Municipal affairs minister won't touch property tax cap

Mark Furey, the municipal affairs minister, is under pressure to remove the property assessment cap.

The Union of Nova Scotia Municipalities has always hated the cap, ever since it was imposed in 2005. A UNSM-commissioned report released last week provides fresh ammunition.

The report was written by two eminent academics, Enid Slack of the University of Toronto and Harry Kitchen of Trent University. The facts are solid, the analysis is good, the theory is sound. They recommend the cap be lifted.

But it won’t happen anytime soon, because it’s bad politics. 

Mark Furey wants to be re-elected, and so do his Liberal colleagues. As I learned when I was a new MLA, people get mighty cranky when you mess with their property taxes. When cranky people are marking their X, they like to punish the politicians who made them cranky.

The assessment cap is, in fact, a perfect example of how politics trumps good policy.

The basic calculation of property tax is simple: it’s the value of your property, multiplied by the municipal tax rate.

Assessment system not perfect

The assessment system isn’t perfect, because the value of a property doesn’t always bear a close relationship to municipal services consumed, or to the owner’s ability to pay. But we stick with it because—well, because everybody's gotten used to it.

The system works best when everybody’s property values are rising at roughly the same rate. Around 2002, MLAs started hearing stories about some assessments going wild. Waterfront properties, especially, saw big jumps. There were stories like Eric Creaser of Lunenburg County, who saw his assessment climb from $82,000 to $380,000 in a single year. The property had been in his family for generations. The jump in taxes was going to make it hard to keep.

Most of the jumps weren’t that extreme, but the cry went up: "Do something!" And that cry acts like a political duck call to elected officials.

The answer from the John Hamm Conservatives was to impose a ceiling on the amount an assessment could rise in a single year, retroactive to 2001. At first the cap was 15 per cent, then it was lowered to 10 per cent, then for 2007 onwards it was lowered to the rate of inflation.

The cap was a political success. It stopped the worst examples of skyrocketing assessments. The hubbub died down, and politicians turned their attention to more pressing issues.

Here’s the rub: The cap creates its own inequities, because it doesn’t apply to everyone. It doesn’t apply to new construction, or when a home is sold, or to commercial properties. 

So now, after nine years of the cap, you can have similar houses on the same street paying quite different property taxes.

Political question

But the political question—which is different from the theoretical question addressed by Slack and Kitchen—is this: Have we got to the point where the unfairness of the cap is as bad, or worse, than the problem it was supposed to fix?

And the answer is a clear "No."

Back in 2002, it was easy to see if you were hurt by skyrocketing assessments. All you had to do was open the envelope, and compare last year’s assessment to this year’s. You knew where you stood.

Today, it’s really difficult to see if the cap is hurting you. You can dig up assessment information about others on your street. Most people don’t know how, and aren’t willing to do the work if they did.

Paradoxically, some people who want to keep the cap would pay less if the cap were removed. That’s because removing the cap would allow a municipality to drop the tax rate. But that’s a tough and hypothetical calculation.

Against this, there’s the clean, simple idea that motivates the cap’s defenders: If my assessment is capped, I must be paying less, therefore I want the cap to stay. 

Simple ideas are politically powerful, though often wrong.

With so many municipalities in financial straits, Mark Furey has plenty of other things to worry about. The cap issue is muted. People hurt by the cap are not mobilized. The minister’s not about to buy a fight by telling tens of thousands of Nova Scotians that their property taxes are too low.

That’s why nothing will change anytime soon.