It is said that ‘the road to hell is paved with good intentions’, a saw that’s more than apt when it comes to Ontario’s property tax scheme, Market Value assessment (MVa). Initially conceived by the Harris government to remedy the disparity in tax assessments between residents of older urban areas and those living in new subdivisions, the plan did manage to bring some level of parity between the two.
But it is also said that ‘one man’s meat is another man’s poison’, which is another cliché that applies to MVa, as the McGuinty Liberals have managed to turn the plan into a neat mechanism by which to download many provincial responsibilities onto municipalities, without having to surrender any cash in the process. The idea is that the municipalities can take up the slack themselves through increased revenues that result from increased property tax assessments. and in the process the taxpayers are screwed. again.
The beautiful thing about MVa is that it allows both levels of government to maintain an amazing degree of plausible deniability while they are in the process of screwing the taxpayers. It goes like this: as property taxes increase through increased assessments, municipal politicians blame the province for the MVa program, whereby the Municipal Property assessment Corporation (MPaC) assesses all properties in Ontario annually. Since currently there is a housing boom in Ontario, the increases in property assessments vary from area to area, but generally fall into a range of about 18 percent, with some property assessments increasing by over 100 percent.
as a result, municipal politicians receive a windfall through this scheme, as the increase in value will result in a corresponding increase in tax revenue, allowing them to spend as much on whatever they want without having to worry who’s going to pay. all the while they can assume a cloak of innocence, as their stated reason that taxes are increasing is because of the provincial government’s assessment.
Provincial politicians, on the other hand, are saying that the assessment has nothing to do with where local property taxes are going, because taxes are calculated on a mil rate established by the municipal politicians. The reason taxes are going up, according to provincial politicians, isn’t because your home has been re-assessed at a much higher value. They’re going up because the greedy local politicians aren’t lowering the mil rate.
So here you have the perfect ‘catch-22’. Local pols pick up a huge windfall of extra cash without having to feel guilty, while the provincial pols can download ever more programs onto municipalities and thus save hugely on their annual budgets, all the while blaming the locals for increased municipal taxes. It’s a great scam.
Of course, the only people who are unhappy with this Ponzi scheme are property owners. The sounds of protest are emanating ever more loudly from the poor schmucks who are finding themselves in a position to take equity out of their homes in order to pay off the tax man.
Finding one’s self in this position means that the government has finally figured out a way to impose a capital gains tax on principal residences without allowing for the deduction of mortgage interest. Of course people who had planned to bankroll retirement with the equity in their home are now forced to sell their homes in order to keep that equity from eroding. In fact, one MPP, Northumberland’s Lou Rinaldi, went so far as to suggest to homeowners that selling would be their best bet, if they expected to have the equity from their home to retire on.
So what’s being done about it? In short, nothing. a raft of complaints has flooded Ontario Ombudsman andré Marin’s office and he has promised to look into it. I would suggest that no one expecting significant change hold his or her breath. In addition, the McGuinty Government has also promised a review of MVa and how MPaC works. again, chances for change are slim to nonexistent.
While the government knows that people are up in arms about this latest tax grab, they’re betting that there isn’t anyone in Ontario that has the corleones to challenge them with a tax revolt. So far, most of the protest that I’ve seen has been tame, if not downright respectful, as Canadians are generally averse to open displays of strong feelings, even at the ballot box.
It’s interesting to note that in times when gasoline and heating fuel have increased by over 25 percent in a very short time period, the government follows suit with similar increases in taxation. One wonders what this will do to the rate of inflation.
anyone who remembers the recession of the early 1980s, when interest rates exceeded 20 percent, may remember that the high interest rates were a result of government deficits run amok. as government and the private sector competed for available capital, the government naturally won out, as they did not worry about interest rates of 20 percent+. Now we have a similar scenario with a subtle twist. Rather than borrowing the money to purchase our votes, government is literally stealing the money from our homes in order to continue doing so.
If MVa in Ontario continues on its current path with no limits to how much taxes can increase, we will see a crash in the housing market as thousands of people simultaneously put their homes up for sale because they can’t afford to pay the property taxes. If and when that happens, will there be a concomitant reduction in the amount of tax those fortunate enough to hang onto their homes will have to pay? Not likely.