Municipalities’ organization wants income tax increase

Ashley Fitzpatrick
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Wade Locke — File photo

Municipal fiscal framework are words that prompt a Pavlovian yawn from many of us. Yet, according to Municipalities Newfoundland and Labrador (MNL) president Harry Hallett, we need to wake up and pay attention to the subject, as the framework is not enough to maintain our municipalities.

It says change is in the hands of the incoming provincial government.

“Since 1992, Newfoundland and Labrador municipalities have seen drastic reductions to their municipal operating grants and, without new sources of revenue, the current tax system cannot provide adequate revenue for basic services like clean drinking water, waste management and safe roads,” Hallett stated in a news release Tuesday.

Along with the statement, MNL released an economic report from Memorial University of Newfoundland economist, Wade Locke, looking at options for increasing revenues in the long term. Locke’s research was floated in brief at the 2011 MNL conference in May, but the final report was not available until this week.

Citing the document, MNL is calling for a one percentage point increase on the provincial personal income tax rate. It says the increase can generate an additional $116.5 million that could be downloaded to municipalities.

It all adds to an ongoing public policy debate on municipal sustainability. How do we keep what we have, afford what we need, if current taxes are not enough, as many municipalities have claimed?

A simplistic solution would be to increase property taxes  which are considered visible, transparent, predictable and easy to administer, Locke’s report states.

Municipalities rely on property for the bulk of their revenue.

However, in Newfoundland and Labrador there appears to be a problem with people paying  property taxes.

A 2007 MNL census suggests as much as 80 per cent of communities ran into problems with tax delinquents in 2006, “resulting in 78 per cent of (them) resorting to a collection service.”

Report offers revenue generating recommendations … Continued from page A1

As well, as the report states, the property tax does not take into account the ability for a property owner to pay. A go-to example is the elderly resident who feels forced into selling their home and moving, due to the financial pressure of rising property tax paired with a fixed income.

Also, the public does not like property tax increases, tending to vote out whoever votes them in, Locke states, even in cases where there is a proven need for the additional revenue.

Enter the alternatives.

The report outlines how municipalities in this province might be given access to an income tax or a sales tax, or both. The point is to diversify where towns and cities get revenue.

He notes countries such as Sweden, Norway and Germany get 75 per cent or more of their local revenues from taxes from income, profits and capital gains.

While diversification is perhaps a simple idea, it is not so simple in execution. Locke warns against potentially increasing inequities between regions, even individual communities through varying taxation. Pairing the additional taxes with some form of equalization system is considered.

Administrative costs, Locke’s report states, can be avoided by piggy-backing the municipal tax on the existing provincial tax.

The report takes a briefer look at other revenue-generating options, including the implementation of or increase in: a general sales tax, grants-in-lieu of taxes, corporate income taxes, development charges, entertainment taxes, hotel and accommodation taxes, property or deed transfer taxes, business occupancy tax, gas tax and user fees.

Ultimately, the challenge is in determining what will work as well for one community as another.

According to numbers provided in the report, over a quarter (26.4 per cent) of the provincial population resides in one of 199 communities with populations of 2,500 people or less. A grand total of about 20 per cent of the population resides in the capital.

As part of his 128-page report (more than 500 pages with appendices), Locke quickly looks at MNL’s push to increase regional governance.

Meanwhile, on the campaign trail, party leaders had little to say on the newly released report.

There was no statement from the Dunderdale campaign.

“Dr. Locke has a number of recommendations, but at this point we haven’t made any decision on that,” Liberal Leader Kevin Aylward said.

Organizations: Memorial University of Newfoundland

Geographic location: Newfoundland and Labrador, Sweden, Norway Germany

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Recent comments

  • Yet Another Pete
    October 06, 2011 - 18:11

    They [incl. Dr. Locke] say that Municipalities are creatures of the Province. The Province however places few limits on revenue that the creatures can raise. Is there a maximum specified in the Act on the maximum that cities can extract from a property, water/sewer (metered or not) assessments, poll taxes, or interest charges or fees. The federal and provincial governments use the municipalities to tax through the back door what they cannot tax through the front. If town councils access personal incomes the problem multiplies. Fee for service structures require the strictest auditing - towns want to avoid this - you know exactly what services you use and how much it is worth to you - big tax regimes hide waste. The literal and figurative wild west of municipal creatures is probably the Bell, Calif. fiasco. Could it, does it happen in Canada?

