This week, while driving to work, the local radio news had quotes from Calgary Mayor Naheed Nenshi (@nenshi) and Alderman Brian Pincott regarding the recent decision by the Alberta Provincial Government to raise the education property tax by 7.2% on residential properties. Now, for some background: Calgary City Council (#yyccc) had already decided to raise city property taxes on residents by 6% this year, with subsequent increases of similar size over the next two years. They had been able to “get away” with this in part because last year the province hadn’t raised their portion of the property tax, so they’re actual increase was somewhat higher, and they had taken up some of the room left by the province…
You might ask – isn’t this confusing? Well, yes it is. You see, both the municipality and the province impose property taxes – the municipality for general revenue to run the city and the province for education funding (purportedly, as this just goes to general revenue at that level). The City collects both taxes as a lump sum and cuts a cheque to the province for their share (which in recent years has total about $600 Million).
The Mayor and Alderman were complaining that the Province treats the city like a cash cow… my view is that the City Council treats residents (and especially local businesses who pay much higher property taxes than residential properties) like cash cows, when claiming they need a tax hike of 20% over three years. The tax base grows with population growth, and inflation in recent years has been very low. This is pure and simple BIG GOVERNMENT at a local level.
The real problem is that governments in many countries, including Canada, have obfuscated the funding and provision of public services for decades. In Canada, very little of the taxes raised are spent by the government that raised them. The Cities collect property tax on behalf of the province, which pays for schools and infrastructure in the cities. The federal government collects the most tax revenue, then redistributes it to the provinces and municipalities for health care, welfare and infrastructure. This allows each level of government plausible deniability for just about anything, while claiming that tax money is well used – when the truth is they can’t know – they didn’t spend it.
So, what should happen is that each level of government should be restricted to raising taxes it needs to fund itself. Force each level of government to explain clearly what we are getting for that pound of flesh. And intergovernmental transfers should be limited to equalization to ensure all Canadians get roughly equal provision of services. I’d like to take equalization itself out of the Constitution, but I know that is too hard to do.