[EnviroTO]

... couple the above with the fact the building Rental Granny is paying far more taxes and $700k asset Granny is getting far too much sypathy in my mind.

Residential ($700k Granny with $30k fixed income) tax rate: (city,education,total)
0.5888434% 0.264000% 0.8528434%
Multi-Residential (Rental Granny with $30k fixed income) tax rate:
2.0881901% 0.2640000% 2.3521901%

Poor old $700k asset Granny.

 

[Admiral Beez]

A few things to remember about Granny.

First, in 1950, when she bought the house for $50,000, that amount was equal to more than ten year's wages at 1950's Canadian average family income of under $4,500. Granny's house today at $700,000 is more than ten times the average Canadian family's income of under $40,000, but the ratio isn't vastly different. Granny worked hard to pay for that home, likely never taking a holiday or upsizing her TV or auto every few years. She's probably still got her avacado-green fridge from 1970 in the kitchen.

Second, as the assessed value on her house increased from its original $50,000 to its current $700,000, she's paid more tax, since both the % and value have gone up.

 

[EnviroTO]

But a Granny retiring in 1950 also would have had a much lower fixed income. Everything has gone up in price for everyone. Feeling sorry for the people whose assets appreciated the most because they will pay property tax on that asset is to ignore everyone whose assets appreciated less or who didn't have assets at all. The people whose property values went up the most are the market winners. They have fiscal power they can get at by refiniancing or selling that all the other people without homes or whose homes appreciated less do not. Lets not cry for the winner who pays a lower property tax rate (although higher property taxes) than the multi-residential rental property or the 905 land owner.

People are told to buy rather than rent. Why? Because it is an investment. Playing hard done by when investment goes up in value is silly.

 

[Prometheus The Supremo]

sometimes granny doesn't want to sell the house because it may be all she has left to remind her of her past. granny doesn't care how much the house is worth, she just wants to live in the home she raised her kids and experienced many kodak moments and for her to not be able to hold on to that home would be the most depressing thing in the world. she lost her husband, her kids are gone somewhere else and now she has to give up her home which she took her whole life to get just right and is a symbol of all her sacrifice and labour? god damn! that's depressing.


fuck the taxes, the money is there. the provs and feds are hoarding it all. they need to give it back and stop asking granny to open her purse.

 

[Hydrogen]

Feeling sorry for the people whose assets appreciated the most because they will pay property tax on that asset is to ignore everyone whose assets appreciated less or who didn't have assets at all. The people whose property values went up the most are the market winners. They have fiscal power they can get at by refiniancing or selling that all the other people without homes or whose homes appreciated less do not. Lets not cry for the winner who pays a lower property tax rate (although higher property taxes) than the multi-residential rental property or the 905 land owner.

People are told to buy rather than rent. Why? Because it is an investment. Playing hard done by when investment goes up in value is silly.

You certainly don't have to feel sorry for people who's "assets" appreciated, but they certainly should not be punished on that basis either. And I say punished because an assumption that seems to be running through some of these posts is that granny and her like ought to get out of their houses and into rental buildings. Don't forget that rental buildings are also affected by property tax increases as well. Since when should the tax system be, in effect, dictating how people should live or where they should live?

When property evaluations go up, so does the tax bill. The manner by which these evaluations are carried out has been an issue of complaint for a number of years. It is an issue being examined by the province and was the object of interest of the Ontario ombudsman a little while back due to the fact the municipal property assessment and the tax system linked to it is a nasty mess presently. Yet some of you suddenly see this problematic system, which should be under scrutiny, as the means to taxing the supposed rich people living in supposedly expensive houses which, in turn, would somehow save the city.

Another assumption is that a $700,000 house is equal to a $700,000 lifestyle. What, equal to $700,000 a year in income? What does such a statement mean? The value of the asset is not realized until the asset is sold. Until then it is a house in which a person lives.

The city will not be saved by increasing taxes under the present assessment system. The whole thing needs an overhaul. The province should take back funding and management of services that it dumped on the city years ago that should never have been funded by municipal taxes and the occasional "grant" handed out by Queen's Park.

