Sir Thomas More wrote his book, Utopia, 500 years ago. The title, literally “no place,” was a pun on eutopia, a “good place.” On More’s imaginary island of Utopia, there was no private property.
A place without private property would present an insurmountable problem for any modern municipality, as the vast and magnificent edifice of municipal taxation rests on a foundation of property ownership. The more valuable your land and building, the more property tax you pay.
Now imagine a modern city where, to pay for the street system, each household paid an annual tax proportional to the value of their car. Every three years, the city would estimate the market value of your car for tax purposes.
Pretty idiotic, eh? Well, that’s how property taxes work, and they make up two-thirds of all municipal revenues. Regardless of actual municipal services consumed, you pay a fixed percentage of your home’s value.
But shouldn’t residents or businesses owning more valuable property pay more property taxes because they’re richer? Well, if property taxes were wealth taxes, your mortgage would be deducted from your assessment.
Besides, since 1980, Quebec has adopted the position that redistribution of wealth is not the municipalities’ job and that property taxes must be based on benefit received, not on the owner’s presumed ability to pay. This is a pious counterfactual wish: property values can’t possibly reflect the benefit received; only user-fees can do that.
In fact, the value of your house or condo has nothing to do with your consumption of municipal services. Services are supplied to people, not to buildings: buildings don’t take the métro, call the police, produce garbage, or use the library. After all, ghost towns cost nothing to operate.
Most Montreal Island cities even bill you for residential water consumption based on your property value, not on your actual use of water. You can fill a swimming pool as often as you like at no additional cost. Imagine paying for electricity, natural gas, internet or phones based on a percentage of the estimated value of your appliances, furnace, computer or TV?
Now, if you add a bathroom to your home, you don’t use more water — but your property taxes go up, nonetheless. Property taxes are an effective disincentive for owners to improve their homes.
And from an ecological viewpoint, it only makes sense to charge by consumption; otherwise, there is no incentive to reduce. Thirty years ago, I was the guest on the TV program Droit de Parole, flogging the idea of what I called “pay-as-you-throw” or “garbage metering.” Laugh if you will, but that’s what Beaconsfield is doing today.
Premier François Legault said that “everywhere in the world” income and sales taxes are for governments, and property taxes for municipalities. Legault was dead wrong. Most U.S. states charge municipal sales taxes in addition to property taxes. Some states even allow municipal income taxes.
Municipal sales taxes — in combination with user fees — make far more sense than property taxes. They are proportional to economic activity, and everyone contributes. In fact, from 1965 to 1980, Quebec municipalities received a quarter of all provincial sales tax revenues.
While municipal services are clearly consumed per capita, simply charging a flat amount per head is highly regressive. It was called a poll tax — poll being an old word for head.
Sir Thomas More, an utterly principled statesman, paid the ultimate poll tax. When he refused to accept King Henry VIII as head of the church and Anne Boleyn as queen, the king had More beheaded.
I’m against poll taxes, but I think we should use our head when charging for municipal services. We could become a fiscal Eutopia.
Peter F. Trent, a former inventor and businessman, served five terms as mayor of Westmount and led the Montreal demerger movement. His Merger Delusion was a finalist for the best Canadian political book of 2012.
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