Ontario municipalities treat small businesses like “cash cowsâ€

[Glen]

With very few exceptions, Ontario’s business property owners are hugely overtaxed for benefits delivered to all Ontarians, according to the latest CFIB report, “The Tale of Two Tax Rates: How Ontario and its Municipalities Tax Business Propertiesâ€. In almost all of the 201 Ontario municipalities reviewed in the study, small business owners (and commercial tenants through their rent) shoulder a much higher burden of property taxes than do residents on property of similar value. This disparity between the property classes cannot be justified on any practical grounds – there is no relationship between the rate of taxes paid by business properties and the services received. While some progress has been made to right this injustice since CFIB last reviewed the gap, small businesses continue to be treated as cash cows by the province’s property tax system.

For instance, in 2009, industrial owners in Pembroke paid over four times more in property taxes than residents (a tax gap of 4.39), Toronto was second with a gap of 3.56, followed by Hamilton (3.33) and Calvin (3.22). In the commercial class, businesses in Toronto paid over three times more, in Owen Sound the tax gap was almost 2.3, followed by Kirkland Lake and Orillia (2.21), Brantford (2.13) and Prescott (2.10).

Both municipalities and the provincial government have a role to play in fixing the business property tax unfairness. To this end, CFIB has recommended a series of measures:

Accelerate the Business Education Tax (BET) relief plan and expand it beyond 2014;
Reduce the tax gap by controlling local spending;
Do not allow another City of Toronto Act; giving municipalities more taxing powers will not solve their budget woes;
Tax all property classes proportionately to the services that they receive.
Collect all property tax data in one public repository to increase transparency and accountability.

http://www.cfib-fcei.ca/english/adv..._treat_small_businesses_like_“cash_cows”.html

 

[cdr108]

With very few exceptions, Ontario’s business property owners are hugely overtaxed for benefits delivered to all Ontarians, ..., small business owners (and commercial tenants through their rent) shoulder a much higher burden of property taxes than do residents on property of similar value. This disparity between the property classes cannot be justified on any practical grounds – there is no relationship between the rate of taxes paid by business properties and the services received. ...

For instance, in 2009, ... In the commercial class, businesses in Toronto paid over three times more, in Owen Sound the tax gap was almost 2.3, followed by Kirkland Lake and Orillia (2.21), Brantford (2.13) and Prescott (2.10).

I agree ... the municipalities are basically forcing landlords to subsidize their tax base by also decreasing the rents to retain tenants

 

[taal]

"Do not allow another City of Toronto Act; giving municipalities more taxing powers will not solve their budget woes; "

None of the taxes currently imposed by the city impact business in particular, at least not any more so then the average individual.

 

[SimonP]

I do agree that the imbalance is too great in Toronto, which is why I fully support Miller's rebalancing policy.

That said, it's nonsense when the report claims that "this disparity between the property classes cannot be justified on any practical grounds." Some imbalance is perfectly justified. Businesses are less cost sensitive with regards to property than consumers. Charging them a higher rate is justified in the same way that airlines can get away with charging business travellers far more than non-business flyers for the same seat. It's called price differentiation. Such policies are economically efficient, producing much less dead weight loss than if the system forced everyone to pay the same price.

As an additional caveat, while small business pays a higher property tax rate, the income tax rate is low to nonexistent for Ontario small businesses. There are also a huge number of grants and programs that give out government money to small businesses in this province. I know I work for one such company. Over all, small business is far from being a deprived section of the economy.

 

[Glen]

That said, it's nonsense when the report claims that "this disparity between the property classes cannot be justified on any practical grounds." Some imbalance is perfectly justified. Businesses are less cost sensitive with regards to property than consumers.

As witnessed from the business fleeing out of and the residents flowing into Toronto.

Charging them a higher rate is justified in the same way that airlines can get away with charging business travellers far more than non-business flyers for the same seat. It's called price differentiation. Such policies are economically efficient, producing much less dead weight loss than if the system forced everyone to pay the same price.

No it is not the same. In the scenarios you listed there are options.

As an additional caveat, while small business pays a higher property tax rate, the income tax rate is low to nonexistent for Ontario small businesses. There are also a huge number of grants and programs that give out government money to small businesses in this province. I know I work for one such company. Over all, small business is far from being a deprived section of the economy.

Only if Incorporated. Besides these programs are not offered by the municipalities.

 

[doady]

I didn't realize that the taxes targeted small businesses and that somehow large businesses are exempt. That is just outrageous. Change is needed for sure.

 

[Second_in_pie]

Why can't we put more tax on bigger businesses and open up programs to aid small ones? Big business has many more routes to fall back on than a small business, and one of the tenants that capitalism stands on is that new businesses need to be able to compete against established ones. Small businesses could use government services to get started and try to benefit from the economies of scale that big ones do.

 

[Mapleson]

With very few exceptions, Ontario’s business property owners are hugely overtaxed for benefits delivered to all Ontarians, according to the latest CFIB report, “The Tale of Two Tax Rates: How Ontario and its Municipalities Tax Business Properties”. In almost all of the 201 Ontario municipalities reviewed in the study, small business owners (and commercial tenants through their rent) shoulder a much higher burden of property taxes than do residents on property of similar value. This disparity between the property classes cannot be justified on any practical grounds – there is no relationship between the rate of taxes paid by business properties and the services received. While some progress has been made to right this injustice since CFIB last reviewed the gap, small businesses continue to be treated as cash cows by the province’s property tax system.

For instance, in 2009, industrial owners in Pembroke paid over four times more in property taxes than residents (a tax gap of 4.39), Toronto was second with a gap of 3.56, followed by Hamilton (3.33) and Calvin (3.22). In the commercial class, businesses in Toronto paid over three times more, in Owen Sound the tax gap was almost 2.3, followed by Kirkland Lake and Orillia (2.21), Brantford (2.13) and Prescott (2.10).

Both municipalities and the provincial government have a role to play in fixing the business property tax unfairness. To this end, CFIB has recommended a series of measures:

Accelerate the Business Education Tax (BET) relief plan and expand it beyond 2014;
Reduce the tax gap by controlling local spending;
Do not allow another City of Toronto Act; giving municipalities more taxing powers will not solve their budget woes;
Tax all property classes proportionately to the services that they receive.
Collect all property tax data in one public repository to increase transparency and accountability.

http://www.cfib-fcei.ca/english/adv..._treat_small_businesses_like_“cash_cows”.html

I like how they don't say that big business is being under taxed, but small business is being over taxed. If someone is being overtaxed, who is going to pick up the slack? We're already basically on the wrong side of the tipping point, unless you're creative with numbers like Flaherty and believe you can get more by taking less.