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DebraW
03-06-2007, 10:46 AM
Property taxes too high? Just wait ...
Market-value taxation undemocratic, and sure to lead to sharp increase next year

Lorne Gunter, The Edmonton Journal
Published: Sunday, June 03, 2007

Think your property tax increase this year was exorbitant? Just wait until next year.

With home prices in some city neighbourhoods already increasing more this year than they did all of last year, the municipal taxman will be even greedier in 2008, unless council puts an end to it, which, of course, it won't.

So who, exactly, authorized property tax increases of 15, 20, even 30 per cent in a single year? City council voted for only (only!) a 4.95-per-cent rise. So how come many house and condo owners got dinged with increases six and eight times that big this week?

Let's see the voting record showing which councillors approved this.

Of course, there isn't one, because there was no vote for these extortionist rate hikes.

Back in the early 1990s, Edmonton (and many other Alberta municipalities) moved away from a replacement-cost calculation of property tax to a market-value one.

Instead of assessing your tax bill based on how much it would cost to rebuild your home in the current market, the city switched to calculations based on how much more your home could sell for today than a year ago.

That's why I warn you to hold onto your wallets for 2008. With housing prices continuing to shoot through the roof, next year's municipal tax bills could be larger still.

No councillor in his or her right political mind would vote directly for a 25-per-cent, or more, bump in property taxes. But through a combination of stealth and cowardice, councillors can sit back, feet up, hands interlocked behind their heads sniggering while the city government reaps windfall tax gains.

Market-value-based property taxes amount to taxation without representation. The tax gains are sneaky and undemocratic. Municipal politicians don't have to be accountable for the huge increases. Thanks to a hot housing market, the increases just happen. Councillors' attitudes may as well be, "Hey, don't blame us, blame the boom. We just work here."

At least when Ottawa and the provincial government decide to gouge the middle and upper-middle class on income taxes, they usually vote for increases directly.

Rod Risling, the city's assessment and taxation branch manager, brushed aside complaints about the unfairness of this year's tax increases by explaining that 50 per cent of property tax hikes this year were below average, and 50-per-cent above. "For every person that saw an increase greater than the advertised number, there is going to be someone on the lower side."

But still, that is a disingenuous answer. That means property taxes have become a lottery in which there are winners and losers, but no one can predict with certainty which category he or she will be in until after the numbers are drawn.

As citizens, we have a right to know what our taxes will be, who set them at that level and why.

With market-value assessments, everyone's final bill is set by caprice.

Now I can already imagine the letters government- and tax-lovers are going to write sneering at me complaining about something labelled "market-based."

Save yourself the trouble. Taxation is not voluntary. It is not a freewill transaction like a purchase in the market. The reason the market is superior to government is that we may choose to be consumers, or not. We have no choice to be taxpayers.

If you bought a car and the dealer told you the price would be five-per-cent higher than last year, but when you went to pick it up he said the price would now be 30-per-cent higher, you would have the right to walk away because he had broken your deal.

But if you refuse to pay 30-per-cent more property tax this year because council only approved a five-per-cent increase, the city will begin proceedings to take your house for back taxes after giving you a year to pay your arrears.

For those who think it only fair that people pay more tax when their house values rise sharply, consider that such homeowners are not likely to sell any time soon -- so they are paying much higher taxes on a benefit they are not receiving.

And their incomes may not have risen in lockstep with their houses' value. So they have no greater means with which to pay their staggering increases.

This year's market-based increases are based on a rise in paper worth, not real income.

And what if home prices fall? Would those who are cheering on market-value tax increases also support refunds for those who pay more during the high-value period, but who don't sell their home until the price is lower?

Not likely.

Nor is the city likely to scale back its tax grab when house prices inevitably decline. By that time councillors will be addicted to the higher revenues and will concoct some excuse for keeping them.

Mayor Stephen Mandel and others have blamed current and forthcoming tax increases on city growth. But in the past decade, almost 70,000 new taxpaying families have bought homes in Edmonton.

What happened to the extra revenue from their property taxes?

[email protected]

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kcantor
03-06-2007, 11:00 AM
And everyone who is prepared to sign over any of the increase in the value of their home to the city when and if they ever decide to sell should be exempt from any increase in their property taxes in the interim...

