MUNICIPAL LEVEL TAX

EDMONTON JOURNAL - April 24, 2002
Cities need more tax powers: But only after Ottawa and the provinces give up some of theirs
By Lorne Gunter

We are becoming a nation of city states. It's a trend common to nearly every western nation.

In many ways, urbanization is lamentable. Rural values - simplicity, hard work, community, reliance on family, curling - are worth preserving. But urbanization is an unalterable trend, at least for the foreseeable future. Besides, it has brought enormous wealth.

A hundred years ago, 80% of Canadians lived in rural areas and 20% in cities; now those percentages have been reversed. These numbers represent a subsistence/industrialization split, as much as an urban/rural one, too.

Once, more than three-quarters of us lived where we could fish, farm, log or mine, in order that all Canadians could be fed, housed and clothed, and our homes lit and heated. Now the labours of just one-quarter of us are needed to provide these necessities, so the other three-quarters of us can get on with value-added tasks.

To be sure, there are distortions in Canadian policy that have depopulated rural areas faster than necessary. In the West, for instance, Wheat Board rules discourage pasta plants and flour mills from setting up close to producers. And for a century, transportation policy favoured the shipping of raw materials east and finished goods west. These two policies alone discouraged dozens of industrial developments in the West.

Yet more and more Canadians live in cities. Mostly this is not the fault of government. And the trend's not so bad, either.

While cities' populations and economic importance have grown, their political independence has not. Cities are legally nothing more than the creations of provincial governments. They have important sources of tax available to them - notably the property tax - but they lack the ability to raise all the money they need to pay for the increasing service pressures they face.

Provincial and federal politicians, but mostly provincial, have the final say. Each year, municipal politicians must hope their provincial masters throw enough cash their way to pay the bills.

Still, I hesitate to go the next logical step - to insist cities be given greater power to tax.

The TD Bank Financial Group went a little overboard Monday, insisting we either invest in our cities or "disinvest in Canada's future." It's not quite that dire. But the general thrust of the report on the growing problem with managing Canada's expanding urban centres was spot on.

Sixty-three per cent of us live in just the 27 largest metropolitan areas in the country. "In 2001, the seven largest (cities) - Toronto, Montreal, Vancouver, Ottawa-Hull, Calgary, Edmonton and Winnipeg - accounted for 45% of the Canadian total."

Even more astonishing was the TD's economic findings. "Vancouver accounts for 53% of B.C. GDP. Calgary and Edmonton, combined, account for 64% of Alberta GDP." Winnipeg, alone, generates two-thirds of Manitoba's productivity, Toronto 44% of Ontario's and Montreal 50% of Quebec's. In every province, the largest cities account for a far greater percentage of GDP than their percentage of the population.

Unless we are prepared to violate the doctrine of one-person, one-vote, (and we shouldn't) there is no way to match cities' political clout to their economic output. But a new political model is needed if cities are to be governed responsibly.

A move to municipal autonomy would increase the accountability of municipal politicians. If they raised more of the money they spent, their ratepayers could hold them more directly to account.

Municipal autonomy would also be a form of decentralization. Call it the doctrine of "escapability" (I know it's not a real word). The more autonomy cities are given, the greater will be the diversity of communities from which to choose. Voters and politicians in each city will approve the policies and services most desired by them. Persons unhappy with life and programs in one city would always be free to "escape" to another more to their liking. When decisions and power are centralized, such escapability is impossible.

But one big caution: Municipalities should only be given new taxation powers when Ottawa or the provinces give up some of theirs. There are already enough public services being provided and enough taxes being raised by senior governments. What is needed is a shift of services and taxes down to the local level.

If cities are allowed to levy new taxes, in addition to existing federal and provincial taxes, the result will be worse for the economy than "disinvesting" in cities.

Ottawa began giving significant tax room to the provinces in the 1970s and 1980s. The result has been enormous growth in provincial governments, until now they consume as much GDP as the federal govt. A third level of government allowed to grow to that size would lead the combined tax burden to crush all economic activity. ______________________________ Lorne Gunter Columnist, The Edmonton Journal Editorial Board Member, The National Post Tele: (780) 916-0719 Fax: (780) 481-4735 E-mail: lgunter@shaw.ca