The 3.87 per cent property tax increase in the preliminary Winnipeg budget will cost the average homeowner about $57 extra this year. It's worse for businesses.
According to provincial rules, homeowners in Manitoba pay property taxes on 45 per cent of their home's assessment. Businesses, however, pay on 65 per cent of their property's assessment.
If the extra tax for an average homeowner is $57, for a business with the same value of assessment it is $82 -- or 44 per cent more.
But it gets worse.
Winnipeg also has the dubious distinction of being the last major municipality in Canada to still levy an extra tax on businesses. In addition to property taxes, businesses in Winnipeg also pay another tax called "the business tax." It's not based on a property's assessed value, but rather its annual rental value.
To be fair, many municipalities, such as Edmonton recently, got rid of their business tax by simply moving the revenue collected from the business tax to commercial property taxes. In other words, businesses pay one tax instead of two, but the total bill is roughly the same.
That's why the Canadian Federation of Independent Business has been supportive of Winnipeg's approach to get rid of the business tax by actually reducing the total tax load, although it's been painfully slow.
City council reduced the total tax load by lowering the business tax rate in 2005 for businesses in the downtown core, and then for all businesses in 2007, 2010 and 2012.
Council also reduced the total tax load by introducing the small business tax credit in 2009. The SBTC allows businesses at or below a set annual rental value to receive a credit for their full business-tax bill. When it was introduced, the threshold for the credit was $14,040. With annual increases, last year the threshold for the credit reached $22,680. Because of the credit, about 40 per cent of Winnipeg's businesses did not have to pay the business tax last year.
In the preliminary city budget, there was no change to the business-tax rate or the SBTC threshold.
The real crux of the issue is spending. The city is spending faster than our ability to pay for it -- that's why we are getting saddled with tax increases.
That wasn't always the case. Until about 2007, the City of Winnipeg was reasonably good at keeping spending growth in line with the growth in inflation and population. Then spending really took off and it led to an increase in frontage levies in 2011, a 3.5 per cent property tax hike in 2012 and now a proposed 3.87 per cent hike this year.
The business tax generates almost $60 million in revenue each year for the city. No reasonable business person expects the tax to go away overnight. But they do want a plan for when this election commitment will be honoured. In fact, according to a recent survey by the CFIB, 85 per of its members in Winnipeg want a plan to eliminate the tax.
A plan is free and the business community didn't even get that in this year's budget.
A strong and healthy business sector is good for all of us. Not only to businesses create jobs, offer products and services and contribute to community causes, their taxes also protect you and I from even higher tax bills. Council must address this competitive challenge for businesses in Winnipeg.
Message to council: Please control spending so you don't have to keep asking us for more money. And can we at least get a plan to eliminate the extra business tax?
Janine Carmichael is the Manitoba director for the Canadian Federation of Independent Business (CFIB).
Janine.email@example.com or Twitter @cfibMB.