Don Cayo
Sun
The NPA, Vision and COPE all agree that business taxes in Vancouver are seriously out of whack and something has to be done.
So Councillor Peter Ladner had a point when he characterized the political grand-standing surrounding Thursday’s approval of the city’s 2007 tax rates as a quibble over just $5.25 a month of additional cost to each Vancouver homeowner.
But if that’s the case, how did such a trivial change add up to the whopping eight-per-cent increase in residential tax rates?
And, if the amount at stake is so small, how come it matters so much to business?
The answer to both questions is that, although Thursday’s debate was indeed about fairly small increments, there’s nothing small about the total amount involved.
It was already a done deal when councillors walked into the chamber to begin their deliberations that somebody was going to be hit between the eyes. A big tax increase, in one form or another, became a certainty a month ago when council decided it just had to have an extra 3.98 per cent in property tax revenues this year.
So the only question left for Thursday’s meeting was who would have to pay the lion’s share — or, as it turned out, the whole share — of that increase. All parties agreed that the imbalance was so egregious that a significant shift from business to residents was overdue. So the argument boiled down to just this: Would council reduce the business burden by one per cent of the total tax load — as Vision and COPE councillors seemed to favour, although they carefully avoided saying so — or by nearly two per cent, as Ladner proposed and the NPA majority endorsed?
The shift means that the new business tax rate in Vancouver is 5.63 times higher than the residential rate. That’s down from 6.15 times higher, but still the most business-unfriendly rate of any city in Canada.
Thursday’s decision lifted a total of $10 million worth of tax liability from business shoulders and placed it on the backs of residents.
A quick analysis of the numbers shows why that can provide big relief for business while amounting to — in relative terms — a small extra burden for residents. With just under 600,000 residents in the city, $10 million works out to about $17 a head — or perhaps twice that much per residential property. However, with only 43,000 businesses, that $10 million works out to $232 each — nearly 14 times more.
Of course, those are average figures, and in reality the tax load will not be spread evenly across either business premises or residences. Homeowners and businesses whose properties have shot up in value will get hit with much larger-than-average increases, and the tiny minority whose property values have stalled or dropped may even see their tax bills go down.
But an eight-per-cent average increase is a big one, and councillors are braced for a backlash on both sides of the ideological divide — NPA members who voted for the shift, and Vision and COPE members who said they supported a big shift, but voted against this one at this time.
They will hear, no doubt, of some genuine cases of hardship that this increase causes. Residential properties are also vulnerable to “hot spots” of huge tax increases that have plagued business owners in locations that suddenly become trendy. And they will hear, too, from people who are simply fed up seeing their tax bills rise so much faster than their salaries.
I have some sympathy for that latter view, but I’m afraid I can’t offer any words of comfort. Indeed, I fully expect it to get worse before it gets better.
Prior to the shift, businesses in Vancouver were consuming 24 per cent of civic services, yet paying 55 per cent of the costs. Now they’ll still be consuming 24 per cent — possibly a little less as residential growth continues to outpace business development — and they’ll be paying 47 per cent of the costs.
So no one should delude themselves that the inequities are fixed. The situation has simply been made a little more tolerable — and a powerful signal has been sent. But there’s still a huge reform task to be undertaken when the city’s Property Tax Commission comes up with final recommendations in June.
All of which brings me back to my first point — that the real root cause of the eight-per-cent increase in residential tax bills is not to be found in Thursday’s tinkering, but rather in the March 13 decision to increase the total property tax levy by 3.98 per cent. If council hadn’t done that — if they’d held the line on spending — they could have had a zero increase for business and a zero increase for residents as well.
© The Vancouver Sun 2007
