
April 8, 2018 · 0 Comments
AT A TIME when a key promise of Doug Ford is that as premier he’ll find $6 billion in potential savings and Kathleen Wynne says the only way that could happen would be to have massive cuts in program spending, we’d like to offer a way to save billions without touching social services.
In our submission, the savings could and should be achieved by phasing out market value assessment over a five- or 10-year period and replacing it with property taxation based simply on volumes instead of perceived values.
As most Ontarians should well know, property taxation has been around a lot longer than the income tax, which came into being 100 years ago as a temporary wartime measure.
The property tax was and is something akin to the personal income tax, in that it has always been based on an assessor’s best guess as to the property’s worth.
In the absence of things like general inflation and soaring real estate prices, such a system should work. But in the real world it doesn’t, and one need only look at the real estate pages of the Toronto dailies to see huge discrepancies in the property taxes paid for properties being sold for similar prices.
In Ontario, the job of assessing properties was once carried out locally, but that changed after the provincial government appointed an Ontario Committee on Taxation in 1963. Its report in 1967 highlighted many inconsistencies in the current assessment system, and three years later the government introduced market value assessments as something municipalities could adopt.
Some did but others didn’t, and in 1997 the Harris government passed the Fair Municipal Finance Act, which set the stage for what the government called the Ontario Fair Assessment System and with it province-wide assessments by an agency initially called the Ontario Property Assessment Corporation and later renamed the Municipal Property Assessment Corporation (MPAC).
Under MPAC, all properties in the province are hypothetically re-assessed once every four years and changes in the perceived value of each property are phased in over the following four years.
However, it’s clearly impossible, even at the best of times, for millions of residential, commercial and industrial properties to be individually examined to determine accurately the price that property would command if it were on the market.
In the real world of the 21st Century, the only properties accurately assessed are those that happened to be sold just prior to being assessed. And as a result, recently-sold houses wind up being taxed far more heavily than similar houses that haven’t been on the market for 10 or more years.
Yet another problem is the “market bubble” which today sees prices dropping because of higher interest rates and new regulations on mortgaging.
All such problems would vanish if the government phased out MPAC and replaced market value assessments with simple calculations of the amount of land and occupancy space involved, so that any two properties occupying the same amount of land with houses the same size would pay the same tax.
Under such a system, the tax on any property would increase only if the owner built an addition or the municipality provided local improvements. Two houses of the same size, one of which was brick and beautifully landscaped and the other frame, in need of paint and on land that’s overgrown with weeds, would pay the same tax.
While eliminating MPAC would clearly save billions of dollars, the new tax system would see major changes in the tax level on individual properties, requiring the system to be phased in over at least four years.
But in the end we would have a tax system that not only worked but provided an element of fairness that’s missing in subjective market value assessments.