 

[afransen]

"Well, your response does not even resemble an argument. For example, the city may have what you refer to as a "right" to tax (these rights are, of course, granted by the province, though; remember that?), but there are limits to the level of taxation that home owners can bear. That is an economic argument, and if you owned a home it might actually grab you.

No jam from granny for you!"

The City's right to tax is more substantial that granny's right to live in a particular house. Her right to live in that house extends so far as her ability to pay for the financial obligations associated with that ownership, including property taxes but also utilities, repairs and maintenance, etc. If the price of heating that big drafty house rises beyond granny's meagre fixed income, shall we institute a nice little subsidy so that granny need not be displaced or freeze to death in her rocking chair--given her 'right' to live in that home?

You make the valid point that there is a level beyond which property taxes become onerous for homeowners. If that is the case for poor granny, imagine the plight of the poor suburban grannies or tenant grannies that face property tax rates that are much higher.

Economically speaking, I would say that granny should live where she can afford to live. She has substantial equity built up in her house, maybe she should move to less expensive community, or sell her home, invest the proceeds in nice GICs or corporate bonds and more than double her income. Or, she could remain in her house and face the increasing tax burden. Granny doesn't deserve a free ride.

As far as home ownership goes, I think granny is sitting pretty sweet. I'm sorry if it offends you that my heart doesn't bleed for her given that my financial situation is a lot less rosy as a student. I make do on a much, much more meagre income--exluding tuition and books, in the range of $7,000 - $10,000/yr. That's poverty baby.

Yes, poor property owners... how could someone with negative net-worth fail to feel for their plight at having to pay for the rising costs of services rendered by municipal government?

 

[Hydrogen]

First, we assume that granny lives in her home because she can afford to do so. She is, after all, a "straw granny." That being said, the repeated particulars of her situation are certainly not so for every other property owner in the city. They can vary quite considerably.

Stating that a city has a "right" to tax is one thing, but the city, to be prosperous must also tax reasonably. Generally speaking, the purpose of a tax system is that it should serve the people who pay it. A tax system is a fabrication, a financial method designed to serve multiple purposes essential to the operations of the city. Raising taxes by way of home evaluation is one possible method of generating these tax revenues. However, by linking that tax system to a process of assessment that results in wild variations in evaluation across and outside the city creates considerable disparity. Adding services to the municipal tax burden amplifies those disparities. Adding yet another tax to the purchase of a home with a price determined by a questionable evaluation system is, then, most certainly open to questioning.

By confusing the potential value of a home with the income of the owner is a recipe for inflation. The value of a house very often bears no relationship to the income of the owner - particularly if that person has owned that home for a number of years. That should be clear. Don't confuse the municipal tax with income tax. The two are very different.

 

[Hydrogen]

Toronto is not the only city facing this problem. Ottawa has similar issue brewing.

__________________________
Ottawa says no thanks to cash advice
By Mohammed Adam , ottawa citizen
Published: Friday, July 20, 2007

Ontario Finance Minister Greg Sorbara is offering to send in experts to help cash-strapped cities find savings to avoid hefty tax increases, but Ottawa politicians want nothing to do with it.

Several councillors say they don't need Queen's Park telling them how to find savings when it was the provincial government's dumping of services onto municipalities that caused the problem in the first place.

"It is an outrageous statement. We don't need experts to tell us that downloading is the source of the problem," said Councillor Maria McRae Friday.

"If we were to return all the downloaded services, we will save $666 per household on an average $250,000 home. We don't need an expert to tell us how to do that."

Councillor Gord Hunter agreed, noting in particular that the record in Ottawa of so-called provincial experts, is not exactly stellar.
"We have 800,000 residents of Ottawa who are telling us how to make savings. I'd rather take the cash," Mr. Hunter added.

"The (previous) Conservative government sent in an expert to run the Ottawa Board of Education for a while, but to the best of my knowledge they are still in financial trouble."

