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B.C.'s bump in homeowner grant threshold is not the good deal suggested

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Photo: Craig Paterson/flickr

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Last week British Columbia's provincial Finance Minister announced a $100,000 (9.1 per cent) increase in the threshold for the province's homeowner grant, raising it to $1.2 million. There is more to this story than has been reported in the press release or the media. What looks like "tax relief" to homeowners has actually in recent years been a big increase in taxes aimed at communities with high property values.

The Home Owner Grant offers a rebate of all or a portion of the residential property tax charged by the province. The government news release reported that: "The Home Owner Grant provides modest property tax relief to those who need it most. Last year this program returned nearly $800 million to B.C. residents. For 2016, more than 91 per cent of homes are below the threshold." People whose property is assessed as worth more than the threshold of the grant lose $5 for every $1,000 their home is worth above the threshold.

First of all, the increase in the threshold to $ 1.2 million still leaves it below what the threshold was in 2013. That year the government announced in its Budget Documents that:

the threshold for the phase-out of the homeowner grant is increased from $1,285,000 to $1,295,000 for the 2013 tax year. This increase ensures that at least 95 per cent of homeowners are eligible for the full grant, consistent with longstanding government policy.

In 2014 that "longstanding government policy" changed when the government announced that the threshold was going to be reduced from $1,295,000 to $1,100,000 -- a 15 per cent decrease in the threshold. The percentage of homeowners covered by the grant fell from 95 per cent to 93.8 per cent.

The next year in 2015 the government froze the grant threshold at $1,100,000 and the percentage of homes fell further to 93 per cent.

This year, with the announced increase, in the words of the government press release, "more than 91 per cent of homes are below the threshold."

In recent years money collected from provincial property taxes has been rising at a much faster rate than the homeowners grants.

Even looked at from the perspective of a single year the increase in the threshold for 2016 is less than generous -- for the lower mainland. The threshold increases by 9.1 per cent.  Almost every municipality in Metro Vancouver saw residential property values rise faster than that.  The B.C. Assessment Authority's press release last week reports:

Increases of 15 - 25 per cent will be typical for single-family homes in Vancouver, North Vancouver, West Vancouver, Burnaby, TriCities, New Westminster and Squamish.

The growing community of Squamish, saw residential property values rising by 17.3 per cent, almost doubled the increase in the threshold. For the rest of the province, the few homes in the $1.2-million price range will see a benefit.

On the whole, the changes since 2013 are costly for Metro Vancouver and make little difference for most of the province. But it is good news for provincial revenues. In 2013 the province collected $715 million in property taxes after the homeowner grant was factored in. In the 2015 Budget the province predicted it would make $763 million in property taxes for the year after it had paid the grant -- an increase of nearly 7 per cent in two years.  Last year's Budget predicted property tax revenues after the threshold would rise to $819 million by 2017/18. The increase in the threshold this year, less than the increase in property values for Metro Vancouver, will probably mean another property tax windfall for the government in the 2016 Budget.

As well, the government will earn another billion dollars next year from the property transfer tax, another measure which hits Metro Vancouver with its higher than average property values.

In short, the "increase" in the threshold for the homeowner grant this year means that the percentage of homeowners eligible has fallen from 95 per cent to 91 per cent. Taxes based on residential properties are being targeted as a growing revenue source for the province with Metro Vancouver providing most of the revenue.

There are good arguments that can be made for using a wealth tax as a source of government revenue, but as wealth taxes go, what the province is doing with its taxes based on residential property values is both targeted and sneaky.

There is another question. If the province is drawing this much money out of Metro Vancouver with its property-based taxes, couldn't they afford to put more money into infrastructure for Metro?

The provincial government brags about its low rate of income taxes but more and more it pays for its services with taxes that are not progressive -- MSP premiums, insurance charges, tuition fees and charges on property.

Photo: Craig Paterson/flickr

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