PROPERTY tax in Nova Scotia is like that old weather joke: Everyone complains, but no one does anything about it.
The difference, of course, is that a tax, unlike the weather, can be improved — if critics put some serious effort into designing a better one.
Kudos, then, to three Nova Scotia organizations that have been advocating property tax reform — the Atlantic Institute for Market Studies, the provincial wing of the Canadian Centre for Policy Alternatives and the Nova Scotia Chambers of Commerce. On Monday, they’re launching an initiative to devise a better alternative for municipalities than taxing real estate.
All three groups have issued reports that condemn property taxes as flawed and unfair (they undermine investment, are not a good indicator of ability to pay and are unrelated to the cost of services). To varying degrees, the trio also believe a local income tax, which directly measures ability to pay and is not subject to volatile real estate bubbles and busts, should completely or partly replace property tax.
But the devil is always in the details. So the would-be reformers are being responsible in acknowledging that detailed homework must be done on what a local income tax would mean for the public and municipalities. To answer those questions, they are calling on the province to commission a study into the viability of shifting from property tax to income tax as the main source of municipal revenue.
The province should rise to this challenge and do the study. It’s no secret property tax has become a volatile, disruptive mess. And patching over problems has only created new ones.
The province capped residential assessments because house values were far outstripping the growth of incomes, but that only shifted more burden to businesses. Even within the business sector, property-based taxes fall harder on firms in downtown areas and drive businesses to the suburbs where land values are lower. That trend creates new servicing costs for everyone.
So AIMS, CCPA and the Chambers are right to push the province for a comprehensive study of an alternative used in many other countries. People are understandably skeptical of new taxes, particularly when there is a history of doing things in patchwork fashion. They need to understand how likely income tax rates would affect them. They will want to be sure any change is not a proxy for increasing revenue and their tax burden. And they deserve a means of ensuring they pay reasonable prices for services (perhaps through regulated fees).
So let’s see the homework on a municipal income tax. Then the public can grade it.