[Public service announcement: Londoners should note that any reference to property tax cuts, reduction or relief, in the London Free Press should be qualified as cuts or reductions in the proposed 5% property tax increase.]
Cutting taxes is the wrong thing to do? dishonest? Caranci and Gosnell need to learn something about right and wrong and honesty…
A debate that wasn't supposed to begin yet exploded yesterday on the floor of London city council, with some demanding that a surplus be used for tax relief and others calling that a foolish grab at popularity.
The City of London press release of November 16 announcing the $8.7 million surplus is called Budget Surplus Result of Fiscal Restraint. City council has been voting for extravagant social welfare programs and colossal capital projects for years now with the result that, at the end of the 2004 fiscal year, London's debt stood at $335.4 million, roughly $1000 for every man, woman and child. "Surplus" may be the correct technical term to describe a condition in which revenue exceeds expenditure in a given year, but the short-term attention given to the circumstance exceeds the recognition of council's long-term financial mismanagement.
I have argued in the past that debt reduction is the only valid use of taxpayer money, given that debt is a contractual responsibility that — unfortunately — can only be honoured by taxpayers who are at least complicit in its incurrence, the "surplus" is not budgeted revenue that councillors can even pretend is legitimately municipal assets. Jim Chapman put it well the other day:
Councillors who argue that it is irresponsible to give that money back to taxpayers are in effect saying that it's their money now. Gosnell and Caranci suggest that debt reduction is in the long-term interests of taxpayers — however, even if that were true, making that decision for those taxpayers against their stated preference is contemptuous and condescending.
This supposedly "surplus" money isn't really surplus at all. It is tax money that we paid to the city beyond what it had to spend to meet its obligations. It may look like a bonus on the city's books, but every dollar of it represents money plucked from the pockets of hard-working Londoners.
Nor is it necessarily true that using the "surplus" to reduce debt will be in the best interests of taxpayers. Debt reduction is of course one of the city's obligations — as such, it ought to be a line item in each budget. If debt reduction proponents were as principled at budget time as they are now, debt reduction would receive much more attention at budget time. Unfortunately for them, planned debt reduction is regarded suspiciously by socialists and community activist groups as "discretionary" or, in other words, better spent on their pet welfare schemes. The airing these groups receive from the London Free Press ensures that the most important principle of councillors is avoidance of unpopular initiatives. But city council has learned from its federal Liberal counterparts that citizens can be overtaxed each year to produce a "surplus" that can then be marketed as the product of sound fiscal management and earmarked for debt reduction, a ruse to practice a financially necessary policy.
In the case of London, this ruse is practiced to even less effect than an actual reduction in overall debt. Council currently has a self-imposed $30 million debt cap in place for each year's budget — this means that they can add $30 million in debt each budget above and beyond any debt retirement made. Last year the city incurred $69 million in new debt after retiring $29.8 million. "Surplus" money used for debt reduction could then presumably be applied to this debt retirement, allowing an additional $8.7 million to be incurred as debt in the next budget, as long as total new debt does not exceed $30 million. "Debt reduction" then would not result, and has not in the past resulted, in reduced debt.
Despite the condescension and arrogance of Gosnell and Caranci,
The noblest sentiment expressed at city hall for many a year. The hopes and fears of all our years' budgets are with us in this article by Jim Chapman:
[Coun. Paul] Van Meerbergen said there's a legitimate long-term gain to cutting taxes — it puts pressure on council and staff to cut spending.
Update: Better take the reduction in the property tax increase while you can get it, it might make up a little for this:
There are sound fiscal reasons to reduce our debt. Every dollar it decreases also reduces the interest we have to pay. In the long run, we are told, that will help keep taxes down.
Board of control sits down today to wrestle with its 2006 budget, but Londoners have already been hit with the equivalent of a 2.5-per-cent property tax hike.
Wednesday, November 23, 2005
Posted by MapMaster on Wednesday, November 23, 2005