Taxation Time

It is that time of year when the property taxes become due here in Edmonton and the complainers start to come out of the woodwork and up the volume of their complaints. I don't get it.

The first complaint that is heard is that taxes shouldn't go up beyond the rate of inflation. Really? The rate of inflation should be the rate at which taxes should increase? Really? Let's think about that for a second.

Inflation is a measure of the rate of change in the prices in a basket of goods called the Consumer Price Index. If the total amount of that basket rises from $100 in one period to $110 in another period, we can say that inflation rose by 10%. Simple concept. The basket of goods is comprised of items that an average consumer would purchase. So, it contains the prices of things like gas (for cars), natural gas (for heating), bread, milk, rent, etc. The list varies as we change our preferences from time to time. It makes perfect sense for consumers.

Now let's look at how that relates to the idea of holding taxes to that increase. Municipal Governments don't purchase the same items as individual consumers. A typical basket of goods for municipalities may include commercial rent, diesel (buses and fire trucks), commercial vehicles, labour, asphalt, concrete, land etc. The basket looks completely different and those increases aren't measured.

So, inflation may be 2% but the items that the City needs may have gone up by 12%. If the City can only increase taxes by the 2% inflation rate, then services will have to be cut to make up the difference in what the City can buy.

It would be like deciding how many apples to purchase for the week based on the number of bowling balls you have.

Finally, if the City only raised enough money to match inflation it couldn't grow. It could only maintain status quo. That doesn't make a lot of sense to me either.

Second, I have also heard the complaint that taxes always go up but the services that citizens receive stay the same. I'm not sure I can agree with that either. I see a lot of new construction going on with new centres opening up and a lot more police and emergency services personnel so I do see an increase in services. If all we have to complain about are some potholes not being filled the instant that someone notices, I think we have it pretty good.

Third, from the complaints I hear, it seems Edmonton has the highest tax rate in the world. People should look at rates in other cities to see what their tax rates are. From my own experience, I receive more services here than in my previous city, I live in a larger place, and I pay approximately one-third the taxes here that I paid there. Oh yeah, my property here is also worth almost 4 times what my property was worth there.

I may post more about this as I feel like it, but knowing that most of you won't agree with me, flame away.