Speaking to reporters in the midst of the financial crisis that has gripped Toronto and threatens everything from public transit, police and social services to municipal jobs, Mr. Sorbara said cities that can't balance their books should not expect any bailouts from the province. And he offered to send experts to help dig up savings to stave off tax increases.

Toronto faces a $575-million budget shortfall, but the crisis came to a head after council narrowly defeated Mayor David Miller's plan to raise $356 million from new land transfer and vehicle registration fees. Following the loss, Mr. Miller demanded $100 million in service and program cuts, with the Toronto Transit Commission expected to cough up about one-third. Among measures being contemplated by the commission are fare increases, cutting bus routes and abandoning subway projects.

Facing a $118-million shortfall, the city of Ottawa's problems pale in comparison to Toronto's, but its impact is no less severe. As it stands, the shortfall translates into a tax hike of more than 12 per cent, a $300 increase that many homeowners can ill-afford.

Even then, some Ottawa councillors warn the shortfall could be higher. Councillor Rick Chiarelli says the official $118-million figure neither includes the millions of dollars needed to refurbish the city's affordable housing stock nor the cost - expected to run into the millions - of a lawsuit that rail giant Siemens has filed against the city.

Still, Mr. Chiarelli believes Mr. Sorbara's comments are directed more at Toronto than Ottawa. Mr. Chiarelli says finding savings is not new to Ottawa because as long ago as 2004, the city began a review that was aimed at setting core priorities to trim down costs.

A lot of savings were identified, but the problem, he says, is that council hasn't found the will to act.

Mayor Larry O'Brien's recent visioning exercise is also part of the same effort and there is very little Ottawa can learn from provincial experts.
"In Ottawa, I don't think finding the savings is the issue. It is acting on it," Mr. Chiarelli said.

Mike Patton, the mayor's spokesman, would not be drawn into a discussion of whether Ottawa needs the province to tell it how to save money. He says Mr. O'Brien wants to concentrate his energy and attention on council's long-range financial review, which will determine the city's direction.

"The mayor wants to get a firm handle on the long-range financial situation, what precisely the position of the city is, and then we will know whether we need or do not need help," Mr. Patton said.

"At the end of the day, we need to get our house in order before we are in a position to say what kind of help we may need from other levels of government."

But coming only months before a fall provincial election, some Ottawa councillors share the view of Toronto colleague Suzan Hall, who believes the October election is a good "lever" to use to pry concessions on the transfer of services.

"Yes, the election is a good opportunity to get some action on downloading of services, but I don't want it to become partisan," said Mr. Chiarelli.

"I don't want to see Tories attacking the government and Liberals defending the government. We should be able to agree on a specific downloading program."

 

[EnviroTO]

You certainly don't have to feel sorry for people who's "assets" appreciated, but they certainly should not be punished on that basis either.

She isn't punished. The tax rate as a percentage is equal for her as it is for the home owner in a neighbourhood in Toronto that did not appreciate as much. She has more fiscal power than all the people who didn't benefit from rising home prices. How can the person who made the most on rising home prices not afford the tax rate that everyone else can?

And I say punished because an assumption that seems to be running through some of these posts is that granny and her like ought to get out of their houses and into rental buildings. Don't forget that rental buildings are also affected by property tax increases as well. Since when should the tax system be, in effect, dictating how people should live or where they should live?

The tax system isn't deciding anything. The tax rate is the same on all homes regardless of their desirability in the 416. The only punishment is on multi-residence buildings paying more than triple the property tax rate. There is more punishment on income as the actual percentage goes up as you make more. But the end goal of investing and income is to have more value at the end... people whose home prices skyrocketed have more value.

When property evaluations go up, so does the tax bill. The manner by which these evaluations are carried out has been an issue of complaint for a number of years. It is an issue being examined by the province and was the object of interest of the Ontario ombudsman a little while back due to the fact the municipal property assessment and the tax system linked to it is a nasty mess presently. Yet some of you suddenly see this problematic system, which should be under scrutiny, as the means to taxing the supposed rich people living in supposedly expensive houses which, in turn, would somehow save the city.

