Our city budget has been majority funded by residential taxes, by so wide a margin and for so long, that it comes like a shot in the dark to hear Councillor Chris Stephan declare that the business tax rate set on Monday is unfair and will drive growth away from Red Deer.
Since Gail Surkan was mayor, and probably even before that, Red Deer was known among Alberta cities for its extremely favourable tax rate for business. At least, that’s been our reputation.
Tax revenues for the current year’s budget, which was given final approval on Monday, are around $94.2 million.
Of that, 54.3 per cent is taken in residential taxes. Taxes on apartments and other buildings that contain three or more dwellings are a hybrid of business and residential (they are revenue-producing investments, but the taxes are raised through costs on a residence — the rent). They produce 4.6 per cent of city tax revenues.
Only 41 per cent comes from non-residential or business taxes.
On this ratio, our city has for years carried the reputation of being among the most heavily weighted toward residential taxes. This was supposed to be Red Deer’s business advantage.
But somehow, Stephan says the weighting is onerous and suggests that business people thinking about moving here will go someplace else. Just where that might be is a good question.
Good enough for Councillor Tara Veer to suggest a report from the Governance and Policy Committee, to be ready for consideration in October.
Since we won’t be messing with taxes until late in this calendar year and early into 2012, we have plenty of time to poll the data and consider options.
It would be opening a can of worms to ask the committee to look at data such as that supplied by the Canadian Federation of Independent Business. These might be the guys supplying Stephan with his point of view.
From the CFIB’s perspective, Red Deer is middle of the pack for Alberta cities, with a “property tax gap” of 2.2, as of Monday. What that means is that for every $100,000 of assessed value, businesses pay 2.2 times more taxes than homeowners. (There are so many millions of dollars worth of homes in Red Deer, that even with this gap, they still provide the lion’s share of tax revenues.)
As a matter of fact, that gap has been falling in Red Deer for some time. In 2007, it was 2.48.
The can of worms comes in a suggestion from the federation that businesses should be only taxed according to the services they use. This suggests businesses can ignore that they are citizens in a community and are content to make everything user-pay.
Are we left to imagine a business owner balancing the cost/benefit of making a fire call, or complaining that his taxes for fire services saved a competitor’s business or their employees’ lives?
Throw in more worms: that Canadian law forces municipalities to raise their revenues in the most patently unfair system one can imagine: taxes on property values.
This whole system can never be made “fair.” One person’s burden will always be arbitrarily greater than another’s.
But there are still enough people who quote things that ain’t so, to make them seem so.
In the federal election just finished, it was clearly shown that business tax rates have little impact on decisions regarding expansion or employment. A rate cut in any year mostly just results in a larger executive bonus, not jobs.
Red Deer is a great place for business, because of our location, our available workforce, easy access to Hwy 2, excellent quality of life (including arts, parks and trails) and — as a minor consideration — our favourable business tax rates.
To claim a tax gap of 2.2 makes Red Deer somehow unattractive to business, really, is a bit of a slur.
Greg Neiman is an Advocate editor.