Tuesday, March 20, 2007

Harper's equalization formula is stealing from somebody else's rice bowl.

Woman at Mile O has a couple of good posts on Flaherty's purchase of Quebec budget.

One of the articles she linked pointed to a very dangerous element in the new equalization formula worked out by Flaherty and Harper. The federal government is now in the property tax game. Not directly, but in the game nonetheless.

Now, when working out equalization payments, property values within a province will also be a part of the formula to determine levels of transfer. In short, what that means is that even if the economy of a province slumps, but property values take their time decreasing, those inflated housing and land prices will prevent a federal transfer from meeting the program requirements of the province.

David Emerson demonstrated that, not only is he a political piece of pond-scum, but he doesn't have a clue how property taxation actually works.
But Emerson said the new formula for sharing wealth with "have-not" provinces is based on firm principles.

"Everybody in the world knows that high real estate prices translate into de facto wealth, which is taxed by local governments amongst others. So I don't know why that wouldn't be part of the calculation."


That illuminates the unbelievable stupidity of David Emerson. Property taxes are based on the value of the property alright, but the levy is based on a mill rate. If the actual tax levy rose with the value of the property in British Columbia, nobody would be able to afford the taxes and local government would be swimming in surplus cash.

There is a process which clearly escapes the self-absorbed minds of David Emerson, Steve Harper and Flaherty. All property is assessed for value, local government sets a budget, the amount of money required is determined, the mill rate is established and taxes are paid based on both the property value and the mill rate.

[BC Premier Gordon] Campbell argued last week that the inclusion of property values would probably deny B.C., which won't receive equalization in 2007-08 thanks to a booming economy, future access the program during an economic slump.

"Anyone that says that your property values are in direct relation of your ability to pay doesn't frankly know a lot about what they're talking about," Campbell said last week.

"The fact of the matter is, property values in British Columbia went up by about 24 per cent last year. Peoples' ability to pay did not go up by 24 per cent last year."

I don't normally agree with much of what Gordon Campbell has to offer, but in this instance, he's dead on.

And now, you have the federal government, quite incorrectly, playing a tax game around property values.

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