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PROPERTY TAXES.   Term Paper ID:28694 Click to get this paper

Essay Subject: Examines commerical & residential tax structure in Toronto (Canada). Political & economic issues; deferral programs.... More...

7 Pages / 1575 Words 8 sources, 14 Citations, APA Format $28.00 Return to List of Papers

Paper Abstract: Examines commerical & residential tax structure in Toronto (Canada). Political & economic issues; deferral programs. Paper Introduction: Introduction Property taxes can be a contentious economic issue for individuals and commercial interests, alike. Such taxes are levied only on those who have achieved at least a minimum level of wealth (since they are able to purchase the property being taxed), and failure to pay property taxes can result in the loss of the property itself. It is therefore in the self-interest of individuals and organizations subject to property tax to pay as little as possible. At the same time, however, property taxes are a primary source of revenue for most municipalities, and politicians are eager to ensure that they receive the maximum benefit from this type of taxation while appearing to have an equitable strategy in place (since taxes are always an issue at election time). Add to the mix the need both to attract businesses to municipalitie Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Reforms give businesses greater property tax-bill predictability.(2 , November 17). Thus whileproperty taxes are a key consideration for commercial interests, they arenot the only consideration that companies take into account when evaluatingtheir location alternatives (Branswell, 1997, p. Maclean's,p. The suburbs received greater tax reliefthan the inner city, according to some critics, causing residential flightfrom the city center and a decline in the vital neighborhood activitycritical to sustaining city center activity. The Property Tax Structure Today The MVA structure has been renamed and reformed under the currentvalue assessment (CVA). 6). Commercial properties saw a cap puton tax increases of 2.5 percent over 1997's taxes, with increases limitedto an additional 2.5 percent for both 1999 and 2 . Toronto has adopted an automated payment plan ostensibly to assisttaxpayers (both residential and commercial) manage their tax liabilitybetter. Why grow elsewhere? Such taxes are levied only on those who haveachieved at least a minimum level of wealth (since they are able topurchase the property being taxed), and failure to pay property taxes canresult in the loss of the property itself. Commercial propertieswhich would have seen tax decreases did not realize the full benefit ofthose decreases as the funds were "held back" to cover the cap. Canadian Business, p. Maclean's,pp. 6. Partialdeferrals with less stringent requirements are also available forhomeowners over 5 with limited income. Inaddition, because the payments are made automatically, there is less time(and money) required to process the payments, and payments are not receivedlate ("The Pre-Authorized," 2 , p. To be eligible, the homeownermust have owned and occupied the residence for at least one year, and meetincome, age and disability requirements ("Property Tax Deferral," 2 , p.1). As a result of the 1998 changes, slightly more than half of allresidential properties (56 percent) saw a decrease in their tax liability;both decreases and increases were phased in over a five-year perioddepending on the amount of the change. 3). (1997, June 9). (2 ). Thiscaused some consternation among business owners who held the opinion thatthey were carrying an unfair tax burden despite the supposed decrease intheir tax liability. The CVA grew out of the Tax Assessmentand Tax Policy Task Force, which was the body that reviewed the taxsituation in 1998 as a result of the 1992 actions ("Current Value," 2 ,p. Introduction Property taxes can be a contentious economic issue for individuals andcommercial interests, alike. This benefits the city far morethan the taxpayer (who loses some flexibility regarding when payments aremade), and reduces delinquent accounts. At the same time,businesses also were able to relax the rules regarding the amount of timerequired to reach their full current value assessment. From 1979 to1992, nearly 9 percent of the province's municipalities chose to use thissystem (Wickens, 1992, p. Property tax deferral program. Full and partial deferrals arealso available for homeowners who are disabled and have low incomes; againrestrictions based on the type of public assistance received apply("Property Tax Deferral," 2 , p. Toronto, Ontario: City ofToronto. Residential assessments can be based on other propertiesin the area which have sold; commercial properties (which typically sellless frequently can be more problematic). At the same time, however, property taxes are aprimary source of revenue for most municipalities, and politicians areeager to ensure that they receive the maximum benefit from this type oftaxation while appearing to