While the sale price of homes has more than doubled in the last 10 years, property taxes have increased on average just 2.4% annually according to Toronto Real Estate Board (TREB) stats. The 2018 budget includes a property tax increase of just 2.1%, which CBC says means a mere $81 more for the average homeowner.
While the city is a “gold mine” for those who own a lot of real estate, it’s becoming less and less affordable for those “just trying to go about their business,” according to Parkdale-High Park Councillor Gord Perks to CBC.
Property taxes in Toronto are the lowest in the GTHA, with any shortfalls for services made up in large part by the Municipal Land Transfer Tax, which amounted to $800 million last year.
With several reports this week claiming that many neighbourhoods in Toronto are transitioning from sellers’ to buyers’ (or at least balanced) markets, it may not bode well for the quality of our city services.
Unlike sales taxes, property tax rates aren’t set at a certain percentage in advance; instead, city council figures out how much money they need from the tax, and then divvies it up proportionately among all the city’s homeowners.
The avoidance of a substantial property tax increase in this year’s budget is a campaign promise kept for Mayor Tory, but it may not be what’s best for the city in the long haul. As big a fan as I am of keeping my money out of government hands, with a projected 2018 rate of inflation of 2% according to Focus Economics, a 2.1% increase in property taxes is too low.
Property taxes don’t rise with inflation; the city barely benefits from inflation in the housing market. We expect our incomes to keep up with inflation, why shouldn’t our property taxes?
Home value can double (or triple!), but it only means $100 or so more in property taxes; legislation requires a reduction in tax rates proportionate to any increase in assessed property values, which makes even a hefty increase in value after a reassessment revenue-neutral for the city’s coffers.
Should we be tying property tax rates to wealth? We apply different tax rates to different income brackets, why aren’t we charging a variable rate based on what each property is worth? Owners of lower-value homes would see a reduction in their bills while the city enjoys an increase overall.
You might argue that because property taxes are used for city services, and a wealthy homeowner is unlikely to use any more garbage collection, for example, than a less wealthy homeowner, tying property taxes to wealth is unfair, but property taxes pay for more than just home-services.
Fair or not, for a city like ours to work, it falls to those with more money to supplement those with less. I’d liken it to arguing that the childless among us shouldn’t have to help pay for schools. They may not have children who attend them, but they certainly benefit from their existence. Likewise, non-drivers helping pay for roads. It takes a village.
None of us want to pay more in taxes, but neither do we enjoy the erosion of our sanitation services, roads, public health, police force or any of the other city-funded services we count on.
If land transfer taxes aren’t sufficient to fill the gap, what will? It seems like a pretty innocuous change, politically speaking — I’d bet that many homeowners have a vague idea that their taxes are tied to their home’s value, but that the finer points remain foggy.
However you think it should be done, there’s one point that’s hard to argue: being the largest city with the most infrastructure and paying the lowest property taxes just doesn’t make sense.