Last Updated on Sunday, 17 April 2011 19:53
Property taxes are unfair because they consider neither a person's ability to pay, nor the quantity of government services which a person consumes. Taxes on a particular property must be paid regardless of whether your annual income is $10,000 or $110,000. Property taxes are the same whether your household has six people using municipal services or just one.
Property taxes are also unfair because they can increase rapidly and unexpectedly with the market value of one's home, as much as 5% or even 10% in a single year.
The question is not whether the Current Value Assessment System must be reformed, but how. Recently the Canadian Taxpayers Federation (CTF) polled its supporters on different models of municipal taxation. Based on survey results and on additional research, the CTF advocates a Municipal Property Tax Cap - the slayer of "assessment creep."
As a maximum, annual increases to property taxes should be limited to the rate of inflation. Alberta's Municipal Government Act should be amended to make it illegal for municipalities to raise taxes on property by an amount which exceeds the inflation rate. If local politicians want to increase taxes further, they would have to ask taxpayers' permission in a referendum. Taxpayers themselves would be able to use similar initiative provisions to get a property tax reduction proposal on the ballot.
Residential property values themselves would be based on a combined formula including lot size, house size, and habitable square footage. Unlike market value or current value assessment, properties would not fluctuate in value each year. Any "assessment growth" would only result from the construction of new residential properties. Because properties would still be assessed relative to each other, changes to one's property and differences in lot and house size would retain progressive elements found in the existing property tax system.
Another important change is toward a more user-based or user-pay system, by lowering property taxes and instituting more fee-for-service arrangements for water, sewage and garbage collection. But this kind of change must be revenue neutral, and not increase the overall tax burden.
Unfortunately, change will probably not come without a fight from municipal politicians. They would prefer to maintain a system which allows them to set budgets first and raise taxes to pay for them later. Under the current system, politicians and bureaucrats have little incentive to reign in their spending.
Ultimately, the responsibility rests with Premier Klein's government to replace the Current Value Assessment System with a fairer, more predictable form of property taxation. Cities, towns and districts are not the only ones taxing property. The provincial government will also take $1.2 billion from Albertans in property taxes this year - over $1,500 paid by the average family of four.
However, until the Municipal Government Act is amended, nothing stops Edmonton, Calgary, and other cities from imposing a Municipal Property Tax Cap on themselves, as a matter of policy.
Voter turn-out in municipal elections is very low, which means that each vote counts even more so than in federal or provincial elections. Before going to the polls on October 18, voters should ask the candidates for Mayor and for City Council whether they support a Municipal Property Tax Cap. Electing taxpayer-friendly representatives at the municipal level is an important first step towards lower and fairer property taxes.
John Carpay, Alberta Director, with files from Tasha Kheiriddin, Ontario Director
Last Updated on Sunday, 17 April 2011 19:57
Four years ago, Alberta's MLAs voted themselves a huge increase in their compensation. They did this just after the August long weekend, when Albertans were on holidays, or just leaving for holidays, or just coming back from holidays, or thinking about holidays.
The MLAs on the Members' Services Committee vastly increased their MLA severance pay, and they also voted themselves a brand new RSP allowance. They did so without any public input or consultation, just a few months after a provincial election in which no party or candidate talked about MLA compensation.
The MLA severance pay in 2001 was already generous: two months' salary for every year in office, to a maximum of 24 months. But that wasn't good enough for Liberal and Conservative MLAs, who voted to increase their severance pay to three months' salary for every year in office, with no maximum limit. After the 2004 election, Alberta taxpayers were on the hook to pay $516,000 to Halver Jonson, $478,000 to Pat Nelson, $356,000 to Lorne Taylor, $274,000 to Mark Hlady, $181,000 to Mary O'Neill, and so on. Premier Klein will get $670,000 from taxpayers if he retires in 2008.
The NDP joined the Liberals and Conservative in voting to create a brand new RSP allowance, currently $9,000 per year, and set to rise to $11,000 and even higher, as it is based on 50% of the federal maximum RSP contribution limit.
In protest, the Canadian Taxpayers Federation placed 82 pink pigs on the Legislature lawn.
Now, four years later, just after the August long weekend, there is more talk about another MLA pay increase. Here is why MLA's don't need or deserve another raise:
First, Alberta MLAs are the third-highest paid provincial politicians in Canada, after those in Ontario and Quebec. Only if one ignores the $22,566 tax-free allowance and the $9,000-per-year RSP allowance do Alberta MLAs rank lower than third place.