have an equitable strategy in place (sincetaxes are always an issue at election time). Wickens, B. (1998, April 1 ). Simply put, property taxes are levied on the marketvalue of the property, or the amount for which the property would sell onthe open market. It is therefore in the self-interest of individuals and organizations subject to property tax to pay aslittle as possible. References Branswell, B. (1992, November 16). Commercial property assessmentsunder the MVA system are often based on replacement costs and some type ofmultiplier in order to determine the assessment (Wickens, 1992, p. From 1977 to 1997, more than 5 companies moved their headquarters from Montreal to Toronto, but only 122moved their headquarters from Toronto to Montreal. Internet address: http://www.bot.com/press/press - 2- 8bg.htm. Recognizing that the implementation of CVA had political as well aseconomic consequences, a tax deferral program was put into effect. 57. The MVA approach to property taxes is commonamong those municipalities which have a property tax system (both insideand outside Canada). (2 ). How a tax-cutting revolutionarybetrayed his biggest supporters. Once the taxpayer signs up for the plan, noadditional work is needed on the taxpayer's part. In 1998, taxesincreased on nearly 8 percent of Toronto's commercial properties, withsome tax liabilities increasing tenfold. The Pre-authorized 2 tax payment plan. The CVA is also based on a property's estimatedmarket value, but changes the assessment base. In 1989, Toronto's Metro council announced that it also planned to goahead with the market value assessment (MVA), a move which sparkedconsiderable protest from individuals and businesses alike. At the same time, residentialtax payers argue that the tax increases which are being imposed arearbitrary and likely to cause hardship in addition to resentment from onesection of the city to another. As a result of the changes implemented in 1998, commercial interestsin Toronto largely consider themselves overtaxed, and they have lobbied foradditional reforms to the tax structure. Canadian Corporate News, p. Toronto, Ontario:City of Toronto. Internet address: http://www.city.toronto.on.ca/taxes/deferral.htm. Other largeCanadian cities had already adopted this system: Vancouver, for example,implemented MVA in 1977. The result was commercial flightfrom Toronto for those companies which could afford it, and the eliminationof some small businesses: the commercial property tax situation became tooburdensome for them to survive (Johnson, 1998, p. The Toronto property tax situation is not likely to be resolved in thenear future since the various stakeholders each are insistent on minimizingtheir own liability. (2 , February 8). Brighter days in Montreal? This research examines theproperty tax structure in Toronto, the commercial and residential taxstructure, and the outlook for Toronto's property tax structure in thefuture. While Harris did cut income taxes a small amount,property taxes did not receive the same treatment. The program applies only to the increasesresulting from the change in assessments arising from the CVA, not to thebase property tax, and not to taxes which might already be in arrears.Individuals must apply each year for the deferral, and the deferred taxitself results in a lien against the title of the property. 57). The city of Toronto has struggled with its property taxes years, andthe 199 s were particularly contentious. Commercial Property Tax Issues Today When 1998 came, the property tax system was restructured, led byOntario's new premier, Mike Harris, who campaigned on a small-governmentand lower-tax platform. Under the new plan, 75 percent of commercialproperties faced tax increases, and more than half of these faced increasesin excess of 1 percent ("Current Value," 2 , p. Residential critics of the new taxstructure agree that concessions to business are putting a greater burdenon residential property owners, however ("Reforms Give," 2 , p.1 8321c2586). 1). Recent History of Property Taxes in Toronto Toronto's current tax situation can be traced back as far as 1969 atwhich time the government of Ontario passed legislation that passedmunicipal property assessments from municipalities to a regional provincialgroup. 57). 1). Johnson, A. (2 ). These homeowners are also prohibited from receiving the GuaranteedIncome Supplement (GIS) or the Spouse's Allowance under the Old AgeSecurity Act. Homeowners who are 65 years or older who receive a GISpension also qualify for a full deferral so long as they are receiving aGIS, or so long s they are widowed (and between the ages of 6 and 64) andreceive a Spouse's Allowance under the Old Age Security Act. 57). The municipality continuesto fine-tune its 1998 structure, but commercial interests continue to lobbyfor reductions at their end, and low-income residents have succeeded inwinning deferrals (though not relief) for their part. Toronto is recognizedas having a highly skilled and technical workforce, and the quality of lifeis considered