The only problem with the system is valuations that don't match the value homes can actually be sold for. There is no better way to tax that to tax at an equal rate on value.

Another assumption is that a $700,000 house is equal to a $700,000 lifestyle. What, equal to $700,000 a year in income? What does such a statement mean? The value of the asset is not realized until the asset is sold. Until then it is a house in which a person lives.

Not a $700k income lifestyle, a $700k asset lifestyle. The value of the asset in the case of a home is realized immediately. To live in the neighbourhood you need to buy a $700k home. She doesn't have to pay that because she already has the home... but she gets to live in a neighbourhood which is so desirable that the cost now is $700k. If people are willing to pay $700k for what she has it is worth $700k.

The city will not be saved by increasing taxes under the present assessment system. The whole thing needs an overhaul. The province should take back funding and management of services that it dumped on the city years ago that should never have been funded by municipal taxes and the occasional "grant" handed out by Queen's Park.

The only overhaul the city looks to be considering is throwing lump sum taxes on people who would be more likely able to afford it spread out over a lifetime of home ownership. This lump sum hits people who may not have had any benefit from city services yet, who are just buying a home and have furniture and many other expenses to pay for, and who may not have some big asset they can tap into to pay tax with. They are expected to pay this big lump sum so people who have benefited far more than the average person from rising home prices don't have to pay more. It is downloading the cost of city services to new market entrants like children and immigrants, and maybe to Granny herself if she decides her house is just too big to maintain on her own and moves into a condo. I just don't see why the people whose net value goes up the most are to be sympathized with at the expense of new entrants to the market and renters.

People who have assets that rise the most are the ones who benefited the most. How could you possibly come up with a better property tax system than one that has one rate that applies to all people? I don't think that after the province evaluates the system that it will come up with something that moves away from one rate for all people. To give someone a tax break is to give someone a tax hit in order to raise the same amount of funds. Who are you going to punish to reward the big asset gain winners with a tax break?

 

[ShonTron]

Sorbara is such an ass hat. By his mean-spirited, patronizing remarks, the Liberals should worry more about the 17 seats they have left in Toronto. Tory might look like the better person for cities by default.

 

[Hydrogen]

She has more fiscal power than all the people who didn't benefit from rising home prices. How can the person who made the most on rising home prices not afford the tax rate that everyone else can?

If granny doesn't move, she makes no bucks on a sale. We can presume that anyone else younger than granny in a similar situation needs new lodgings if they move (unless they are moving out of Toronto), and thus must make a purchase in the same market with the same conditions.

The tax system isn't deciding anything. The tax rate is the same on all homes regardless of their desirability in the 416. The only punishment is on multi-residence buildings paying more than triple the property tax rate. There is more punishment on income as the actual percentage goes up as you make more. But the end goal of investing and income is to have more value at the end... people whose home prices skyrocketed have more value.

Again, not everyone who bought a house, or buys a house, is doing so with a goal of "investing." That is your assumption. A tax applied only in the 416 just might make people think 905.

The only problem with the system is valuations that don't match the value homes can actually be sold for. There is no better way to tax that to tax at an equal rate on value.

And there is a problem on just how that value is determined.

Not a $700k income lifestyle, a $700k asset lifestyle. The value of the asset in the case of a home is realized immediately.

What the hell is an asset lifestyle? If you are living in it and don't want to sell, you realize nothing. If you are buying it then you are already presumably laying a chunk of cash on the mortgage. The value of the property tells you very little about owner or the purchaser.

The only overhaul the city looks to be considering is throwing lump sum taxes on people who would be more likely able to afford it spread out over a lifetime of home ownership. This lump sum hits people who may not have had any benefit from city services yet, who are just buying a home and have furniture and many other expenses to pay for, and who may not have some big asset they can tap into to pay tax with. They are expected to pay this big lump sum so people who have benefited far more than the average person from rising home prices don't have to pay more. It is downloading the cost of city services to new market entrants like children and immigrants, and maybe to Granny herself if she decides her house is just too big to maintain on her own and moves into a condo. I just don't see why the people whose net value goes up the most are to be sympathized with at the expense of new entrants to the market and renters.

