The current rancor over the province’s surprise dip into municipal revenue from photo radar and red light cameras isn’t fully based on the underhanded tactics of the province to increase its revenue at the expense of municipalities. It’s about the unfairness of the way both governments get their money from us.
Albertans like to brag about our low income taxes, but have you renewed your car registration recently? Fees are up, aren’t they?
Do you really believe it costs $15 to type an auto licence number into a computer, find out who the registered owner is (using a database taxpayers have already paid for with their car registration fees), and email the result to the issuer of a photo radar speeding ticket?
Of course it doesn’t. If $15 really is an accurate assessment of that cost, I have an idea for a non-profit to take over that service — at $5 a pop. It would make a fortune.
If photo radar is in fact merely a cash cow for cities, the province has just implanted a new teat to drain a bit on the side. Without telling anyone — including some of their own MLAs.
It was a sleazy thing spring on the province, just weeks after the cities had finished their annual budgets. You can understand why city officials would be angry.
But their anger is more justifiably pointed to the way they are forced to raise the money needed to house and deliver the many that services people expect from municipalities.
Nationally, cities take just under 10 per cent of all taxes levied in Canada. According to the latest figures available (2008), property taxes provided just over 35 per cent of all Alberta’s municipal revenue. That happens to be the lowest rate in Canada.
In other words, those property taxes we all gripe about only account for a bit more than one-third of all the money that towns and cities must raise to operate their services.
User fees account for about 25 per cent more (the cities are only following the provincial model here). Intergovernmental transfers account for a portion of the rest.
Melville L. McMillan, of the Department of Economics of the University of Alberta, did a pretty thorough study of cities and their tax share. He found municipalities spend 10.5 per cent of all government outlays, and in Alberta, that comes to just over $1,500 per person. Alberta municipalities raise just over $1,700 per person, meaning their “overhead” is less than one per cent.
But over the past 30 years, the portion of total revenue that cities raise from property taxes has been dropping. McMillan offers the sensible suggestion that it may be time to drop property taxes altogether.
Cities lost the ability to levy income taxes in 1941, when some city tax bills were greater than the income tax levy for province at the time. Was that necessarily bad? Who knows? But that tax power was taken away.
McMillan points to 3,700 cities and towns in the U.S. that do levy income taxes. Typically, he says the levy is only one per cent of taxable income. That option has been found to be much more popular among people than, say, a local sales tax, which occurs in about 6,500 U.S. cities.
Having the province collect five per cent more on provincial taxes, and forwarding that money to cities shouldn’t cost that much to administer. McMillan estimates that’s how much would be needed to fully replace the revenue of Alberta’s manifestly unfair system of taxing the real estate value of your house, regardless of ability to pay.
Given how our province operates, the government would probably just keep the money, claiming high processing costs. But if it’s too much of a burden, I’ll bet a non-profit could provide the service for a lot less.
Greg Neiman is an Advocate editor.