Three groups spanning the political spectrum want the province to consider overhauling the municipal tax system so that a surcharge on income would be the main contributor to city coffers.
It’s somewhat rare that the Atlantic Institute for Market Studies and Canadian Centre for Policy Alternatives agree on a plan of action, as they typically regard public policy from stage right and left, respectively, in the political theatre.
But both think-tanks and the Nova Scotia Chamber of Commerce are collectively asking the province to study what it would mean for the average taxpayer and for government if municipalities began charging income tax. All say it would be a more equitable distribution of the tax burden and easier to administer.
That such disparate groups agree, in part, on changes to municipal taxes is notable in itself, giving the argument more weight, perhaps, in Halifax Regional Municipality, where property taxes account for about 80 per cent of annual revenue.
The municipality’s last discussions about tax reform died in 2010, but it has been on the agenda of the new council, especially in the form of changes to corporate tax.
Mayor Mike Savage said the income tax idea warrants more study both because of the consensus among the analysts and because of the demand for tax reform during the election.
“But I don’t think we’re at the point where I would say I would endorse it,” Savage said.
While he’s met with both think-tanks, Savage said he would need to know how average taxpayers would be affected and what kind of balance would be struck between residential and corporate taxes before he could take a position himself.
Taxing income is considered more progressive, because the amount you pay is directly connected to your earning ability. Property taxes, however, are calculated on criteria outside of a homeowner’s control, since assessments are driven by market value.
“I think in many ways it is equitable,” Savage said.
“You could adjust the system so that it would be neither revenue-positive nor revenue-negative. So, it’s not a way to say we want to raise more money or less necessarily. It’s just a way to say we want to raise revenue differently.”
The big question for taxpayers, of course, is how this would affect their bottom line.
That answer depends how much they’re making compared to the value of their homes and what system is adopted — whether property taxes would be abolished outright or whether a new system would be a combination of property and income taxes.
“Someone with a high income and a cheap house would see their tax bill go up,” AIMS president Charles Cirtwill said. “Someone with a lower income living in an expensive house — the famous (parable of the) widow living in Bayside who lives now beside three Germans who bought their houses and renovated and suddenly sees her (own) assessment go up — would see a significant saving.”
Charging income tax would also give municipalities a way to capture revenue from those commuters who have access to certain services but live outside city boundaries, Cirtwill said.
If property taxes were abolished, AIMS would only want the new system to match the $1.1 billion in property taxes collected across the province each year.
The Canadian Centre for Policy Alternatives, however, has a slightly different perspective.
“These income tax revenues would allow local governments to reduce property taxes or (they could be used) to improve services,” the centre’s 2012 alternative budget for Halifax found.
A combination of municipal income and property taxes would likely be the best approach when looking at reform, Dalhousie University professor Jack Novack said.
While income tax distributes the burden more fairly among residents, the downfall is if the economy dips, tax revenues do the same, the municipal governance expert said.
Despite some fluctuation in the housing market, property taxes are considered a more stable revenue stream.
The Nova Scotia Chamber of Commerce would like the province to look at removing the cap on residential property taxes, arguing that it places on unfair tax burden on businesses and hinders economic growth.