Again, you've thrown a wide range of presumptions into this. People who may have had this, or may have had that, and so on. You can't call a new tax equitable and argue that it unfairly affects those who have to now pay it as opposed to those who purchased a home before such a tax.

My problem with this lump sum tax is that it represents a broken system. The city should not be funding services that are the responsibility of the provincial government. It was a strategic mistake for Miller to try to add additional taxes to cover what the city should not be paying for. All the leaders of the main provincial parties have made statements along these lines. This to me, this is the heart of the matter. Provincial responsibilities belong to the province; they should be funded by provincial taxes, and not by additional city taxes that create a disadvantage for just one city.

 

[3cp1]

Let's get this straight. $50,000 dollars in 1950 is the equivalent of something like $450,000 today. Add to that all of the maintenance costs of keeping a house in good shape for more than 50 years (probably at least $250,000 in today's dollars), and the property taxes and you can see that granny hasn't gotten rich off of her house. She has merely kept up with inflation. Stocks, which rise on average 7% per year are actually a far better investment than real estate in most cases.

Now some areas may have increased at a rate slightly higher than inflation. Possibly Cabbagetown, Riverdale, the Beaches, and a few others. But I can think of plenty of areas in the city where the opposite may be true. There are still lots of areas downtown or very close to downtown where the average house price is $300,000. Lots of these areas have not been gentrified, some have even declined, and as a result, the housing prices have not appreciated much.

The real issue is that Miller promised many times to limit tax increases to the rate of inflation. The problem is that city unions have been able to negotiate wage increases far exceeding inflation. And now guess what? Tax increases are exceeding inflation by a wide margin. Property taxes have been rising at roughly twice the rate of inflation. And now that's not enough, Miller wants to introduce a land transfer tax, a gas tax, a car tax, a booze tax, and a sidewalk tax. Coincidence? I think not.

The city is right to demand an end to the Harris policy of downloading provincial services onto municipalities. But the Toronto Board of Trade is right to ask Miller to look at controlling costs, something he refuses to do. Instead, he accuses them of being irresponsible. Expecting Miller to stop catering to the unions is like expecting fish to stop swimming. And until the city gets city wages back in line with market rates, and starts contracting out, as well as opening up infrastructure projects to free market competition, the province can use it as an excuse not to upload.

Unfortunately, the province is also hesitant to upload because it doesn't have much money, and that has to do with the equalization system. Ontario is becoming a have not province, as its manufacturing sector dies, while sending billions to provinces like Quebec, which is now becoming a have province. But the Liberals haven't been effective at all in their half hearted campaign to remedy the situation.

I say get rid of Miller ASAP, freeze city wages until they are back in line with market wages, contract out city services, and open up infrastructure projects like the Bombardier subway contract to competitioin. Also, we need to elect a premier who is going to to be more effective at arguing Ontario's case, so that the province can actually afford to upload municipal services without raising taxes through the roof.

It's not that Torontonians aren't willing to pay tax. It's just that the taxes (when you factor in federal and provincial) are already so high and Torontonians receive so little in return. That's why there is so much public pressure on Miller to finally control spending and stop catering to the unions.

Here are just a few facts to mull over:
-On average, Toronto pays its workers around a third more than the province and a quarter more than the feds
-labour is the most expensive item in the city budget by far
-the City’s net budget is increasing by 9.3% this year, more than triple the current rate of inflation
-Over 2000 city workers make $100,000.000 or more
-A city-employed cashier makes $25.90 an hour, more than twice the wages of a cashier in the private sector
-litter-pickers - those guys with sticks who pick up garbage in the park - make $46,000 a year plus benefits
-Streetcar drivers (who don't even have to steer) earn $80,000 per year
-the City Manager's salary is as much as the Prime Minister's
-Toronto has hired 8,000 more civil servants in the past 4 years and now has over 60,000 bureaucrats to manage 2.5 million people. The city of Pittsburgh has ¼ of this amount on a per capita basis and is a much cleaner city
-TTC workers won the right not to have to pay the provincial health tax (retroactive to 2004) and now Toronto residents have to shoulder the added tax burden ($18 million and counting)
-under the city of Toronto's Fair Wage policy, any outside private firm bidding on a city contract must agree to pay its employees at 90% of the unions pay scale
-More than 40% of Toronto workers are in union shops. The average public sector union rate in the US is 12 %.
-Montreal (a city whose finances are in much better shape than Toronto) is looking at freezing city wages in 2007
-the city's debt and the costs of servicing it have been increasing dramatically under David Miller's rule
-In Toronto the private sector loses 9,000 jobs on average per year