JayBee
04-06-2007, 07:35 AM
Dear CanWest:

Do you really want to be seen as anti-Alberta in Alberta? Fine, keep employing that writer. But if you really want to sell soap, know that Gunter (and the rest of his weekly social club (Kerry Diotte, among others)) is out of fashion.

You too obey the invisible hand, and I'm sure you're aware that alternatives to printed media are readily at that hand. People continuing to abandon both dailies is not impossible at all. Nor, clearly, is acceleration of that trend. And the threat of letter writing campaigns directly to your advertisers has not even begun to have been explored.

Do you want to make Edmonton and by extension Alberta, better, or worse? This is a serious issue. I think I can speak for a large number of people who would like you to support Edmonton, rather than bash its nascent ambition.

Your decline in per capita readership, coincidental with Diotte's Sun's, is noted, and the reasons are obvious. If you won't change course (during or even after this election campaign), I suspect yet more of your readers will.



Yours sincerely hoping nobody feels a need to put some effort into something,
J.B.

Dusty Bear
04-06-2007, 09:05 AM
Don't you love when Lorne Gunter writes about topics outside of his knowledge?

He unloaded both barrels on council for using market-based assessments, but fired on the wrong target. The provincial government legislated the change to market assessments.


Plus there was this little gem:


Taxation is not voluntary. It is not a freewill transaction like a purchase in the market. The reason the market is superior to government is that we may choose to be consumers, or not. We have no choice to be taxpayers.

Gunter has oft-argued for privitization of health care, but this choice statement undermines his case. People don't choose to get sick, either.

IanO
04-06-2007, 09:43 AM
"Mayor Stephen Mandel and others have blamed current and forthcoming tax increases on city growth. But in the past decade, almost 70,000 new taxpaying families have bought homes in Edmonton.

What happened to the extra revenue from their property taxes? "

how many new roads, how many new sewers, how much more for fire/police, etc etc etc etc etc

lux
04-06-2007, 06:14 PM
I've said it before and I'll say it again. New citizens should not be a net drain on Edmonton. If it costs us more money than it is worth to bring people to Edmonton, then Sherwood Park and St. Albert can have them. He is right about this point.

Overall, I think Gunter is right to criticize Market Vaule Assessment but for all the wrong reasons. Firstly, he is just talking nonsense about a city tax grab. The province REQUIRES market value assessment.

The real problem with is MVA that is it punishes people who invest in keeping up their homes. People who improve their houses this year do not make any more demands on city services than they did last year. All they have done is increase the value of their homes and their neighbourhoods, and for this they are punished with higher taxes.

Tis totally unjust.

m0nkyman
04-06-2007, 07:44 PM
Last sale price would be a good way to do it. It would slowly increase the taxes on areas that are undergoing a renaissance, while protecting seniors who don't want to move, and also people who are investing in their own home.

kcantor
04-06-2007, 10:58 PM
Last sale price would be a good way to do it. It would slowly increase the taxes on areas that are undergoing a renaissance, while protecting seniors who don't want to move, and also people who are investing in their own home.
that in fact is an excellent way to do it. taxes are not "fixed" as there is still the potential for some increase in the mill rate to look after general increases in the provision of municipal services as time goes on but you don't get hit "twice" after you made your decision to purchase based on current expense levels including taxes. i believe there are still some jurisdictions in california that do indeed fix the value at the time of sale.

the other alternative is to move further away from taxing the capital investment or the value of the property and move closer to charging based on a "fee for service" formula. That way the Cecil Hotel (anybody miss it yet?) that was a constant drain on municipal services but wasn't "worth" very much would not pay less taxes than the MacDonald Hotel which was a net contributor and then some no matter how you measured things.

DebraW
06-06-2007, 06:41 AM
Better revenue sources

The Edmonton Journal
Published: Wednesday, June 06, 2007

Re: "Property tax increase frustrates homeowners," by Ken Cantor, Letters, June 3.

Cantor writes, "If we stop paying for education in our property taxes, average earnings will go down (along with the ability to pay any taxes) while other costs rise as a result." This makes no sense.

