaries, fat benefits and fat pensions to match their fat asses that they spend all day sitting on. Sound familiar?

These people have had it too good, the reasoning goes, making a better living than we do from our sweat, toil and taxes. But the good times are over. We need to reign in, tighten up and cut back. Stop spending and start being sensible again like we were back in the day.

Trouble with this line of thinking, as we see it, is that it only considers half the economic equation. If you cut spending by cutting salaries, doesn’t that diminish incoming revenue in the form of taxes? If people are making less or are fearful for their futures, don’t they likewise stop spending? Government revenue sources begin to dry up.

So it becomes like the image in Ronald Wright’s ‘A Short History of Progress’ of the Rapanui laying waste to their land to build the Maoi monuments to their gods, pleading for divine intervention in reversing an ecological downturn. The frenzy of building only serves to exacerbate the problem. An almost too perfect example of a self-fulfilling prophecy or the solution being no solution whatsoever.

We’ve been at it now for decades, public sector austerity as part of the trickledown theory of rising tides raising all boats. Hold on, hold on, hold on, I hear you screaming at me. What planet have you been on during the past 7 years? You certainly weren’t living here in Toronto. David Miller fiscally austere? Look at the numbers. Look at the numbers!

Yes well, numbers never lie do they, and always present the cold, hard truth. The fact of the matter is that David Miller’s 7 years were little more than a desperate attempt to staunch the slow bleeding of social spending brought on by cuts and downloads and neglect by senior levels of government since the federal Liberals bought into the Reform playbook in 1993. And trade deals that gutted our manufacturing base. And let’s not forget the megacity’s first mayor, Mel Lastman, and his ill-advised promise not to raise property taxes during his first term.

It was a promise reminiscent of California’s 1978 Proposition 13 that, among other things, “lowered property taxes by rolling back property values to their 1975 value and restricted annual increases in assessed value of real property to an inflation factor, not to exceed 2% per year… the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to raise special taxes.” (Thank you, Wikipedia.)

And look at California now? Blame the mess they find themselves in on illegal immigration or overpaid civil servants or whatever other boogie man you want to summon up but ignoring the price the state has paid for its greedy, self-centred embrace of Prop 13 is simply ignoring reality. Handcuffing (or ignoring) government’s ability to adapt to changing economic landscapes, good or bad, leaves the public susceptible to the mindless vagaries of chance and the market. It is nothing more than a dereliction of duty.

Almost two years ago now, governments the world over infused mind-bogglingly amounts of public money into financial institutions deemed too big to fail. The economic fall out would be irreparable. We were spared that here in Canada but still managed to throw around a lot of money into our deeply troubled automobile industry because it too was too big to fail. While afraid of what massive layoffs would do to our economy, we weren’t too concerned about the effect of wage rollbacks aside from increasing our productivity factor. Again, the argument was put forward that workers were being paid too much as the cause for near insolvency as opposed to management, for the 2nd time in a generation, was caught flat-footed by a sea change in the market.

So if an industry can be too big to fail, what about a city? What are the implications of a Detroit dying, aside from a rush to adopt the Red Wings but not so much the Lions. Can a city, full of people like they are, ever really be considered broke? If 80% of a country’s population live in cities, and people are the generators of wealth, then 80% of a country’s wealth comes from cities. I know it doesn’t work out exactly like that but the point is, if the money and wealth that is created in cities remained in the cities, then it would be hard to imagine how cities could go broke.

So maybe what we’re facing isn’t fiscal bankruptcy but more of a bankruptcy of ideas. The solutions on offer to our problems are exactly what created the problems in the first place. To pursue them would be tantamount to doing the same thing over and over again, expecting a different result. We all know what that is the definition of.

wistfully submitted by Urban Sophisticat