Second, the after-tax take-home pay for MLAs, when you include the tax-free allowance and the RSP allowance, is the same as an Albertan earning over $80,000 per year. This means that Alberta's MLAs are already in the top 10% - if not the top 5% - of all income earners.
Third, there is little transparency in MLA compensation. Neither the RSP allowance nor the huge MLA severance pay packages are mentioned on the main web page for
MLA remuneration at www.assembly.ab.ca. The only way a taxpayer would know about these things is by reading through the small print of a 130-page "Members' Guide."
Fourth, Premier Klein and his Tories loudly and proudly abolished the former MLA pension plan in 1993, which helped them beat the Liberals and win the election. They have no basis for whining about the absence of a pension plan, since they themselves chose to get rid of it.
Fifth, MLAs get a raise each year, on April 1, based on the Statistics Canada average weekly earnings index. In recent years, MLAs have received raises ranging from 1.1% to 3.3%. That's not bad for people who are already earning more money than 90% of their fellow citizens.
Sixth, Alberta voters were not consulted before or during the last provincial election about increasing MLA compensation. Therefore, there is no political or moral mandate for MLAs to unilaterally hike their own pay without public consultation and input.
Last Updated on Sunday, 17 April 2011 19:59
After a decade of success in his struggle against alcoholism, a man returns to the bars. Drinking alcohol really isn't that bad for him after all, he decides. Considering the damage and destruction which alcohol caused in his life, it's a sad choice.
A similar sad situation is playing itself out in provincial politics, with Alberta's governing "Conservatives" talking about going back into debt again. For taxpayers, that kind of talk is frightening.
Back in 1994, Albertans lost one out of every eight tax dollars to debt servicing costs. Annual debt-servicing costs of $1.7 billion in 1994 worked out to $645 for every man, woman and child in Alberta, or $2,580 for a family of four. Considering inflation, that $2,580 in 1994 works out to about $3,400 today. In other words, Alberta families were paying over $275 per month - every month - to service the provincial debt. Not one penny of that $275 monthly payment was available for roads, bridges or other government programs.
Fast-forward to 2005. This current year, debt servicing costs of $291 million work out to $90 per Albertan, or $360 for a family of four. In other words, Alberta families are now paying only $30 per month to service the provincial debt, instead of $275 per month. Taxpayers benefit when all of their tax dollars are available for roads, bridges, policing, the justice system, etc.
But now Premier Klein is talking about reversing this progress, and saddling Albertans with debt again.
The reason Infrastructure. Yes, somehow the $9,000-per-Albertan which Klein's government is collecting this year is not enough to build new roads and maintain existing ones. Somehow, although the Alberta government collects more - per person - in tax revenues than any other government in Canada, it claims there is not enough money for infrastructure.
The Alberta government, if it laid down its priorities properly, has more than enough money to pay for new roads and bridges, and to maintain existing infrastructure. Alberta's spending on government programs is up 100% in nine short years, from $12.7 billion 1996 to $25.5 billion today. Alberta's population only grew 18% during the same time period. Why has this 100% spending increase not been enough to pay for adequate infrastructure
In other words, if there isn't enough money available to pay for Alberta's roads and bridges, this government is guilty of gross mismanagement of tax dollars.
There would be plenty of money available for more roads and better bridges if the government cut its spending on lower priorities.
Why not scrap the Ministry of Restructuring and Government Efficiency, with its 1,272 bureaucrats And why not abolish the Ministry of Aboriginal Affairs and its 90 bureaucrats Does the health ministry really need 1,378 bureaucrats Surely Premier Klein could get his job done with fewer than 233 people working for Executive Council And why do we need 2,007 bureaucrats running the seniors ministry No doubt Alberta's 26,811 civil servants are sincere and dedicated, but there are far too many of them.
The Tories haven't gone back to the bar yet. But the fact that they are discussing a return to the bad old days of $275-per-month interest payments calls for sober thought. This is one "trial balloon" which should be shot down immediately.
Last Updated on Tuesday, 07 December 2010 07:01
The Friends of Medicare and the CBC have declared that Premier Klein's "Third Way" will lead to the destruction of the government's health care monopoly. But in fact, Alberta's 12 "renewal initiatives" consist mostly of reorganizing bureaucracy and throwing more tax dollars at a system which lacks incentives for efficiency.
Reminiscent of the Soviet Union's five-year "plans" of days gone by, Alberta plans to announce a new "Health Services Plan," not to be confused with the new "Public Health Strategic Plan," the "Provincial Research Strategy" or the new "Health Policy Framework." No doubt this will keep Alberta's 1,378 health bureaucrats busy as they decide how to spend nine billion provincial tax dollars each year.