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Index for my Toronto Budget 2004 project
Toronto Business Property Taxes
18/03/2004

This week the province made a partial concession to the City of Toronto on the business property tax front.

The province partly lifted the Bill 140 freeze that prevented the City from increasing property tax rates on businesses. After a five-year lock, the City is now allowed to increase commercial tax rates, but only so long as those increases are half the increase applied to homeowners. In other words, since the City is planning a 3% increase on residential property taxes, commercial rates can go up 1.5%.

The City had been counting on a 3% increase across the board, so there's now a further $26-million gap that needs to be filled somehow.

Business lobby groups are complaining, but to keep things in perspective, this year's increase will be lower than inflation. (And, as I said, there has been no increase in five years.) Additionally, commercial property taxes have actually been declining, anyway, as their growth in assessed value hasn't kept up with the increases in home prices.

On the other hand, the Toronto Board of Trade claims that business property taxes in Toronto are second only to New York City. I haven't had a chance to investigate this yet, but it is nothing to sneeze at.

Much more disappointing, however, is the case of provincial education tax rates on commercial properties. As John Barber explained in the Globe on Tuesday, they simply have a special rate for Toronto, for no reason at all:

[Finance Minister Greg] Sorbara's adherence to Tory policy was made even more plain by his decision not to address even more irritating anti-Toronto provisions in the property-tax regime, especially its wildly inequitable business education tax. Under the Tories, all businesses in the province were required to pay taxes for education at a standard rate -- except in Toronto and other cities where, by historical accident, they paid taxes for education at two times or more the fictional standard rate.

Provincial spending on Toronto schools is no greater than it is anywhere else, but Toronto businesses still pay far more than others to receive an identical service. City businesses pay education tax at a rate of 2.3 per cent of their assessed value, while businesses just across Steeles Avenue in Vaughan pay 1.76 per cent. Unless you think that income-tax rates should also vary depending on where taxpayers live, there's no policy rationale for it at all. It's just a crude grab.

City officials have estimated that reducing Toronto education tax rates to the regional average would save local businesses $120-million a year. Appropriating even half of that "tax room" to fund threatened municipal services would still leave enough behind to permit a substantial tax cut for businesses.

But Mr. Sorbara never even mentioned the business education tax. Instead of doing what is so obviously right -- deciding to levy a universal tax at a standard rate -- he gave the city a limited "right" to raise business taxes even higher. The reason why he balked is likely the same reason why the Tories failed in their promise to level the tax field: Being fair to Toronto will require other towns and cities to pay higher education taxes. For reasons that have nothing to do with fairness and everything to do with politics, that will never happen.

I've often wondered -- isn't this a violation of our rights to equal protection under the law? What gives the province the right to arbitrarily charge different tax rates to its residents based simply on where in the province they live? Those municipal borders were created by the province to begin with, and we're all citizens of Ontario -- so why does Queen's Park discriminate?


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