Property Tax Base TSC – May 15-16, 2002

1. Property Tax Base TSC – May 15-16, 2002

2. Overview • Progress Report on Data Collection • Comparison of Stratified Income Tax Base and Property Tax Base • Clarification of Some Issues Regarding Stratified Base Option

3. Data Update • Collection and processing of municipality-by-municipality data still not complete • But we hope to be able to pass data on to provinces over the next couple of months

4. Data Update • Getting close to having satisfactory provincial level data • But even here numerous issues need to be worked out: • properties subject to grants-in-lieu • tax-exempt properties

5. Property Tax vs. Income Tax Comparison • The simple and stratified market value approach have much in common, but there is also a key difference. • Looking at how we equalize income taxes – and comparing that to the property tax case – is a useful way to examine this difference.

6. Property Tax vs. Income Tax Comparison • The property tax is (primarily) a local government tax. • Tax rates differ from municipality to municipality. • If that were not the case, the stratified base approach would just collapse into the simple market value approach.

7. Property Tax vs. Income Tax Comparison Property Tax • Different tax rates within each province. • Each dollar of market value is not taxed at the same rate. Income Tax • Different tax rates within each province. • Each dollar of (taxable) income is not taxed at same rate.

8. Property Tax vs. Income Tax Comparison • There are other revenue sources for which tax rates vary within provinces, for example: • oil revenues • revenues from the sale of alcoholic beverages • forestry revenues • In each case, a more complex base is required to equalize these revenues than for revenue sources with a single uniform tax rate

9. Effective Income Tax Rates,Random Sample of Individuals, Ontario, 1998

10. Effective Property Tax Rates for Ontario Municipalities, 1998

11. Property Tax vs. Income Tax Comparison • Every dollar of income is not taxed at same rate  we need a stratified income tax base. • Every dollar of market value is not taxed at same property tax rate  we need a stratified market value base.

12. Stratified Income Tax Base (BFT Base, PI Tax Model) BFT

13. Stratified Income Tax Base (BFT Base, PI Tax Model) BFT for all individuals in Province A in $30,000- $49,999 taxable income range.

14. Stratified Income Tax Base (Taxable Income Base) Taxable Income

15. Stratified Income Tax Base (Taxable Income Base) Taxable Income for all individuals in Province A in $30,000- $49,999 taxable income range.

16. Stratified Property Tax Base Market value of all property in municipalities with per capita market values in $200,000 - $300,000 range.

17. Property Tax vs. Income Tax Comparison • The income tax rates paid by individuals are a function of their individual incomes. • Therefore the income (or BFT) of all individuals with the same income is put into the same stratum in tax base.

18. Property Tax vs. Income Tax Comparison • The property tax paid by each property owner is a function of the per capita market value of property in eachmunicipality. • Therefore the market value of all property in municipalities with the same average market value is put into same stratum in base.

19. Stratified vs. Unstratified Taxable Income Base

20. Stratified vs. Unstratified Taxable Income Base Entitlements for 1998-99 ($ million):

21. Clarification of StratifiedBase Option • Stratification by individual property value versus stratification by average municipal value.

23. Average: 250,000 Average: 150,000 300,000 300,000 100,000 200,000 50,000 150,000 Average: 400,000 Average: 80,000 700,000 100,000 300,000 100,000 90,000 50,000 500,000

24. Average: 250,000 Average: 150,000 Rate: 2.0% Rate: 2.6% 300,000 300,000 100,000 200,000 50,000 150,000 Average: 400,000 Average: 80,000 Rate: 1.6% Rate: 3.5% 700,000 100,000 300,000 100,000 90,000 50,000 500,000

25. Rate: 2.0% Rate: 2.6% 300,000 300,000 100,000 200,000 50,000 150,000 Rate: 3.5% Rate: 1.6% 700,000 100,000 300,000 500,000 90,000 50,000 100,000

26. 100,000 300,000 500,000 700,000 1,600,000 Proposed Stratified Base (Market value of all property in white municipality classified in one cell.)

27. Rate: 2.0% Rate: 2.6% 300,000 300,000 100,000 200,000 50,000 150,000 Rate: 1.6% Rate: 3.5% 700,000 100,000 300,000 100,000 90,000 50,000 500,000

28. Rate: 2.0% Rate: 2.6% 300,000 300,000 100,000 200,000 50,000 150,000 Rate: 1.6% Rate: 3.5% 700,000 100,000 300,000 100,000 90,000 50,000 500,000

29. 100,000 300,000 500,000 700,000 Stratified Base With Classification Based On Individual Property Values

30. Average: 250,000 Average: 150,000 Rate: 2.0% Rate: 2.6% 300,000 300,000 100,000 200,000 50,000 150,000 Average: 400,000 Average: 80,000 Rate: 1.6% Rate: 3.5% 700,000 100,000 300,000 100,000 90,000 50,000 500,000

31. Average Property Values and Taxes by Municipality Green Municipality

32. Average Property Values and Taxes by Municipality Elasticity: 0.5

33. Individual Property Values and Taxes $700,000 Property in White Municipality

34. Individual Property Values and Taxes Elasticity: 0.73

35. Tax Rates and Property Values: Average Municipal vs. Individual

36. Tax Rates and Property Values: Average Municipal vs. Individual Elasticity: - 0.50 Elasticity: - 0.27

37. FAMEX vs. Assessment Data, British Columbia