Small Tax Shift Means Big Gains

By Chris Pettingill
Published: May 16, 2015

WE’RE in budget season again, and a topic that always comes up is taxation. People usually don’t like to see their taxes increase, but I sometimes wonder if Squamish would benefit from a more equitable balance between residential and business taxation?
Suggest lowering business taxes, and peoples’ minds drift to thoughts of mega-corporations with mega-profits getting a free ride.  It’s true that a moderation of business property taxes would be financially beneficial to the large chains, but more importantly it would be very helpful to many small local businesses. Large non-local chains have the scale to weather tight margins. Small local businesses are more challenged by high taxation because they don’t have the scale of operations to manage tight margins.
I often hear folks say taxes are too high here. My question is: “Too high compared to what”?  Looking at the rest of BC, the rate of business taxation relative to residential is roughly the same.  In absolute dollars, people in Squamish do pay a little more than the BC average for both business and residential property.  However, compared to other provinces, BC businesses bear a much higher proportion of the tax burden compared to residential payers.
Properties in BC’s lower mainland are more expensive than elsewhere. At the end of each month, there’s more money out of a Squamish homeowner’s pockets, but the primary culprit is the mortgage, not property taxes. Comparing properties of equal value across provinces, BC taxpayers pay much less in taxes for a property with the same value.  I realize that for a homeowner on a tight budget, a residential tax increase isn’t very palatable even if our residential taxes are currently low in comparison to other provinces.  So, why would we consider the idea of shifting a greater portion of the tax burden to residential tax payers?  Despite high property prices, Squamish is facing a zero-vacancy rental rate, and home sales seem to be on fire.  At the same time, people worry about there not being enough jobs in Squamish, and whether we are becoming a bedroom community.

If it was a little cheaper to own a business in Squamish and a little more expensive to own a house, I think we might see an easing of the demand for housing, and growth in local business.  That should mean more jobs and also less competition for available housing.  It will make Squamish less attractive to people that want to live here but work somewhere else.  Squamish would also have a strong tax advantage relative to our neighbors when competing for new businesses.
We already do, and likely always will charge more tax on business properties than residential properties.  That means that growing the number of businesses will bring more tax revenue than bringing new homeowners to Squamish.  And this also means that if we can attract enough business, we could theoretically start to lower everyone’s tax rates. Roughly, for every dollar of tax moved onto residential properties, there’s a business property tax reduction of six dollars— with no change in total revenue collected.  That means a very small shift of the tax burden to residential ratepayers can have a much bigger positive impact for local business.
When housing is already so expensive, it’s not easy to ask homeowners to consider taking on a greater share of taxation. However, doing so might actually help us resolve the housing and jobs challenges, and might also put us on a path to lower taxes in a few years. Do you think it’s worth trying?