 

[Hydrogen]

Granny will probably be sending you a fresh-baked pie.

 

[EnviroTO]

If granny doesn't move, she makes no bucks on a sale. We can presume that anyone else younger than granny in a similar situation needs new lodgings if they move (unless they are moving out of Toronto), and thus must make a purchase in the same market with the same conditions.

She can tap into that money without selling with a reverse mortgage or refinancing. It is an asset now and going into a bank with a $700k home even with no plans to move gives you different fiscal abilities than walking into a bank with a $300k home or no assets at all. Yes, everyone else that moves also needs to deal with the same market conditions. Not sure what the point is because they should be paying the same rate of tax too.

Again, not everyone who bought a house, or buys a house, is doing so with a goal of "investing." That is your assumption. A tax applied only in the 416 just might make people think 905.

Why don't they rent? Property tax is applied everywhere. It is the dumb land transfer tax idea that would be unbalanced because nowhere else has it. Someone who has $300k to spend on a home now would be wise to buy in the 416... the tax rates are lower here right now.

And there is a problem on just how that value is determined.

Well that should be fixed so that when we raise the property tax people get dinged the right amount.

What the hell is an asset lifestyle? If you are living in it and don't want to sell, you realize nothing. If you are buying it then you are already presumably laying a chunk of cash on the mortgage. The value of the property tells you very little about owner or the purchaser.

House, car, it is the same thing. Two people own BMW 7 Series, only one can afford it... they are still living the same life style. The sum of cash + assets - debts tells you the fiscal truth at any given time, but you can't see that outwardly. Income includes asset growth, debt reduction, and cash growth. Expenses include asset depreciation or loss, debt increase, and cash reduction. If I live a life that includes a $700k home and a $90k car I'm living a lifestyle.... affordability is a totally different thing.

Again, you've thrown a wide range of presumptions into this. People who may have had this, or may have had that, and so on. You can't call a new tax equitable and argue that it unfairly affects those who have to now pay it as opposed to those who purchased a home before such a tax.

I'm talking about two different taxes. One tax, property tax, is an equal rate applied across all properties (except multi-residential which is unfair) and is paid for by all people who have received the benefits of city services. If the city had spent only half of what it did on the property values wouldn't have gone up as much because it wouldn't be as desirable a place to live. The other tax doesn't tax ALL people that receive city services, it only taxes NEW people (new property owners)... people that may not have even been here when council spent more than it had and who wouldn't have benefited from the services the city was providing at the time.

My problem with this lump sum tax is that it represents a broken system. The city should not be funding services that are the responsibility of the provincial government. It was a strategic mistake for Miller to try to add additional taxes to cover what the city should not be paying for. All the leaders of the main provincial parties have made statements along these lines. This to me, this is the heart of the matter. Provincial responsibilities belong to the province; they should be funded by provincial taxes, and not by additional city taxes that create a disadvantage for just one city.

I agree completely. But if the city is to raise taxes... let everybody's tax rise. We all receive city services.

 

[EnviroTO]

I agree with what you are saying 3cp1. There are a lot of issues that the city should be dealing with and a lot of fiscal pressures on the city, some their own fault, some not. I'm not arguing the need or lack of need to raise taxes. I'm only arguing that the budget must be balanced somehow and that when the city council decides it isn't going to cut anymore and decides to tax... we should all pay. Not just new people. The mayor coming up with a tax that only new people pay is giving his own voters a free ride for his own lack of ability to balance the budget.