among the highest of Canada's urban settings. In late 2 , commercialinterests won some concessions, including flexibility in financing acapping program for businesses, which will decrease taxes for thoseproperties which have been over-assessed (over-assessment occurs whenproperties are valued too high for market conditions). Underthe program, special classes of taxpayers may be able to defer all or partof tax increases due to CVA implementation. Add to the mix the need bothto attract businesses to municipalities (keeping in mind that businesseswill seek low tax rates) and the often contentious issue of how propertiesare valued for tax purposes, and it becomes obvious that property taxes canbe an economic and political morass. Meanwhile, the city continues to lose some corporatetaxpayers to other locales, and those taxpayers who remain continue tolobby for additional reform. Commercial properties faceda maximum 25 percent increase implemented over three years (Wickens, 1992,p. Conclusion Property taxes, although a time-honored way for local governments toraise revenue, are a complicated mix of political and economic issues.Everyone, business people and individuals alike, want "the other person" topay the greater share of property taxes, and everyone questions whether thegoods and services provided by the taxes are worth the amount levied. In 1979, the provincial government amended this legislation toallow municipalities to choose whether to be reassessed. 1 8321c2586). The result is that taxpayers have lower tax amounts due at any one time,and both the city and the taxpayer can prepare budgets more accurately. Toronto, Ontario: TorontoBoard of Trade. 54-55. 1 8321c2586. Duringthe 199 s, the city sought to reform its property tax structure on twoseparate occasions, but with limited success. 54). These reforms areintended not only to help Toronto's existing business community remainintact (reducing flight to other Canadian cities such as Montreal orVancouver), but also to attract additional businesses to Toronto ("ReformsGive," 2 , p. This, they argue,results in increased taxes for others but no relief when the cityeventually receives the funds from the property lien (resulting in whatsome critics have termed a "windfall" for the city) ("Why Grow," 2 , p.1). As a result, tax increaseson residential properties were limited to a maximum of ten percent, andthat increase was implemented over two years. Under the plan, taxpayers can select a six-installment plan or an11-month installment plan. Instead, the money isautomatically deducted from a designated bank account on the tax due dates. If theproperty is sold or ownership changes hands (such is likely to occur whentitle passes to heirs), the taxes become due (although no interest will becharged against the deferred amount) ("Property Tax Deferral," 2 , p. Internet address: http://www.city.toronto.on.ca/taxes/cva.htm. Current value assessment (CVA). Under the first program, homeowners who are at least 5 years of agewith a household income of $2 , or less qualify for a full so long asthey also receive a pension from a plan registered under the Income TaxAct. Despite the property tax situation, Toronto has remained a strong andattractive location for commercial interests in Canada, particularly thosein the financial services industry. 3). In 2 , for example, theassessment was based on 1996 estimated values; in 2 1, the assessment willbe based on 1999 estimated values. The controversy that accompanied Toronto's decision to adopt MVA camefrom the upheaval that a city-wide reassessment was expected to cause.Toronto had not reassessed properties in nearly 4 years, and there wasconcern that the property tax burden would be shifted from the suburbs backto the city center, which would lead to business and residential flight outof the city. The taxman's long arm. In addition, critics of the program have noted that since the taxesare deferred rather than forgiven, the city must make up the shortfall inthe cash that would otherwise have been received. Toronto, Ontario: City ofToronto. 1). Although the deferral program appears, on its surface, to be a way forthe tax burden to be lifted slightly for those least able to handle taxincreases, the program was initially perceived incorrectly as tax reliefrather than tax deferral. Residential Property Tax Issues Today The fact that the implementation of CVA caused significant changes inthe tax liability throughout the city resulted in protests from commercialand residential interests, alike. To help Toronto's residents plan for what could be dramaticchanges in their tax liability, the city opted to impose the tax changeover several years, and to review it in 1998. Internet address: http://www.city.Toronto.on.ca/taxes/preauth.htm. Within Toronto, additional rifts have developed between the "haves"and the "have-nots" in the form of commercial interests against residentialinterests, and low-income residents against high-income residents. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.