  • Joseph McGrath
    October 05, 2011 - 20:50

    Enough of this verbal garbage about increases in taxes etc.We are taxed to death and it is time to remove these single entity incorporated communities from every street corner in NL.People of NL are being governed and taxed and studied to death and are sick of it.We are 500,000 people and politicians and university professors are acting and sprouting fiscal ideas as if we are an independentally rich province Wake up ,NL is not. I have a question for Prof Locke?Who foots the bill for your oponions and the oponions and studies of of other fical wizards at Memorial.I think the taxpayer does or either that you spend a lot of your own free time working away from the university and being paid seperately.What gives,who pays??? Long ago the Auditor General after vicious attemts to hang in was given the boot from the annual audit of Memorial but it was promised back then that the President would be required to appear before the Public Accountss Committe to have its financial affairs reviwed.Not being done to the best of my knowledge????It is high high time that a comprehensive audit of that place of higher learning was carried by the Auditor General to ensure taxpayers are getting full value for money there.I think highly of MUN but would like a little reassurance on its financial operations and controls or lack there off. As for the City of ST.John's the annual beggars cry for tax increases on taxpayers and corporations draws near as budget prep time draws closer .The whole fiscal operation of the Povince,its corporations and municipalities needs a good comprehennsive audit review to see why government etc feels that the public tat can be squeezed at will.I am sick to death of being a fleeced taxpayer.

  • Judy
    October 05, 2011 - 15:08

    I think we're have starved to death, now as it is. Everything gone thru roof. Groceries, Housing, gas/oil, phone/cable and the gov wants to more than double our utility bill. On top of this we have City Council wasting money on this research to tax us further. If City Council did their job to begin with, instead of wasting tax payers money over the years on stadiums, hockey teams and giving millions to charity - perhaps we would not be in this predicamount. People already pay enough for city taxes and to prov + fed taxes. We are well above most provinces. Where does it stop. They increased everything to home owners back 2004-5 based on the appraisals of homes. Then they want raises. Like everything, the have's want to have more and shoulder on the back of the have not's. Sick of political b/s. This research is crap because it's funded by City Council just trying to get money from prov and fed gov now. City council never could manage snow clearing or clearing sidewalks, their basic duties in other words that they are mandated for, let alone anything else. You would think with the way they get on, that they have a right into provincial matters and a higher say than they do. Now they are lobbying gov for more money on the backs of taxpayers, pensioners and people who cannot afford to eat or cover their housing costs, let alone incur more expenses. For all of you in the upper top crust, and those in between making good money and awaiting good pensions (gov and city officials), I say NO - THIS IS REDICULOUS and scandalous like the decrapped lower churchill deal - Muskrat Falls being funded on the backs of poor people and business people. Only business people can afford it or the PC's or this City Council. More sadly, now with Elections we get word that NDP go along with Muskrat Falls and the doubling of utility bills. That about leaves the Liberals folks and lets hope they aren't lying to us - while they all vie for the prize (gov income) and their pensions (security) that the rest of us will never see while being gouged to death.

    October 05, 2011 - 14:07

    Asking Newfoundlanders for more taxes will not fix the problem. As many other posts pointed out we are taxed to death. Wade Locke only sees one side of the coin, so we pay more tax for municipal infrastructure and operations, where do we cut back in our personal lives to pay for this? Food, heat, medications, children's clothes, do we buy used clothing, eat cheaper foods, cut back on fruit & vegetables to pay this extra tax? This will put extra pressure on social services, and especially food banks, believe me I volunteer at one, and these increases increase demand! Mr. Locke usually deals with the real world, but not so this time. He leaves out the most important factor, the human factor, most of us are so far overtaxed already, this sort of increase will be devastating to seniors, low income, and others. There has to be a better way Mr. Locke, we pay enough tax already!

  • California Pete from NFLD
    October 05, 2011 - 12:35

    Start taxing the no tax areas after all they also use the services

  • Joe from the city
    October 05, 2011 - 10:21

    It's not feasible to continue to have all these isolated communities and towns in every cove and bay in Newfoundland. Time for another re-settlement. Forget the whiners who keep looking at the history books thinking a way of life that their great grandparents lives ago is coming back.....Time to move on.

