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You can bet you’re at the edge of a sustainability breakthrough when you start finding tax policy sexy.
That’s a gleaning from two apostles of a really edgy tax revolt who wowed a crowd of urbanists last week. Addressing a Gladstone Hotel salon and a conclave of the Canadian Urban Institute at Metro Hall, Donna Morton and Zane Parker offered their exposé of how municipal taxes sabotage cities’ stated enviro goals.
Taxes fail, says Morton, director of the British Columbia-based Centre for Integral Economics, because they’re designed to raise the most money with the least fuss – and not to shape policy that builds healthy and beautiful landscapes.
For example, city leaders like to say they favour preservation of historic buildings and areas, Morton and Parker say, but developers who do the right thing face a whopping increase in taxes. Like the million dollars the developers of the Distillery District face, which they’d never suffer if they’d just torn everything down and built a box store with a huge parking lot.
Because stately and refurbished buildings are charged more taxes per square metre than unstately ones, the city punishes lovely renos and rewards dilapidation and ugly design.
City leaders say they want buildings with green roofs and water-efficient appliances that save millions on water filtration, Morton and Parker say. But a condo developer who pays the extra money to do the right thing pays the same development fee as the one who puts up a cookie-cutter condo.
City leaders say they like neighbourhood-based main street retailers who keep affordable apartments on a second and third floor, but those retailers pay higher property taxes per square metre than box stores.
“We don’t have the basic economic architecture right,” says Morton, and there’s no transparency and accountability in tax governance.
But city taxes and user fees can be put to work to “harness the market to sustainability objectives,” she says. Realizing that sustainability is a taxing job is what led her from an environmental career with Greenpeace during the 1990s to her career as a pro-green and social equity tax consultant today. If you follow the ecological road, “it eventually takes you to tax policy,” she says.
Morton and Parker had the chance to put some of their ideas into practice when they worked with a range of BC cities and with former Winnipeg mayor Glen Murray, now head of Ottawa’s Round Table on the Environment and the Economy.
One of the first things they learned is that people eat less and are healthier afterwards when they “pay by the slice” instead of going to the all-you-can-hold-down buffet. But most city services paid for by charges – which have the same revenue function as taxes – are based on the buffet model. That’s not exactly a strategy for rewarding or encouraging thrifty and conservationist behaviour.
Moving to pay-by-the-slice methods means metering water use, which a 1999 Environment Canada study showed resulted in 70 per cent reductions in home water use, and charging by the bag for garbage. A quick jolt of metered IQ teaches most hosers not to use water to clean their driveway and sidewalk. When individuals pay more per unit, the ornery side of human nature works for the social good.
Parker’s a fan of what Sydney, BC, did to encourage recycling of materials from demolished buildings. Sydney officials charged companies that recycled their materials a nominal flat demolition fee, while companies that hauled materials to the landfill paid 5 per cent of the value of the building.
The most controversial change but also the one with the best success record is the shifting of city property tax away from buildings and other improvements – presently around 70 per cent of property taxes in most jurisdictions – and toward land.
Parking lots and box store malls that currently pay less per square metre would have to cough up more, while retail strips that encourage pedestrian access and provide affordable apartments overhead could pay a much smaller share.
Homeowners who renovate their attics or basements for rental units wouldn’t be taxed as much for their improvements, which increase affordable housing and make city garbage collection and utility services more cost-effective. But speculators who hold onto vacant land would pay through the nose.
Many places have gone this route, including Melbourne and Sydney in Australia, Johannesburg in South Africa, several cities in BC and Saskatchewan and 15 cities in Pennsylvania. Pennsylvania has been studied closely, since the changes were introduced during the 1970s and 80s in Rust Belt cities experiencing harrowing urban blight.
By shifting taxes from buildings and improvements to land, these cities achieved a miraculous turnaround that strangely included a drastic reduction in crime and fires and a sharp increase in building renovation rates.
The experiment has been judged a boon for renovators and a cornerstone for turning forgotten areas into “enterprise zones.” The only losers are real estate speculators, which may explain why we don’t see such successes more often.
This tax revolt message reminds pessimists that we only have experience with what happens when bad behaviour is artificially rewarded by public policy. We have yet to learn what happens when governments learn to design taxes to support pro-social behaviour.
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