The debate about HRM property taxes makes for interesting theory but avoids some difficult questions.

An unlikely trio of the Canadian Centre for Policy Alternatives, Nova Scotia Chamber of Commerce, and Atlantic Institute for Market Studies has called for some or all of the property-based taxes to be replaced by a provincially administered income tax.

As Marilla Stephenson has pointed out, the biggest problem is not the way we are taxed; rather, it is the high level of spending that the taxes are asked to support, a burden that the CCPA wants to make even higher.

But for the purpose of this discussion we will assume that any systemic change will be revenue neutral. If so, and if the change is meaningful, there will be winners and losers. Who should they be?

Most taxpayers accept the notion that better-off taxpayers should subsidize those less able to pay. But it is nevertheless useful to start by considering what drives the cost of providing services.

It turns out that for a number of those services—road maintenance, snow clearing, street lighting, sidewalks—the cost depends largely on the road frontage of a property, not the value. For others—waste collection, transit, recreation programs—it is likewise cheaper to furnish the service in higher density areas. In other words, it costs a lot more to service an acreage in Hammonds Plains than a similarly priced condo downtown.

So, a portion of the taxes should be based on road frontage. This has the excellent advantage that it does not have to be measured every year and is not subject to inflation. It forces municipal politicians to be honest about increases in costs. Even better, by encouraging narrower lots, it would discourage urban sprawl.

A small second portion of the taxes, primarily for education, is provincially mandated. This amount could be collected by the province as part of its income tax.

But for the remainder, a property tax may be the least bad idea. Police and fire services are more valuable to more expensive houses.

Apart from that, taxes on incomes could produce some silly outcomes. Imagine a business owner from Amherst who has a small condo in Halifax for business trips and to house his kids in university. Would he pay municipal income tax twice? Or would he choose to have his kids with no income own both his residences, yielding no income for government? Would an out-of-province owner be nevertheless expected to pay Nova Scotia municipal income tax? Would property owned by registered charities be exempt?

Nova Scotia already has one of the highest tax rates in Canada, including a marginal rate of 50% on income above $150,000. AIMS estimates suggest that fully replacing the property tax with an income tax would take the rate to 54%.

Adding a municipal burden would mean that the government starts getting more of a pay raise than well-paid taxpayers. This is the sort of thing that makes people up and leave.

It is fashionable to criticize the top 1% of taxpayers who pay over 21% of income taxes, but it will only make things worse for everybody else if tax policy encourages many of them to leave.

In its response to Stephenson, the odd trio pointed to Europe as a model for municipal income taxation, suggesting that it has not encouraged Europeans to emigrate. In fact, Europeans have for the last 400 years been leaving for North America in their millions.

Seven American states, including large and growing ones like Florida and Texas, have no income tax at all at the state level, never mind for cities. Property taxes do not have special treatment for capital gains, dividends, family trusts, or charitable donations. They may be a more effective way of tapping high earners than income tax.

The assessment process is not inexpensive but it could be improved. Properties could be valued on a rotating three to five year cycle. Given that most properties in HRM are under the assessment cap, why worry about having precise valuations?

The extent of the trio’s agreement is thinner than it appears. CCPA thinks changing the system will let government further raise taxes and spending. AIMS hopes a new system will slow down spending increases. The Nova Scotia Chamber of Commerce’s agenda is reducing business taxes.

None of them has provided a compelling case for the proposal.