Vancouver Sun
Tuesday, February 20, 2007
Page: D1 / Front
By: Don Cayo
Beware the backlash in fixing business taxes: A blueprint to spend less can be found just down the road in Surrey
If B.C.'s high-tax cities -- and that's most of them -- want to give their business communities a decent break, the policy challenge is straightforward. A simple analysis of who consumes what municipal services would provide an equitable way to rebalance the ratio of taxes paid by businesses and residents.
But the politics to pull off a fair and meaningful tax shift? Ouch!
If a council in a city where taxes are far out of line simply pared the business rate to a fair level and passed the load to residents, the backlash would be brutal.
Business people may be muttering about a tax revolt in Vancouver, for example, where they are taxed at a rate six times higher than residents. But, as elected councillors well know, only a few tens of thousands of business owners get a vote, compared to hundreds of thousands of residents.
It might be possible to pull off a one-shot adjustment to a business rate that's fair -- a level that I peg at two to three times the residential rate -- in cities like Abbotsford, Nanaimo or Surrey where ratio has crept to a level only a little over 3 to 1.
But in places like Coquitlam and Vancouver, where the ratio pushes 6 to 1, the impact would be too high for homeowners, and too hot for politicians, to handle.
I asked Norm Stickelmann, a Terasen accountant who volunteers his technical services to the Vancouver Fair Tax Coalition, to calculate the impact on residential tax bills in the city if the ratio was dropped to 3 to 1. That's the high end of the range that most analysts consider fair, and it would drive up residential tax bills by an average of $1,200 a year, or 37.5 per cent.
If the business rate dropped to 2.38 to 1, the amount the Coalition says is justified by its consumption studies, the hit to residents would be even greater -- $1,650 a year or 51.5 per cent.
Realistically, that can't happen.
But that doesn't mean nothing can be done. Vancouver's business tax level and its rate of increase are unsustainable. As I wrote Friday in an analysis of how the rates got so skewed, the screwy formula business tax is based on means its shoots up far faster than market-driven costs.
Businesses are at risk all over the city. For example, in Yaletown the commercial vacancy rate has soared to 20 per cent as retailers drop like flies.
West Fourth, on the other hand, is keeping its store-fronts full, but at the cost of the very amenities that drew so many people to live in the area. The unique mom and pop shops selling daily necessities are being swamped by costs and crowded out by high-end retailers. What was once a neighbourhood with everything you need within a short walk is becoming another version of Robson Street or a trendy mall.
This trend is sure to continue in other neighbourhoods as soon as condo developments start driving up land prices, which trigger a far steeper increase in property tax. This puts at risk Vancouver's envied reputation as a city of neighbourhoods. It creates a scenario where the only stores that can afford to stay are high-fashion ones with high markups.
So how can council rebalance the tax load without provoking a residential tax revolt?
Firstly, the shift will have to take place over time.
Secondly, finding new revenue sources would let council ease business taxes without passing the full burden to residents. This isn't a pipe dream. Both Ottawa and Victoria are coming out a long period of off-loading costs, and they're starting to recognize the need to pass on revenue, too. While I don't advocate more grants, which undermine accountability, I do think senior governments should lower some taxes -- gas or sales taxes are good examples -- and give municipalities the tax room.
The final piece of the puzzle, however, is the most important. It's to cut spending.
Politicians and their bureaucrats generally spurn spending cuts. It can't be done, they say. Budgets are already pared to the bone. They need more, not less.
But for most municipalities, that's questionable.
Over the last decade, Vancouver City Hall, for example, has enjoyed a property tax revenue increase of -- in inflation-adjusted dollars -- of 57 per cent.
And a study done last year by MMK Consulting for the Fair Tax Coalition pegs Vancouver's spending as the second-highest of the eight regional municipalities it looked at. The city's per capita expenditures of $1,277 trailed only North Vancouver's, which were $1,385.
Surrey, on the other hand, spent just $694 per capita.
It's unfair to compare every category of spending dollar-for-dollar given the differences between cities. Vancouver might, for example, be expected to spend more on parks given its unique network of green spaces.
But Vancouver's spending exceeds Surrey's in every area including, tellingly, $137 per person for general government compared to just $40.
In other words, there are lots of opportunities for this city to spend less. And a blueprint for how to do it can be found just down the road.
dcayo@png.canwest.com
|
 |
