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The City of Montreal’s 2018 Budget was tabled on January 10. In it, we learn that the tax burden of the owner of a home of average value will go up by 3.3% compared to 2017. The explanation of the details of this increase, however, left me dumbfounded. According to the budget document and every report that I read on the topic, this 3.3% is due to a 1.9% property tax (general tax charge) increase, a 1.1% water tax increase, and a 0.3% borough services tax increase (see page 32 of the City’s 2018 Budget).
This is quite simply impossible. Let’s look at a simple example to understand. Suppose that you pay $1,000 a year in provincial income tax and $1,000 in federal income tax. If each level of government raises your taxes by 10% (or $100), you are now paying $200 more, which is 10% of $2,000. No one would think of saying that Quebec and Ottawa each raised your taxes by 5% for a total of 10%.
Yet this is what the imaginative authorities in Montreal did, by adding up the increase of each of these taxes as a proportion of the total tax bill, instead of calculating the increase of each of these taxes separately. It is by doing so that we can measure the tax increases facing Montrealers.
Since the City, in its budget, only included the amounts of taxes that will be paid in 2018, a small calculation is required to find the amounts of those same taxes in 2017. Thankfully, this is simple enough.
The important number to remember is $3,611. This is the average municipal tax bill paid last year in Montreal. We already know that this tax bill will increase to $3,729 this year, an increase of $118, or 3.3%.
- The property tax will increase the tax bill by 1.9%. For the average bill of $3,611, this must represent an increase of $69. In its recent budget, the City indicates that the average property tax amount will be $2,818 this year. Last year, the corresponding amount was therefore $2,749, and the increase must be calculated starting from this amount. Out of $2,749, the variation of $69 actually represents a property tax increase of 2.5%, not 1.9%.
We can carry out the same calculation for the water tax and the borough services tax.
- The water tax will increase the total tax bill by 1.1%, which must represent $40 of the average bill of $3,611, mentioned above. Since the water tax will be $434 in 2018, it must have been around $394 in 2017. The water tax increase is therefore actually 10.1%, not 1.1%.
- Finally, the borough services tax increases the average total bill of $3,611 by 0.3%, or $11. As it is $463 in 2018, this tax must have been around $452 in 2017. The actual borough services tax increase is therefore 2.4%, not 0.3%.
When the City writes, in black and white on page 32 of its budget, that these same variations are 1.9%, 1.1%, and 0.3%, this is simply not true.
More or less the same results can be calculated using the City’s 2017 Budget figures as a starting point (p. 39). The budget then projected a tax bill of $3,611 broken down as follows:
- $2,744 for the property tax;
- $397 for the water tax;
- $454 for the borough services tax.
Calculating the difference between these taxes this year’s budget and last year’s, the variations are 2.7% for the property tax, 9.3% for the water tax, and 2% for the borough services tax, for a weighted average of 3.3%.
It’s not exactly the same distribution, but it’s close. (It is likely that the numbers used for last year’s budget were updated.) Regardless of the reason, and regardless of the way it is calculated, there is no possible doubt: The tax increases are greater than those indicated by the City in its budget this year.
The total tax bill of a Montreal property owner should increase by 3.3% in 2018. This increase is the (weighted) average of the increase of three taxes:
- a 2.5% property tax increase;
- a 10.1% water tax increase; and
- a 2.4% borough services tax increase.
Claiming that the growth of the property tax was limited to below the projected inflation rate (2.1%) is therefore simply false. This tax, the water tax, and the borough services tax are all growing much faster than the City claims, and these increases are presented by the municipal authorities in a way that is highly questionable, if not dishonest.
Germain Belzile est chercheur associé senior à l’IEDM. Il signe ce texte à titre personnel.