[CDL.TO]

Please explain !

I hope this post from the 2010 budget discussion will help make things more clear.

 

[hawc]

The beautiful thing about the free market economy is that as the demand increases so will supply.

 

[EnviroTO]

Please explain !

Taxes at the municipal level are done as a total amount to be collected for the whole of the city. Any increase is reported as a tax increase. Other forms of taxes levied by the province and federal government like income tax and sales tax are done as a percentage so growth in the economy or population nets more revenue. A growth in population or property value only nets more revenue for the city if they raise taxes (even if the mill rate is actually going down).

 

[taal]

Gotcha perfect !

Argg don't want to rehash this all over again, but why are our commercial tax rates SO much higher then the 905; Our residential rates are less but not by the same magnitude.
Does that mean Toronto takes more money per capita then the 905 ?

 

[TrickyRicky]

Thanks for clearing that up CDL.TO. My personal taxes have gone up 13% since 2007 so I and all these new office and condo owners must be subsidizing people such that their personal property tax bills have actually decreased in absolute dollar terms since 2007, no?

 

[CDL.TO]

Thanks for clearing that up CDL.TO. My personal taxes have gone up 13% since 2007 so I and all these new office and condo owners must be subsidizing people such that their personal property tax bills have actually decreased in absolute dollar terms since 2007, no?

With inflation and the transfer from commercial to residential, probably not.

 

[Riverdale Rink Rat]

Taxes at the municipal level are done as a total amount to be collected for the whole of the city. Any increase is reported as a tax increase. Other forms of taxes levied by the province and federal government like income tax and sales tax are done as a percentage so growth in the economy or population nets more revenue. A growth in population or property value only nets more revenue for the city if they raise taxes (even if the mill rate is actually going down).

This is the essence of the debate on municipal taxes. CDL is not wrong, but that's the micro level calculation. The macro level view is that new revenue, in this case of new taxes dollars coming from newly built properties (either residential or commercial properties), are a net gain to the city as long as the services provided (e.g. new sewers) are less of a cost than the new revenue. It's all at the margin, though, and while higher density helps keep taxes down, it'll never make up for inflation in the cost of services. It's a fact of life that taxes will go up by at least inflation or services will be cut.

Or, I don't know, you could diversify away from property taxation to other forms of taxation to raise revenue, as long as those other forms also rose with inflation...

 

[CDL.TO]

The macro level view is that new revenue, in this case of new taxes dollars coming from newly built properties (either residential or commercial properties), are a net gain to the city as long as the services provided (e.g. new sewers) are less of a cost than the new revenue. It's all at the margin, though, and while higher density helps keep taxes down, it'll never make up for inflation in the cost of services. It's a fact of life that taxes will go up by at least inflation or services will be cut.

No. That's the whole point, newly built properties do not raise any additional revenue for the city. As such, taxes need to go up by both inflation AND to account for growth in order to simply hold steady.

Let's say that in 2010 the revenue from property tax was $3,500,000,000. Now let's say that over the following year 10 billion dollars in new construction is completed, and they city announces a 0% tax hike. The revenue from property tax in 2011 would be... $3,500,000,000.

(NOTE: New property raises a little additional revenue, but only for the fiscal year that the new property was built.)

 

[Riverdale Rink Rat]

No. That's the whole point, newly built properties do not raise any additional revenue for the city. As such, taxes need to go up by both inflation AND to account for growth in order to simply hold steady.

Let's say that in 2010 the revenue from property tax was $3,500,000,000. Now let's say that over the following year 10 billion dollars in new construction is completed, and they city announces a 0% tax hike. The revenue from property tax in 2011 would be... $3,500,000,000.

(NOTE: New property raises a little additional revenue, but only for the fiscal year that the new property was built.)

Yes, CDL, but each individual taxed unit (i.e. my house) would experience a decrease in its taxes, as the tax base broadened, if you wanted to raise the same revenue. Higher density helps keep individual taxes down, because each taxed unit is part of a greater number of units. I don't disagree with your calculations, they are correct.

But, given your calculations, why do politicians/citizens want to have higher density in the city? You need to move beyond the calculation argument to see why higher density is considered a 'good' thing.

 

[CDL.TO]

OK, I see what you are saying. I don't disagree with your argument either. I'm not stating anything about the value of intensification; I'm only talking about the effect of new development on city revenues (in response to a statement that suggested that new development means lots of new money for the city).

It's unfortunate that the only way a new development can be a financial benefit to the city is if they are willing to "increase taxes" by the same amount as the new development generates. This would be called a "tax hike". If the city could keep its assessment growth without it being branded a "tax hike" we might not even have a budget shortfall right now.

 

[neubilder]

newly built properties do not raise any additional revenue for the city. [/SIZE]

Excuse my lack of understanding, but how does increasing the tax base not increase tax revenue? Are you saying it's because revenues are comprised of an aggregate tax base which effects a floating rate that rises or falls as the pool of tax sources changes? If this is the case then at least the option to increase revenues is available, or the cost burden on the taxpayer is reduced?

 

[CDL.TO]

Are you saying it's because revenues are comprised of an aggregate tax base which effects a floating rate that rises or falls as the pool of tax sources changes?

Yes, that's a very good way of putting it.

If this is the case then at least the option to increase revenues is available, or the cost burden on the taxpayer is reduced?

The option is available, but not automatic (unlike other taxes that the public is familiar with). Keeping per capita tax levels steady is considered a tax hike.

 

[neubilder]

Ok got it, thanks.

However this should mean that if the tax on '500 King St' is X % of it's assessed value, then the following year, if a thousand new condo units are registered, as long as the tax collected on '500 King St' is still X % of it's assessed value, the city will see an overall rise in the taxes collected - without any apparent change to property taxes on 500 King St.

So suddenly the city can afford to build more parks, public squares, transit, pedestrian bridges and paths, community support networks,...basically all of the things that the suburbs can't support due to the dispersed and inefficient nature of their design.

 

[sixrings]

i agree and the buildings downtown have alot less needs. less transit needs versus some suburb. and if there is a transit need often the ridership justifies it. alot of the condos are rentals or investments from people who dont even live in toronto. the people are not demanding schools be built beside them, they are not demanding extra recreation centres.

 

[CDL.TO]

Ok got it, thanks.

However this should mean that if the tax on '500 King St' is X % of it's assessed value, then the following year, if a thousand new condo units are registered, as long as the tax collected on '500 King St' is still X % of it's assessed value, the city will see an overall rise in the taxes collected - without any apparent change to property taxes on 500 King St.

Yes, that might be a better method than what we have now.

It's truly unfortunate that the city's financial decisions are driven by semantics and a lack of understanding.