Editorial: Tax sleight of hand

City council displayed a brilliant act of mathemagic Monday by shuffling the no-win hand dealt by the province to keep the property tax increase at six per cent. It's still a huge tax increase, one of the highest in years. What also shouldn't get lost in the budget wizardry is the broken promise from the Redford government.

Alberta Premier Alison Redford promised no new tax increases or levies would be brought forward in the budget, expected to pass today. Instead, the government's tax grab came through the backdoor, when it demanded some $1.8 billion more in education property taxes — a full

$107 million more than it collected from Alberta property taxpayers in 2011.

For Calgarians, that equals an increase of $34.8 million in the education portion of the property taxes for 2012 over 2011. This is an increase nearly 10 times higher than the increase taken in 2011.

While technically true that the mill rate hasn't increased, what the province has decided to do is apply that rate on the rise in assessed property values. Not only is the province's actual dollar take increasing because of new housing and developments now paying property taxes, it is charging the mill rate to the total value of a property. The last time it did this was in 2004.

It's clearly a tax hike, but one that is underhanded, hidden and conveniently complex enough to cause great confusion among ratepayers.

The city's policy is to keep property assessments revenue-neutral, to maintain a level of certainty and stability for property owners, and shelter the tax rate from the boom-and-bust cycles of real estate. That the province can, on a whim, decide to apply the mill rate to property value proves the need for stable, certain funding for municipalities. The province, this year, is essentially treating the assessed value of property much like it would income, whereby any increase in income is taxed at the appropriate rate.

The city has adjusted the numbers so that the province gets its 10-fold increase in the education portion of the municipal tax bill, while charging all rate payers, both residential and non-residential, the same combined six per cent increase. It's done this by taking advantage of the decline in property values on the non-residential side, which hasn't experienced the boom that the residential side has seen. On paper, it appears that businesses are being hit harder to soften the blow for residential taxpayers. In reality, it is pretty much a wash.

Unfortunately, the move does send a negative message to small and mid-sized companies in Calgary, who already feel city policies are anti-business. Business taxes are an increasingly big burden on independent upstarts trying to compete, create jobs and contribute to the economy. Passing on a tax break once in awhile would create much good will, and might even help some of them keep the lights on.

To suggest this is anything but a tax increase is a smoke-and-mirrors trick worthy of a master illusionist. Worse, the province has created chaos at the local level by changing the rules around its share of the property taxes. Cities deliver the services that citizens most need.

More than ever, municipalities need a funding formula that prevents the province from offering anything but predictable and sustainable funding.

Calgary Herald, Mon Mar 19 2012

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