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Toronto's Business Property Tax Increase
29/04/2004

An association that represents small businesses in Toronto -- The Toronto Association of Business Improvement Areas -- has issued a press release about the City's new budget that warns "Tax Increases Threaten Toronto's Future".

Their concern is that a 1.5% increase in the commercial tax rate will cripple businesses, particularly small businesses and those trying to compete with the 905 region.

Now, I certainly understand that everyone would prefer their taxes to be lower than they otherwise would be, all other things being equal. But, I find this complaint to be somewhat exaggerated and unreasonable.

The first thing one needs to keep in mind about municipal tax increases is that they are defined differently than other tax increases. Unlike income or sales taxes -- which produce more revenue every year as a result of inflation -- property taxes are automatically adjusted to cancel out inflation. So, assuming city government costs go up at the rate of inflation, there also has to be a rate-of-inflation tax increase just to keep up. There's no other way.

The press release makes a point of saying that Toronto has "supported the maximum tax increase possible under law for commercial property". For the past 6 years, that figure was 0 -- the province outlawed commercial property tax increases in Toronto. Over that period, according to the Bank of Canada inflation calculator, a real dollar declined more than 14%. And for this year, the tax increase is still less than the rate of inflation.

Of course, one could hope that City costs could be contained below the rate of inflation. This would be tough given that Toronto has been under pressure for years now. Additionally, the city is still feeling effects of wage harmonizations as a result of the forced amalgamation.

The National Post's Peter Kuitenbrouwer was watching Toronto's budget process. He wrote a column yesterday -- not available online -- that was titled "Disorganized right gives a fat budget easy ride". But he does very little to demonstrate that, in fact, this is a "fat" budget.

He asks, but doesn't answer, questions like "Why is it, as councillors have pointed out, that the city employs more people now than before amalgamation?" Perhaps it has something to do with the additional service roles that were downloaded onto the City simultaneously!

He asks, but doesn't answer, "Why is it that we haven't found a way to save any money on fire-fighting?" But sensible analysts predicted that amalgamation wouldn't produce savings.

And he claims that council didn't address the police budget in a substantive way without mentioning that the provincial police act explicitly removes City Council from that role.

Yes, there are things that can be done in the coming years to help the city's financial situation. Foremost is cooperative pressure on the provincial government to redress issues like social services downloading and the "special" Toronto rates for education taxes. But a tax increase on businesses this year was neither necessary nor easy to avoid.


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