The City’s recently approved budget increase has seen, along with it, an increase in property taxes, by 2.1 percent. This increase is in line with the natural rate of inflation, leaving property taxes at the same rate they would be expected to reach this year. Some people are leery of this increase, claiming it should be more than inflation levels and that in the end, it is only going to make the city more unaffordable, not less.
Facing down History
The decision to maintain land tax in line with inflation is also in line with the city’s history of maintaining low property taxes, whereby for the last decade, the average tax hike has been 2.4 percent. Repeating history however, isn’t necessarily the answer. Having low property taxes is a great deal for the people who already own property and are able to invest in property in Toronto, allowing them to occupy a great deal of the market. The same isn’t true though for the average Torontonian who is trying to go about their daily life on public transit, using roads, and taking advantage of city resources. In reality, these resources aren’t there to the extent that they need to be because the funds that would be coming in from property tax to support them simply aren’t being collected.
Land Transfer Tax
The council conceding to lower property taxes and deeming it unnecessary to collect extra money through this avenue is because they rely on Municipal Land Transfer Tax (MLTT) to bring in the money instead. This, TREB says, is reason for alarm. The MLTT is a tax levied on all land sales within the city, based upon the sale price of the property, and how many properties are selling. When the city is selling lots of property, for high prices – as was seen in 2017 – the MLTT fills the hole left through underfunding that is caused by lower property taxes. In contrast though, when it is a slower time on the market, as we are seeing start out 2018 due in part to new mortgage laws, the income from the MLTT is not as significant. And now the government is relying on it to make up far too much of the budget, and it may not deliver.
While it’s a done deal now, with the budget set and approved, only time will tell whether it is a good choice for the city, or just a choice made by the council, with little regard for the city.