Too many people, incorrectly, use "Tax Rates" as a measure of comparison from one local government to another. Tax rates are only a tool, albeit an important one, to ensure the required revenue to meet annual budgets is met.
The following explanation from Corporate Services, City of Abbotsford, will hopefully clarify this subject for those still unsure:
Comparing
Tax Rates
Tax
rates are not a direct indicator of comparative tax costs between cities. They
must be interpreted in conjunction with average assessed values, which vary
significantly between cities. Without that reference point, they are
meaningless.
(Having said that, however, if rates are to be used as a comparator, one must include the fact that, since 2005, Abbotsford's tax rate increased from 4.83072 to 4.9075, an increase of 0.33%!)
(Having said that, however, if rates are to be used as a comparator, one must include the fact that, since 2005, Abbotsford's tax rate increased from 4.83072 to 4.9075, an increase of 0.33%!)
Comparing
Total Taxes and Charges on Representative Properties
The
Province of BC publishes a listing of “Taxes and Charges on a Representative
House”. This is the closest data comparison available to compare relative tax
burdens between cities for residential properties. It shows what a typical
house in each city pays annually in total taxes and charges (both municipal and
non-municipal).
Assessed
Values are a Useful Tool for Allocating Tax Charges
Assessed
values are a good tool for allocating
the city’s tax requirement across properties. More expensive properties (those
with conceivably greater ability to pay) pay higher taxes. Less expensive
properties (those with conceivably lesser ability to pay) pay lower taxes.
Assessed
values are not a good tool for dictating
the city’s total tax requirement. Assessed values have virtually no
relationship to municipal expenses, so it follows that they should not drive
tax revenues. Why, for example, should the city increase its tax revenues by
10% in a given year, simply because land values have risen? Similarly, does the
fact that Abbotsford has lower land values than Vancouver or Surrey
automatically mean that it has lower costs of doing business? With very limited
exceptions (e.g. land purchase for road right of way), the answer is no.
How
Abbotsford Calculates Tax Charges on Specific Properties
1.
Council approves a total tax revenue requirement, separate from any market
movement in assessed value (which has no impact)
2.
The tax rate is set such that the total required tax revenues will be collected
from properties, given their current assessed values. (Council has the option
to choose to allocate tax charges in varying proportions to each class of properties.)
3.
The total tax charge per property class is allocated to specific properties in
proportion to their relative assessed values.
