Saturday, November 21

Unhiding property taxes

I've been a renter ever since I left home five years ago, so property taxes are not something I've worried about. They have always been something for my landlord has to deal with, while I just concern myself with the total value of my rent cheque.

Of course, a good chunk of the property tax gets passed on to me in the form of a higher rent. If my landlord faces higher property taxes, she'll probably raise my rent to help her pay for the tax increase. So I really should be interested in property taxes, since it indirectly affects my rent.

I gave this matter no thought until yesterday, when I received a letter from the City of Hamilton describing the property taxes on the apartment building I live in.

"For information purpose only, the average 2009 annual taxes per unit on this property is $1,968 which equates to $164 per month. This is simply an average for your building, and will vary depending on the suite-type," the letter explained. "On average, 20% of your monthly rent goes towards paying for these property taxes; however this varies from building to building, and year to year."

I'm happy the city sent me this letter, because it helps me better understand where my rent cheques are going. But I have no idea why the city would voluntarily send a letter out broadcasting this information, since taxes are generally unpopular. Reminding people that they pay a 20% tax on rent is not likely to make them supportive of their municipal government. In fact, the letter goes so far as to tell me that my tax rate on apartment buildings is almost three times more than it is for houses, which only makes the municipal government look more evil.

But it's interesting to think about how much tax we actually pay. I tend to only really think about income and consumption taxes (i.e. GST and PST), since I see these taxes first-hand. I can look at the bottom of my grocery bill to see how much consumption tax I was charged, and I can see how much income tax gets taken off my paycheque when I look at my pay stub.

But when I go shopping, I don't think about how the corporate tax charged to the store affects the price of the product I'm buying. I don't think about how the payroll taxes the store has to pay affects how much they have to pay employees, which in turn affects the price of their products. I don't think about how the customs duties charged on the product coming into Canada affect the product's price. I don't think about how the gas tax charged on the truck driver who delivers the product to the store raises the price of goods. I don't think about how the store's property taxes affect the prices I pay.

But these things matter. According to the Fraser Institute, the really visible taxes (income and consumption) only make up 48% of total taxes. When we add up all the taxes we pay, it works out that that about 45% of the average Canadian family's cash income goes to the taxman. That's a lot.

When I think about how my property tax is roughly 20%, it makes all the heated tax arguments (switching to HST in B.C. and Ontairo, small drops in corporate tax rates) seem a little inconsequential. If more of these "hidden" taxes could be highlighted, we might have a real understanding of how much the government takes. That could lead to some real heated debates.