Wednesday, 8 June 2016
The Great Tax Scam
Calgary City Council continues to be disingenuous in its budget and taxation processes. Over the past years this Council has raised taxes and fees under the same excuse that costs are rising and that the province is not covering its fair share of municipal expenditures. While there are several factors that determine the imposition of taxes, citizens are often kept in the dark about the use of fees and dubious economic and financial concepts to manage the city finances.
First let us start with the budget. Despite our constant request for the use of Zero Base Budgeting, Council and administration have chosen to use their own version of a system called Zero Base Reviews; these concepts has very rarely provided any reduction in costs and therefore reduced taxes. Furthermore the City uses a concocted statistical measurement called The Municipal Price Index (MPI) instead of the universally accepted Consumer Price Index (CPI) produced by Statistics Canada. The MPI has always been higher than the CPI and therefore costs have been inflated higher than necessary. So in effect there seems to be a pattern of over estimating costs and under estimating revenues, which constantly results in surpluses. These surpluses are in effect over taxation and not caused by any efficiencies, they are then placed in reserves or used for additional expenditures which were never budgeted for in the first place.
In December 2015, administration declared that they had found a surplus of $30 million, and immediately the mayor proposed a number of initiatives to spend the money. Three months later it is revised to a surprising $86 million surplus achieved through unfilled job vacancies, fuel savings, higher utility fees, cheaper capital projects and other factors. This time very little is said but we now talk of increasing taxes in the midst of an economic collapse in the province due to the fall in the price of oil.
In just seven years, council has pushed through compounded residential tax rate increases of 55 per cent, and business tax rate increases of a whopping 180 per cent. The 2016 tax hike is pegged at 3.5 per cent. In addition the province decided to impose a 10.2 % tax increase. As if there was not enough financial hardship in the province and in Calgary, the province will impose a carbon tax which will be passed to the consumer by businesses and also by the municipality. This additional tax has not been factored in yet.
Notwithstanding the increase in taxes, the City will also increase its utility rates and other fees ranging from water to LRT and many others. In addition a new $6.50 fee will be imposed for the use of green garbage bins. Year ago I labelled these additional fees and rates as ‘vicarious taxation’, because that’s what they are –taxes- pure and simple. You may mitigate the use of a service by using less but you cannot reduce your taxes. When the recycling by-law and use of bins were being discussed I clearly warned that the City will impose fees in lieu of taxes to manage this ever growing bureaucracy. Ald. Madeleine King challenged me and there we are today. There are many of us who compost already, why are we subjected to a service that we shall never use, and more importantly why have we not seen an equivalent reduction in our taxes?
As the province contemplates a new Municipal Government Act which will increase the sharing of costs with local authorities, it will be another reason for further taxes and fees in the future. Property taxes are most unfair to low-income residents. In my view these taxes have no correlation with education costs. The market value concept used to raise these taxes does not reflect reality. As we can see in Calgary, the value of housing has dropped by some 4%, if not more, due to the economic downturn. Under the current property assessment many citizens are seeing their taxes go up while their property values have sunk. Where is the fairness? We need a complete re-think on property taxes, including their use to raise taxes to fund education. IPSA will offer some thoughts on this matter in the future.
By the way, remember the surprise surplus for 2015? The $86 million is equivalent to approximately 6% tax. Why have Councilors not considered its use to mitigate and reduce taxes in a time of economic hardship? It seems that no one on Council has either the financial acumen or the intestinal fortitude to go against the grain and put forward a proper use of zero base budgets and fair taxation. A surplus after reserves have been accounted for, is no surplus’ it is over taxation pure and simple, and it should be returned to the taxpayer without any caveats or any proposals for additional non budgeted expenditures