'Panic-stricken': 25,000 Manitobans see tax jump after change to education credit rules
Education property tax credit change mean thousands of homeowners, many in lower-valued homes, paying more
Changes to the property tax credit quietly made by the provincial government last year have hiked the property taxes paid by 25,000 Manitobans, many of whom live in some of the lowest-valued homes in the province.
Mary Hutchings, 70, is one of those homeowners. She lives on a fixed income in a home valued at $43,000 in Erickson, Man., just over 200 kilometres northwest of Winnipeg.
She learned this spring she'll have to pay $500 more a year in property taxes — a dramatic increase to the roughly $250 she paid in combined municipal and school taxes before.
"I was immediately panic-stricken because I had budgeted for my usual taxes, and I just didn't know how I was going to swing it," she said. "The provincial government has essentially taken money from the people who are least likely to afford it."
According to a fall 2018 briefing note to the province's finance minister, 25,000 Manitobans will be affected by changes to who can claim the Manitoba government's education property tax credit.
'A big hit on Manitobans': NDP
Renters and homeowners who are eligible to claim the tax credit, worth up to $700, can have it applied to their property tax bills to help cover school taxes paid directly or indirectly.
Until 2019, homeowners could access the full credit amount even if they paid less than $700 in school taxes — as long as their school taxes and municipal taxes combined were over the $700 threshold.
That changed this tax year — now, only school taxes can be applied toward the credit.
The change means thousands of homeowners, particularly rural homeowners with low-valued homes who pay less than $700 in school taxes, are paying hundreds of dollars more each year in property tax.
"This is a big hit on Manitobans who can least afford it," said Opposition NDP Leader Wab Kinew. "It seems to fly in the face of a government that tries to talk about putting more money on the kitchen table, but in this instance seems to be doing the exact opposite."
Hutchings is a retired teacher who went back to work as a librarian last year to help make ends meet. Around Erickson, she says the increases have hit multiple homes, and she says some of her neighbours are downsizing as a means to pay for the tax.
"You are talking about people on fixed incomes, who are having to somehow find this money," Hutchings said.
The changes were quietly included in the 2018 provincial budget. That budget said the credit would be based only on school taxes paid, but noted there is no change to the amount of the credit.
What was not disclosed was what would happen to homeowners like Hutchings, who relied on combining the two taxes to reach the $700 threshold.
In the past, Hutchings would pay roughly $250 each year in municipal and school taxes, after the $700 education property tax credit was applied.
The credit previously covered all of the $200 owed on school taxes, and then another $500 she owed for her municipal tax bill.
Now, without being able to use the credit for her municipal bill, she is on the hook for $775 for 2019.
"I received no warning," said Hutchings.
'Disappointed' by lack of consultation: AMM
The average increase for the 25,000 homeowners affected by this change is about $180 annually, according to a spokesperson for Manitoba Finance.
The majority of homeowners — about 280,000 — will see no change, according to the briefing note sent to the finance minister.
"The objective of the education property tax credit is to offset school taxes, not municipal property taxes," said the spokesperson when asked why the changes were made.
No warning was given to Hutchings, and the Association of Manitoba Municipalities says there was no consultation with lobby groups before the credit was changed.
The association has been lobbying the government to rescind the decision, which it argues negatively impacts Manitoba taxpayers, especially in rural areas.
"We are disappointed that we were not given an opportunity to very clearly advocate and to very clearly identify the concerns a change such as what has happened would have on our communities," said AMM president Ralph Groening.
"Generally the response and the concerns we have heard are from communities that have lower value [house] assessments, so they, of course, will feel the impact of the changes."
A request for an interview with Finance Minister Scott Fielding was declined, but in a prepared statement he described Manitoba's education tax regime as "complicated and uneven."
He noted his government also removed a $250 deductible which had to be exceeded before the education tax credit would be granted. That benefits 26,000 renters who will receive an increase in their tax credit, Fielding said, meaning the change is revenue-neutral to the government.
"Once the budget is balanced, we will phase out education property taxes — saving homeowners thousands of dollars when fully implemented," Fielding said, reiterating a promise made on the campaign trail in the fall provincial election.
The government pays out about $330 million a year through this credit.
Winnipeggers also affected
Winnipegger Elaine Bishop will also end up paying more in property taxes under the change. The longtime Point Douglas resident will pay over $180 more in taxes this year on her $80,000 home.
She says she felt cheated when she saw her bill this year, which increased about 30 per cent.
"It's only those of us who are sufficiently low-income, and our houses are in insufficiently low-income areas, affected," she said.
Bishop says she is lucky, as she had a house fund that she pays into every month for incidentals like this.
Hutchings says she has been paying off the bill little by little, and had to cancel a summer holiday with her grandchildren. She has spoken to her local MLA, Progressive Conservative Greg Nesbitt, and is no closer to understanding why his government changed the credit rules.
"They need to sit down and explain to people, people like myself who are on fixed incomes, why this decision was made," she said.
"That's what I want to know — were they aware of who it was going to affect? And if they weren't aware, they should have been."
- An earlier version of this story said the tax credit is automatically applied to property tax bills. In fact, eligible homeowners or renters must claim the credit to have it applied to property tax bills.Sep 27, 2019 2:00 PM CT
With files from Riley Laychuk