Thursday, 1 November 2012

A Taxing proposition

Alberta Municipal Affairs Minister Doug Griffiths, must be congratulated on his decision to kill the idea of ‘new powers of taxation’ for municipalities. In the past the Institute has always said that any new powers given to municipalities under a charter must not contain new powers of taxation unless they were revenue neutral.

In our view a complete review of the roles of the Province and Municipalities should be undertaken, not behind closed doors, but with open and public participation. While municipalities would like to see new powers to be able to impose taxes such as  civic levies on alcohol, hotels, gaming, vehicle registrations, insurance and tobacco., the issue is real issue remains that there is only one taxpayer no matter who collects the taxes.

In the past municipalities have argued that an infrastructure deficit exist and that funds from the province were inadequate. However they never acknowledge that municipalities have continued to spend with the same abandon without ever looking at alternative ways of providing services. The cost of public sector labour is on a continuous upward trend; in some cases reaching over 60% of operating costs.

As the Minister shuts one door, Transformation Calgary opens a new one with their proposal for a 1% tax. On the face of it this proposal seems to have some merit, but the administration and jurisdictional problems abound. To have it implemented would require Federal and Provincial buy in.

The premise of a new 1% tax is that Calgary suffers from a lack of infrastructure that would make it world class. Therefore Transformation Calgary flies in Oklahoma City’s former mayor, Ron Norick to explain to 150 Community associations’ leaders how it can be done. Problem is that we do not take into consideration a number of factors.

First that taxation rules in the U.S is totally different from ours. Municipalities have the ability to raise funds through municipal bonds, and their relationship with the State is different from the Municipal/Provincial relationship.  This is another reason why new taxing powers should not be granted before roles are clearly defined.

Furthermore, why is it that infrastructure problems must be solved through taxation? In the case of recreation arenas there are many sports organization that would raise the money to provide them, provided that government would allocate the land and grant tax credits for their provision.. As for libraries, in the 21st century grand buildings are becoming obsolete. With the advent of technology books will be available digitally.

Why a new tax, when we could give tax credits to contributors. Individuals and companies who contribute towards these ‘badly needed’ infrastructures could easily be given the right to deduct a percentage of their donation from their municipal taxes. Instead of imposing a new tax, which is never voluntary, we should reward philanthropic contribution no matter how large or small through tax deductions.

The whole idea of this tax is to appeal to the community on the basis of a leftist mantra. One that believes that quality of life should be provided through taxation. The philosophy is that if’ you build they will come’, that may be true but can’t we find another the way of funding them. Taxation for the arts is not the only way to decrease crime and obesity, and foster innovation, creativity, talent and capital. How about financial incentives?
The problem with a new tax is that once started it will never stop. One tax will lead to another. Going down this slippery slope should be a non-starter. One of the startling remarks was that Oklahoma was so pleased with the initial tax that citizens voted for another one. Of course the new library is named after Norick. How about the Felesky Library or the Brookman Saddledome? There are many philanthropic Calgarians who have their names associated with the arts and education, lets us continue on this path rather than taxing ordinary people. Calgarians must also be mindful of what is happening in Edmonton with regards to the new arena and the Katz contribution to the Progressive Conservative.

While we believe that new facilities are needed, we also believe that they can be built without new taxes. Should Calgarians ever accept a 1% tax they should ensure that sunset clauses are always included in any proposal.  

Be careful of politicians and their friends who bear gifts of new infrastructure that will cost you only pennies. A tax is a tax and it comes out of your pocket whether you like it or not. Tax is a dirty word. Demand tax credits before you contribute one more penny in taxes.

Marcel Latouche

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