2-tier property tax proposal unfair: economist
Last Updated: Thursday, November 26, 2009 | 10:26 AM AT
CBC News
A P.E.I. government plan to cap property tax for as long as a residence remains in the hands of one owner is bad policy, says a tax economist from Trent University.
Harry Kitchen met with Provincial Treasurer Wes Sheridan in July when he was here on behalf of the Federation of P.E.I. Municipalities to discuss several issues.
Under the new system introduced Tuesday, homeowners' property taxes will be capped at their 2007 assessment level. Any increases will be indexed to P.E.I.'s consumer price index.
But when the home is sold the property tax will be re-assessed based on market value. This will likely cause a sharp increase in the taxes for the new owner. Kitchen said for property tax to work properly it has to be fair.
"The properties that are not capped are paying proportionately more in taxes, property taxes, for the local services, than the properties that are capped," Kitchen told CBC News Wednesday.
"This just seems to me you are treating similar or identical properties in an unfair way."
Sheridan has argued that the difference between the current assessed value and the proposed market value on P.E.I. is only about four per cent.
But Kitchen noted the longer a person holds on to their home, the more unfair the system becomes. Keeping your home for 40 years would likely lead to a huge increase in taxes for whoever buys it from you, and probably would depress the price you could get for it.
Kitchen said a similar approach has been used in some jurisdictions in the United States, and people have taken advantage of the unfair structure. Homeowners with capped taxes lobbied for more or better services, knowing they would pay proportionally less for those services than their neighbours.
