Tuesday, January 24, 2006

And that little matter of the budget…

In another development reported in the London Free Press, it turns out that council's much-ballyhooed plans to deliver a property tax increase of three per cent in an election year are predicated on shifting the tax burden to businesses and the unguaranteed approval of the provincial government:

Plans by London council to deliver a tax hike below three per cent could be dashed unless Queen's Park allows the shifting of taxes from homeowners to business, Deputy Mayor Tom Gosnell warns. Without provincial intervention the city is seeking, a tax hike projected at 3.2 per cent for homeowners would rise an extra 1.43 per cent. The reason for the added whammy is this: city homes have increased in value the last two years by more than twice as much as commercial and industrial properties.

"That extra 1.43 per cent is worrisome," Gosnell said. The deputy mayor is one of several council members who have called for a tax hike below three per cent, which they believe would keep an increase in line with the inflationary cost of living.

That goal will be difficult to achieve if the projected tax rises to more than 4.6 per cent.
Before this article appeared, the average Londoner may have been gulled into thinking that an increase in the property tax rate of three per cent after two years of 5.9 and 5.3 per cent was the result of a trifling of fiscal restraint. Not so, as it happens — a smaller tax increase would be the result of redistributing the burden of increased spending to businesses, as though businesses do not pass along those costs through higher prices, lower wages, or reduced investment. In an election year, however, the strategy is compelling because many voters fail to recognize the impact on their own financial expectations or the association with increased business taxes. That extra 1.43 per cent is worrisome — to re-election prospects!
City treasurer Mike St. Amant said he's hopeful, but not entirely confident the province would allow the tax shift. Without the change, this is how much more or less property classes would pay:
  • Homeowners would pay 1.43 per cent more.
  • Owners of multi-residential buildings would pay 5.1 per cent more.
  • Owners of office buildings would pay 16.3 per cent less and those of shopping centres 11.8 per cent less.
  • Large industry would pay 10.1 per cent less; other industry would pay 2.1 per cent less.
  • Commercial owners would pay 1.8 per cent less.