Councillors reap bonanza by cutting perk

Hey there, time traveller!
This article was published 20/04/2011 (5600 days ago), so information in it may no longer be current.

I wasn’t surprised this past weekend to read about city councillors considering taking away the tax-free status on one-third of their paycheques.

What did surprise me was the local television poll released Monday that showed 96 per cent of 4,700 respondents thought this was a wonderful idea.

Be careful what you wish for because you just might get it.

Many politicians have enjoyed this tax-free allowance for a century or more, but it has become a growing trend to put an end to this perk at all levels of government — civic, provincial and federal.

What has brought on this trend in modern times? Is it a feeling of commitment to serve the poor taxpayers in a more altruistic fashion? Is it a feeling of guilt from having an unfair advantage over those poor citizens they represent? Or is it just plain old greed?

Greed? Let me explain.

First of all let me say that no politician of any stripe at any level has taken home less money because they gave up their tax-free allowance. Quite simply, they raise their own salaries so that their take-home pay remains unchanged. The province did this a number of years ago and no one was any the wiser.

Still, most of us would say it is just fairer to see up front what our civic politicians are paid. It puts them on our level for comparative purposes.

But politicians never were on the level of the average citizen and they never will be.

The original purpose of the one-third, tax-free status was to cover expenses that politicians have that the rest of us don’t have. It is important to remember that this was originally set up as a 50 per cent tax-free raise to cover the extra expenses incurred by all politicians. It was a raise, not a piece of any existing salary.

The expenses are real. Politicians can’t say no when the neighbour’s kids come knocking with chocolate bars to sell for their class trip. They can’t say no when the local community club asks them to buy tickets for the New Year’s Eve dance, or the church asks them to donate something for the raffle at the spring tea. The list goes on and I didn’t even mention that these local groups actually expect you to buy tickets and attend these events — all of them.

On top of this, politicians were unable to write off any expenses at income tax time because they were covered by the tax-free allowance.

Times began to change when politicians gave themselves ward or constituency allowances to cover the costs of these extra expenses that had been such a drain on their incomes for so long. That would have been a good time to give up the tax-free allowance but it didn’t happen.

So you, the taxpayers, now pay for all these extra expenses while the politicians still receive the tax-free allowance.

Here’s the bottom line. The city councillor gives up his or her tax-free allowance. The salary is adjusted to keep the bottom line intact. The expense account remains intact and the councillor may now write off expenses such as a home office and telephone or any other business-related expenses that aren’t paid for directly from city expense allowances.

So the councillor’s take-home pay rises courtesy of the provincial and federal governments through the extra income-tax reductions. But the real benefit comes in the form of a huge increase in the size of their pensions.

Councillors now get a pension based on two thirds of their $66,000 base salaries. They will soon get a pension based on ALL of their new $100,000 base salaries.

That is more than double. Actually, it is more like two and a half times the current pension amount.

And who pays for all this? After all, the federal and, to a lesser extent, provincial governments forgave a pittance in income tax to support the old system. They will now recapture this tiny amount while losing all the write-offs that councillors will now enjoy.

The councillors get the same take-home pay with the extra income tax figured into the gross pay. They pay lower income tax because they can now write off expenses for the first time and they are in line for a pension two and a half times what they expected up till now.

So the feds and the province don’t really suffer much and the councillors reap a bit of a bonanza.

Who pays for the fewer dollars going to Ottawa and Broadway? Who pays for the higher gross salary it will take to protect the net bottom line for the councillors? Who will pay for the huge increase in retirement pensions the councillors will enjoy?

You my friends, you.

None of this is to say that councillors’ salaries and benefits should not be reviewed. I have long believed that they are grossly underpaid for running a $1-billion-a-year corporation. This is especially true when it comes to pensions, or lack thereof.

There will always be those, maybe even 96 per cent, who feel councillors are overpaid. They should be reminded that councillors changed their role in the 1990s by taking control from the board of commissioners and taking full responsibility for operating the city.

Since that time, civic taxes have been frozen and the total number of city employees has dropped by thousands, even with significant increases in the number of police, fire and paramedic personnel.

The point is not that councillors’ salaries and benefits should or should not be reviewed. It is that the review should be undertaken out in the open by a truly independent body that is not beholden to council in any way. And council must show the fortitude to accept whatever the review panel recommends, despite the howl of the 96 per cent that it is too much.

Mike O’Shaughnessy is a former

Winnipeg city councillor.