Introducing new sources of tax revenue can diversify revenue sources for The City, and evidence from other Canadian cities shows that this revenue can have a significant impact on a city’s finances.
PRIORITIES
To generate new sources of revenue, a Better Budget includes the following policy asks:
- Introduce a 1% vacancy tax on empty homes.
- Introduce a 0.5% Land transfer tax on property that’s transferred from one person to another.
- Introduce a progressive property tax so people with more valuable homes pay higher tax rates.
- Introduce a 1% return of provincial corporate income to The City.
- Introduce a 1% return of personal income tax from The Province to The City.
- Introduce a 1% return of Insurance Premium Taxation from The Province to The City.
- Introduce a 1% return of Tobacco/Cannabis Taxation from The Province to The City.
- Introduce a 1% return of the Municipal Tourism Levy from The Province to The City.
BACKGROUND
Making Changes a Reality
Not only does The City control daily operational spending and investments in infrastructure projects, it also has some control over ways The City can raise revenue. Generally, Alberta municipalities generate revenue through property taxes, user fees, and government transfers. Calgarians pay taxes to The City and the province, and that funding can be leveraged and redistributed more effectively to improve outcomes for all Calgarians. It is worth noting that the Municipal Government Act (MGA) prevents the municipality from running a deficit for annual operating expenses. The current regulations of the MGA cause municipalities to rely on provincial funding over which they have little control. As a result, municipalities prioritize operational spending over capital investments.
Land Transfer and Vacancy Taxes
In Alberta, a land title fee is paid when a property is purchased and essentially acts as a registration fee. However, Halifax, Montreal, Quebec City, and Toronto have all introduced land transfer taxes which are levied when a property is transferred from one owner to another. In 2018, land transfer taxes generated an additional $27 million in Halifax and $730 million in Toronto. In Calgary, the introduction of a 0.5% land transfer tax based on the value of the property could generate an additional $67 million annually. Vacancy taxes, applied to underused residential properties, are designed not only to increase revenue but to reduce the number of empty homes while other Calgarians go without.
Progressive Property Tax
The current property tax rate is not a progressive tax, meaning that all homeowners in Calgary pay the same tax rate regardless of the value of their home. Altering the structure of the property tax to imitate the design of income taxes would generate significant additional revenue without imposing a heavy burden on homeowners who own less expensive homes. Under our proposed structure, the property tax rate would not increase for individuals for whom the value of their home is in the lowest quartile, and residents with homes in the highest quartile would pay the same tax rate as any individual living in Red Deer. For everyone except those owning the most expensive 20% of houses, all residents would pay a lower property tax value than individuals living in Edmonton. Introducing a progressive property tax is a way to ensure that lower-income residents are not tasked with paying relative higher taxes and ensures that those with the most resources are contributing the most.
Remittances from the Province
Provincial tax remittances refer to the amount of tax revenue that is sent back from the province to the municipality. Calgary generates roughly 30% of all tax revenue for the province and remitting 1% of that revenue from corporate income taxes, personal income taxes, insurance premiums, tobacco and cannabis taxes, and municipal tourism levees can generate an additional $55 million in revenue for the City.
These policy asks are based on input that came directly from over 5,000 Calgarians from every corner of the city through our Better Budget Survey and Community Consultations last spring. Vivic Research and Nick Falvo Consulting helped us compile your responses into a report that includes these and other recommendations.