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Assessment freeze is not enough;
Property owners to pay more after the next election

Bob Topp

July 15, 2006

A "silent majority" of Ontarians, the 65 per cent who are residential property owners, are silent no longer. They are fed up with unfair, double-digit assessment increases and related tax hikes, and that's why the Ontario government responded recently by freezing property assessments until after the next provincial election.

The two-year moratorium announced recently by Finance Minister Greg Sorbara simply shelves this unpleasant political issue until after the vote in October, 2007. Unfortunately, it does not fix the system, so when the freeze is lifted, the problems will still be there.

It didn't have to be this way, and the Coalition After Property Tax Reform, (CAPTR) made that point recently in a meeting with the Finance Minister. CAPTR is a coalition of 700 Ontario ratepayers groups and organizations such as United Senior Citizens of Ontario that together give CAPTR a million voices across Ontario, voices that will be raised, and that will be heard, to start with in the upcoming by-election in Gerard Kennedy's former riding.

We believe the two-year moratorium would be an ideal window to gather some expertise and come up with a way to fix the system. It's not an insoluble problem. Other North American jurisdictions have found ways to solve the issue. Why not Ontario? We've now had eight years to see what the current system is doing to taxpayers.

We had hope in April of this year that the Ontario government might take the issue seriously when Premier McGuinty told the Ottawa Citizen, "I don't think anyone argues that there is not a problem and the Minister of Finance has now become seized with this. As a government we've become seized with this issue".

The Premier also said: "We are going to take some time to find a better way to address this and whatever we come up with will also be the subject of an extensive consultation".

Not quite. It turns out there will not be any "extensive consultation", at least not aimed at actually doing anything to fix the problem of out-of-control assessments and the resulting property taxes.

The reality is that rising property values, combined with a crude assessment methodology, have led to massive volatility in valuations and hence in property taxes. For example, in the 2005 assessment some urban neighbourhoods in Toronto were up 20% while others were up 5%. On waterfront properties, some lakes were up 60%, while others were up 10%. These numbers are averages. The range of individual assessment (and tax) increases was even greater.

To make matters worse, the former Harris government made municipalities responsible for paying for social services in 1999 by downloading what until then had been a provincial responsibility. The Liberal government at Queen's Park is of course reluctant to reverse that Conservative policy, fearing it would then have to raise income taxes. As a result, Ontario property taxes per capita are among the highest in the Western world.

There is a great deal wrong with the present system which distributes property taxes to home owners based on assessment and is now doing so on an annual basis: it meets none of the fundamental principles of fairness used to evaluate any property tax system.

• Benefits received should roughly equal taxes paid, but under Ontario's system, they do not. This is particularly true where land, i.e. location, forms the bulk of the value.
• There is no relationship between taxes levied and ability to pay. Consider this: a wealthy person pays $500,000 for a property, tears down the existing house and spends $500,000 on a new house. He can afford $10,000 in taxes but his next door neighbour, a widow living there 40 years, cannot afford the $7,000 her taxes jump to because of the increase in her property value.
• High taxes will force people from their homes. The only way they can realize the value to pay their taxes is by selling.
• There are massive shifts in tax from year to year and they can be up or down. Different neighbourhoods get hit with each assessment. There is no way to predict your tax bill from one year to the next.

There would be a nationwide taxpayers revolt in Canada if income taxes were determined on the basis of what one might "theoretically" earn, instead of what individuals actually earn. The income taxes we pay are levied on "realized income" and realized capital gains, and we have a progressive system with higher tax rates on higher income. But property taxes are exactly the opposite! We are asked to pay money every year on "unrealized gains", on money we have not made!

CAPTR will continue its campaign to ensure that the provincial government's silent shelving of serious tax property tax reform will not succeed, by "seizing" every property owner in Ontario with the issue, at every by-election, in every municipal election, and yes, in the provincial election campaign which culminates in a vote on October 7, 2007.

Bob Topp is Chairman of the Coalition After Property Tax Reform (CAPTR), a coalition which through over 700 ratepayer organizations and a major senior citizens alliance, represents close to one million Ontario citizens.

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