It sounds like someone swallowed the deliberately-misleading gobbledegook put out by government spinmeisters.

Property taxes are not based on the ability to pay (i.e. they don't reflect income) and are generally regressive. The government has several other sources of revenue which are more appropriate to the financing of education and which are inherently fairer.

But that is not this government's concern.

David Owen, Canmore

The Edmonton Journal 2007

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DebraW
06-06-2007, 06:43 AM
Better revenue sources

The Edmonton Journal
Published: Wednesday, June 06, 2007

Re: "Property tax increase frustrates homeowners," by Ken Cantor, Letters, June 3.

Cantor writes, "If we stop paying for education in our property taxes, average earnings will go down (along with the ability to pay any taxes) while other costs rise as a result." This makes no sense.

It sounds like someone swallowed the deliberately-misleading gobbledegook put out by government spinmeisters.

Property taxes are not based on the ability to pay (i.e. they don't reflect income) and are generally regressive. The government has several other sources of revenue which are more appropriate to the financing of education and which are inherently fairer.

But that is not this government's concern.

David Owen, Canmore

The Edmonton Journal 2007

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DebraW
06-06-2007, 06:54 AM
Letters to the Edmonton Journal June 06, 2007

Tax hike may be final straw for voters

The Edmonton Journal
Published: Wednesday, June 06, 2007

Both Calgary and Edmonton use market value assessment to determine property taxes. House prices in both cities went up a lot. According to the Canadian Real Estate Association, the average house price in Calgary is still higher than in Edmonton.

Calgary has grown a lot more than Edmonton has. Every time I go to Calgary, I see that Calgary has completed yet another capital project. I have seen the following interchanges completed on the southside, where I used to live: McLeod Trail and Anderson Road, McLeod Trail and Canyon Meadows, McLeod Trail and Midnapore.

Edmonton's interchange at Gateway Boulevard and 23rd Avenue is still on the drawing board.

In Calgary, the south LRT line has been extended with four stations and the northwest line with two. There have been many more capital projects completed.

Yet my property taxes in Calgary for the past two years went down, while my property taxes in Edmonton have gone up.

I must conclude that Edmonton city council is doing something wrong. I give Edmonton city council a failing grade in budgeting and managing finances. I will not vote for the incumbents in October's municipal elections.

Rene Loe, Edmonton

Share costs evenly

The Edmonton Journal
Published: Wednesday, June 06, 2007

The southwest appears to have been hit hardest by the annual reassessment. As irksome as this may be to residents in the affected neighbourhoods, it raises a larger concern with market-based assessment: when the market is as excited as this one is there is bound to be some distortion.

My bill increased 13 per cent, but I won't complain about an extra $25 per month, since my wife and I can afford it and I assume the city spends the money wisely.

My concern is that these increases, on top increased energy bills, are hitting seniors and others on fixed incomes the hardest. This is a heartbreaking prospect in a neighbourhood like mine where seniors, who in many cases built their homes, are slowly being edged out of their communities.

In addition to considering the inequities in our municipal taxation system, the city needs to diversify its revenue streams with more strings-free provincial money and appropriate regional revenue sharing so that the burden of dealing with extraordinary growth and cost escalation is borne by all contributing parties, not just Edmontonians who happen to live in hot-market neighbourhoods.

Don Iveson, Ward 5 candidate for city council, Edmonton

A bigger bite

The Edmonton Journal
Published: Wednesday, June 06, 2007

When I moved into my home in 1986, the property taxes were less than a third of my gross monthly income. The taxes were just less than $1,000 per year.

Now that I am retired, the property taxes are almost the same as my Old Age Security, Canada Pension Plan and private pension money for one month. This year's taxes are about $400 up from last year.

Something isn't fair.

Robin Leech, Edmonton

Paying more for less

The Edmonton Journal
Published: Wednesday, June 06, 2007

My property taxes rose by 35 per cent from last year, to an incredible $3,756.86 for a simple townhouse condominium. This amount is especially unbelievable considering the poor level of municipal services.

Early last winter, there was no snow removal. Tonnes of dust and dirt have not been removed from the street. You have to drive slalom not to break your car's axle.

