B.C. Business Matters:
Ken Peacock >>
PART ONE: Municipal Tax Burden Varies Widely in BC and Continues to Outpace Inflation
By Ken Peacock
The Ministry of Community, Sport and Cultural Development compiles data on local government finances, including figures on per capita levels of property tax. What is discussed below and shown in the graphs is the total amount of tax levied on all nine property classes, as defined in provincial legislation. This provides a gauge of the overall tax burden in each municipality, with the per capita data allowing comparisons to be made across municipalities of different sizes. To make such comparisons more meaningful, the figures below show per capita taxes just for municipalities with populations that exceed 10,000. Taxation in smaller municipalities will be discussed in subsequent blog posts. The first figure shows the 2015 per capita levels of property taxes for BC’s larger municipalities. The additional numbers on the right side of the chart are the average annual growth rates of per capita taxes in each municipality over the past three years, and are included in the graph for quick reference.
Even when smaller communities are excluded, it is still necessary to be cautious in making comparisons and drawing conclusions about municipal tax burdens. Municipalities are heterogeneous and face a wide range of cost pressures and funding challenges. In some instances per capita tax levels are not really meaningful because of underlying differences in the data. The District of Whistler, which has the highest property tax per capita of any of the large and mid-sized municipalities in the province, offers the most striking example of why caution is necessary. Whistler’s per capita tax burden is inflated by the fact that a large share of the housing stock in the community is comprised of vacation properties. These properties are taxed, but the owners typically live elsewhere; so the size of the permanent population, which is used to calculate per capita tax levels, is comparatively small. While higher costs and spending may also be factors, the small permanent population in relation to the number of taxable properties is inflating per capita property tax levels.
Given Whistler’s unique circumstances, it is fair to say that Victoria is probably the BC municipality with the highest 2015 per capita tax burden, followed by Prince Rupert, West Vancouver, Nelson, Dawson Creek and Port Alberni.
Among BC’s 58 largest municipalities, the City of Vancouver (the biggest municipality) ranks 20th in terms of the overall per capita tax burden. Interestingly, Surrey, which is the second largest municipality in the province, has the lowest tax burden, underscoring the varying taxation and spending patterns across BC municipalities. Strikingly, Surrey’s per capita tax level of $541 is basically half of Vancouver’s. In Burnaby, the third most populous city, the per capita tax level ($992) is just slightly below that in Vancouver.
An important issue from the taxpayers’ perspective (both business and residential) is that the growth in municipal property taxes continues to outpace inflation, in many instances by a wide margin. Individual municipalities face an array of different costs pressures, but the Business Council finds it alarming that per capita tax levels consistently exceed inflation right across the spectrum of municipalities. The figure below replots the growth in per capita tax levels (initially shown on the right in the top figure) in descending order. Over the past three years, in all but two of the larger municipalities, per capita tax levels have increased faster than the average annual rate of inflation in BC of 0.7% (inflation is averaged over the years 2012, 2013 and 2014).
The pattern of property taxes outrunning inflation has been evident for many years, and the most recent data confirms that it continues. A concern for households is that average incomes tend to grow fairly closely in line with inflation, which means municipal property taxes are taking a progressively bigger bite out of household incomes in many cities and towns across British Columbia.
Again, it is important to recognize that the diversity of municipalities means simple comparisons of per capita tax levels and growth rates should be made with caution. But in general terms the above data provide a useful reference point for assessing the relative tax burdens across municipalities in BC, and underscore the wide variation that exists in both levels and the growth of property taxes. Subsequent blogs will present data for smaller municipalities and explore the differing tax burdens between residential property owners and the main commercial and industrial property classes.