The report, done by respected municipal finances experts Enid Slack and Harry Kitchen, noted “this study does not consider alternatives to the property tax nor does it evaluate the municipal finance system in Nova Scotia more generally.”
That’s too bad. Because previous studies by these same experts — Slack and Kitchen — have found that income taxes are a growing replacement for property taxes in other parts of the world, according to a 2012 paper by Juanita Spencer of the Atlantic Institute for Market Studies.
Spencer’s paper was one of three released by AIMS, the then Nova Scotia Chambers of Commerce and the Nova Scotia branch of the Canadian Centre for Policy Alternatives when they jointly argued, in February, 2013, that property tax itself needs to be replaced as a way of funding municipalities.
Of course, the UNSM is right in a sense. The cap does distort the property tax system. Right now, two side-by-side homes, similar in every way, can have very different assessments — and so their owners can pay very different amounts of municipal property tax — if one’s title recently changed hands but the other hadn’t.
The problem is that lifting the cap would essentially trade one set of distortions for another. After all, the cap was brought in after a public outcry from people who saw their property assessments — and consequently, even with modest cuts by municipalities in tax rates, their property tax bills — rising rapidly at the same time their incomes most definitely were not.
*This piece appeared in the Chronicle Herald