How many wake-up calls do conservative Albertans need before they take political action. This could be the decisive one.

Thomas Messer, Edmonton

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DebraW
08-06-2007, 08:26 AM
Conflict of interest in city's tax method
What other government sets the taxation rate and the value of a taxed property?

Lorne Gunter, The Edmonton Journal
Published: Friday, June 08, 2007

Property taxes "do not automatically go up based on increases to market value assessments, and the city does not automatically get more revenue based on assessment increases."

So wrote Rob Risling, the city's manager of assessment and taxation services, in a letter published here Thursday. He was responding to my column of last Sunday arguing that market-value assessment was furnishing the city with a tax windfall without council having to have the courage to vote for a large increase.

The key word in Mr. Risling's claim is "automatically."

It's true, city coffers won't "automatically" expand by an amount greater than that approved by council.

But as has been the case over the past couple of years, values in Edmonton are surging ahead so fast that the city is getting lots of extra money without municipal politicians having to take the politically painful action of actually approving a big tax increase.

Consider, for instance, that in April city council approved a 4.95-per-cent increase in property taxes. Now that the 2007 assessments and tax bills are out, the average single-family home has been hit with a 6.7-per-cent increase over last year. No councillor voted for the added rise of nearly two per cent. It just happened, thanks largely to Edmonton's red-hot real estate market.

That's the dishonest bit about market-based property taxes: In a frenzied real estate market, they yield more taxes than councillors vote for.

With a municipal election coming this fall, Edmonton voters might have been angry with incumbent councillors who approved a tax increase of nearly seven per cent. But with booming assessment values, council could vote for an increase of under five per cent and still count on getting the same revenues as a seven-per-cent increase under a more transparent system.

Consider, too, that according to the city's own 2007 budget, revenues from property taxes have risen more than 20 per cent in the last two years -- nearly 12 per cent this year alone -- while at the same time total city revenues have risen just 7.6 per cent.

In other words, property taxes are rising nearly three times as fast as the city's other revenue sources. Why, is this not because council is cashing in on rising property values to squeeze more money out of the same properties using market-value assessment?

Mr. Risling contends this meteoric rise in property tax revenue is not due entirely to market-value assessments. "Growth adds additional revenues," he points out.

Again, he is correct -- as far as he goes.

In the past two years, though, the number of new homes in Edmonton has only grown around one-third as much as the increase in property tax revenues

And during the past two years, too, revenue from business taxes increased just 9.1 per cent and from user fees 10.7 per cent, versus 20.2 per cent for property taxes.

Nothing is increasing as fast as property tax revenues, not the number of new homes being taxed and not the city's other taxes, which are not market-value based.

The city is benefiting from rising market-value assessments, even if this benefit is not, in theory, "automatic."

As one astute reader pointed out in response to last Sunday's column, "this whole scheme bears some resemblance to an income tax based on unrealized capital gains."

And it does.

If you have an investment that increases in value during the year, and you don't cash it in, but you have to pay tax on the rise in value anyway, that is a tax on unrealized capital gains.

Edmonton's property taxes work similarly. Even if you don't sell your house (and therefore have received no direct gain from its rise in value), you still have to pay substantially higher taxes to the city.

But, the same reader explained there is an important difference: Under capital gains rules, if your investment loses value you are "able to carry back losses to previous years."

When property values recede in Edmonton, there isn't a chance the city will permit property taxes to go down by similar amounts.

The city not only sets the tax rate but also determines what the assessed values of our homes are. This is a conflict of interest when using market-value assessments. The city not only determines at what rate our property will be taxed, it also gets to determine the value of that property.

I'm not saying the city would "automatically" misuse its dual role in the tax process knowingly to extract greater taxes than the ones approved by Edmontonians' elected politicians. Rather, this is merely an arrangement rife with abuse potential.

Not even Ottawa, with all its taxation might, has the power both to determine the level of income taxes and arbitrarily declare how much income we have earned.

Finally, Mr. Risling writes: "The market-value system is the most widely accepted approach to property taxation throughout the world."

And just why would that be: because it is the fairest and most above-board tax, or because it yields the greatest amount of revenue at the lowest political cost?

[email protected]

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