  • Lane
    October 05, 2011 - 09:53

    Wade Locke's proposal is driven by his socialist ideology, and not by sound economic analysis. His calculation of the revenue that would be generated by an income tax increase does not take into account any dampening effect of higher taxes on economic activity and consequent reduction of the tax base. The actual amount of revenue generated by an income tax hike in the current economic climate would be much smaller than Locke predicts. And even the amount of extra revenue he predicts would be a drop in the bucket when it comes to addressing the infrastructure needs of Newfoundland and Labrador communities. It would take an income tax hike of several percentage points to raise the required amount of revenue, and that would have a devastating impact on the economy.

  • Carl
    October 05, 2011 - 09:40

    Wade Locke knows nothing about rural Newfoundland. Raising property taxes is not a solution - it is a very regressive, knee-jerk response. In most Newfoundland communities outside the overpass, the home ownership rate is high, because the family home is passed on from one generation to the next, and because there are few housing options apart from ownership. But the unemployment rate is also very high, so many families cannot afford to pay higher property taxes. Also, a large percentage or rural Newfoundland homeowners are elderly people on fixed incomes. If municipalities are experiencing a funding crisis, they should find efficiencies through amalgamation and greater accountability instead of jacking up taxes for low-income families and seniors.

  • Bill
    October 05, 2011 - 09:25

    While I have great respect for Dr. Locke, I don't think the taxpayers in St. John's are going to be much in favour with their income taxes being increased so that a greater portion will go to fix the roads in Conche. Municipal funding is a mess, but trying to establish another layer of taxation based on income to support municipal infrastructure is not a sound plan.

  • Gerry Connors
    October 05, 2011 - 09:14

    Ah yes; more taxes. We don't pay nearly enough here in Canada. I:(...A family who makes an income of approximately $68,000, will pay at least 45% of their income to taxes after all is said & done...(federal, provinicial, gas, GST, etc). The majority of those wh call for an increase are those who can afford it. ( read rich; gold-plated pension politicians). Meanwhile, the poor keep getting poorer & the vast majority, the middle-class are sliipping into eventual poverty. As for property owners, go east of town (Torbay, Flat Rock, Pouch Cove) where the majority who have had land there for a hundred years or more cannot afford the taxes for the land they own, let alone the house & the postage stamp piece of ground it sits on. Therefore they are FORCED to sell heriditary family landsto wealthy come-from-aways loking for a picturesque retirement place (Bty, who usually vote no at councils meetings for any industry or senior retirememt community that may interfer with the precious view of the north Atlantic or where they could hold an 'international kite-flying contest' - you read right; this actually happened last year at a town meeting). Here's an idea, vote in politician who will NOT make ludicious promisesjust to get in. Insure politician CANOT vote themselvesa pay - pension increase. Cut down the gold-plated pensions, perks, salaries of civil servants. Privitize government holdings (ie Postal Canada for competition, fair market, reasonable pay & pension benefits as compred to the private sector). Unless we experience some drastic changes, I fear there may be some inevital social upheavals start playing out in western society. , (Is Wall Strret, Bay Street protests the beginning?)

  • Watcher
    October 05, 2011 - 08:59

    So I pay my property taxes and they want me to pay more in income tax to make up for the guy who doesn't? Um, no thanks... Why don't you just cut services? But of course we're not talking about St. John's, Mount Pearl, or any of the larger municipalities here... we're talking about all the little tiny bay/cove communities across Newfoundland. Time to amalgamate folks...

  • Chuck
    October 05, 2011 - 08:47

    Leading Tickle, population 400 with 1 mayor and 6 councillors. Toronto, population >2,500,000: 1 Mayor and 41 councillors. New York City, population .>8,000,000, 1 Mayor 51 councillors. How many Mayors/councillors in NL to serve approximately 510,000 people. How much of our taxes is used to pay the salaries and expense accounts?

  • BI
    October 05, 2011 - 08:26

    If the municipal grants are being reduced to the towns, then maybe the towns shouldn't be striving to be the best and spending money they don't have. Don't expect to get it from the taxpayers - it is just NOT going to happen.