As Canadians, we pride ourselves in our progressive institutions. We accept as moral and just the idea that the well-off should give a little more, while those falling on hard times should pay a little less. How is it possible then that in Canada — the bastion of progressive policy — we maintain a system that forces each Canadian, regardless of their ability to pay, to give a portion of their income over to the government — even if they are making no money — simply because they have a roof over their head? This system is the property tax. A tax not linked to income or consumption, but based on the assessed value of property on which someone lives.
Imagine for a minute that you are a Canadian on a fixed income, perhaps you were recently laid off and are now receiving Employment Insurance. Maybe you are retired and are living off your pension. Or maybe you are a single mother trying to make ends meet. In addition to the cost of groceries, medicine, clothes, heating, electricity, gasoline, and public transit, you have an additional burden placed on you by the provincial government — property tax. Failure to pay this tax results in fines and the risk of a jail sentence, meaning, before you can buy food for your children, you have to make sure you have enough money to pay the government. Of course, the property tax is the main source of income for municipal governments. It is required to fund needed services like garbage collection, upkeep of roads and sewers, and public transit. Unless massive cuts were made, it is unlikely that municipalities in Canada could operate effectively without this major source of income.
So how do we balance the needs of municipalities with lightening the load of low- and middle-income Canadians? One solution would be to adopt a municipal sales tax to replace the current property tax.
Many major cities in the U.S. already have the power to implement a sales tax — though this is in addition to a property tax. In addition to providing municipalities with a needed source of income, a sales tax would give municipalities an autonomy from the province that they do not currently enjoy. Currently, tax rates are set by the municipality but are dependent upon the market value of a property, the calculation of which is set by the province. A sales tax would delineate a clear divide between provincial and municipal jurisdiction, which does not currently exist.
The argument against such a change might be that a sales tax would likewise burden low-income Canadians, who, as it was initially pointed out, have less money to spend on necessities. These necessities would increase in price because of a sales tax and, therefore, any change would simply be a shifting of cost, rather than the elimination of it. However, it is a basic principle of almost any sales tax that purchases such as groceries, heating costs and prescription drugs be exempt from taxation.
People might also be worried that eliminating the property tax would have no benefit for renters, who make up many low-income families. This, however, is not true. The cost of rent is linked to the property tax. The landlord passes on the cost of the property tax to their tenant. Eliminating the property tax would decrease the rent. Conversely, who would pay the largest amount of a sales tax? It would be those who buy lots of luxury goods – video games, TVs, iPods, fancy cars, designer clothing – who would end up paying the most. In addition, it should be noted that property taxes are paid exclusively by the residents of a municipality. Do tourists and visitors not use the roads and public transit system provided by city governments? Under a sales tax, the burden would be shared by every person who purchased goods or services in the city, ensuring everyone who uses city services, pays.
Some might argue that, instead of eliminating property taxes altogether, it would be preferable to link them to income in some form, to ensure a progressive system. However, this would result in an incredibly complicated formula whereby an additional set of variables would be added on top of the current system of property tax evaluation. Undoubtedly it would produce loopholes and exemptions which, if a progressive and fair system is desired, should be avoided. Only the very well-off are able to spend their own time or purchase an accountant to make sure they are taking advantage of all the special privileges offered. A sales tax is public and easily understood.
Ultimately, if Canadians wish to be true to our country’s progressive principles, we need to restructure our tax system to ensure it is fair and simple. A first step in this is to replace the property tax with a municipal sales tax.
