The Right Tax for the Job: The Role of Property Taxes in Funding Cities

The property tax generates a significant proportion of municipal revenues in Canada and has done so since Confederation. This paper makes the case that the property tax is a good tax for funding local (especially general-purpose) governments for several reasons: the base of the tax is immovable; the tax can generate reliable and sufficient revenues and make local governments independent from other orders of government; many of the core goods and services provided by local governments directly benefit property owners; the tax is visible to property owners; and the tax is easy to administer.

The paper also counters many criticisms levelled at the property tax, including that it is inelastic, unresponsive, and regressive, and that it limits growth. The authors conclude that the property tax is an adequate but underused source of revenues for Canadian municipalities and make a strong argument for lowering the taxation of business properties by eliminating provincial school property taxes on both business and residential property. The result of such a reform, which would leave the property tax solely a municipal tax, would better meet tax criteria for revenue and expenditure assignment.

A previous version of this paper was published by the Canadian Tax Foundation in Enid Slack, Lisa Philipps, Lindsay M. Tedds, and Heather L. Evans, eds., Funding the Canadian City (Toronto: Canadian Tax Foundation, 2019).

“Property Taxation in Canada: Past, Present, and Future”

This is the first paper in the IMFG series, “Property Taxation in Canada: Past, Present, and Future.”

The property tax has a long history in Canada. It predates Confederation and has long been the country’s central source for municipal revenues. In recent years, governments have also implemented further taxes on property, including foreign buyers’ taxes and vacancy taxes, to address new policy concerns.

“Property Taxation in Canada: Past, Present, and Future” focuses on property taxation in Canada and whether changes are necessary to ensure municipalities can meet 21st-century challenges. Papers by experts from across the country will look at topics that include the role of the property tax in Canadian municipal finance, recent developments in property tax policy, and new challenges that governments face in administering the property tax.