Guest Opinion - Moose Jaw City Council needs to keep their foot on the gas with property tax shift
By Tyler Slobogian - Canadian Federation of Independent Business - Opinion/Commentary
For small business owners, property taxes are often cited as one of the most harmful costs to their operations because these taxes are ‘profit insensitive’ – meaning businesses must pay them regardless of revenues
And it’s no secret that many small business owners’ revenues continue to suffer in the wake of the pandemic.
Inflation, supply chain challenges, and high interest rates are creating the perfect storm - squeezing the budgets of both business owners and consumers.
According to CFIB’s May Business Barometer, half of Saskatchewan small business owners claim ‘insufficient demand’ is the top factor limiting their business’ growth.
As a result, an alarming 72% of Saskatchewan small businesses report they are still not back to normal (pre-pandemic) revenue levels.
The City of Moose Jaw has recently made some progress towards easing the burden of property taxes for local small businesses.
In 2018, the City began implementing a “tax sharing” policy - which aims to achieve greater fairness between commercial and residential property owners when it comes to splitting the burden of property taxes.
The municipal government deserves credit for striving for greater property tax fairness and delivering meaningful cost relief to businesses at a time when many are struggling.
To be clear, Moose Jaw’s property tax shift isn’t about small businesses forfeiting their responsibility to pay property taxes. It’s about fairness.
“To be clear, Moose Jaw’s property tax shift isn’t about small business forfeiting their responsibility to pay property taxes. It’s about fairness.”
Back in 2017, commercial property owners in Moose Jaw were paying almost 2.5 times more in property taxes than residential owners would have paid for properties with the same assessed value.
In 2024, because of the City’s tax sharing policy, a small business will now pay 1.8 times more than a residential property owner.
While this is a significant improvement, commercial properties will still pay 36% of all property taxes collected by the City of Moose Jaw despite making up just 22% of total property values.
Like residents, small business owners have many bills to pay. From payroll costs to income taxes, rent and utilities, you name it, it has become more expensive over the past 12 months.
Small business owners are in desperate need of cost relief with many (65%) indicating they would use any potential cost savings to pay down business debt or increase employee wages (58%).
An additional 40% said they would use cost savings to expand or grow their business and the City’s tax sharing policy provides savings to do just that, which ultimately benefits the local economy.
If we’re going to look at this problem honestly, we need to address the elephant in the room.
This isn’t just a tax revenue/distribution problem, it’s a spending problem.
“This isn’t just a tax revenue/distribution problem, it’s a spending problem”
According to Moose Jaw’s 2024 budget, the City is expected to spend an additional $4.2 million or 7.3% more than 2023.
That’s a big jump.
The primary source of this funding will come from a 9.3% property tax hike, which is already the largest source of revenue.
While we recognize municipal spending is necessary to maintain basic services, the 2024 budget includes massive spending increases, such as a 32% increase to the Moose Jaw Event Centre, nearly 17% for provisions/ debt, and 19% for sanitation and waste services.
These substantial increases in spending come at a cost, and this cost (born by taxpayers) has the potential to harm long-term economic growth which could lead to lower tax revenues in the future.
The point is, the bulk of the taxpayer’s property tax headaches are not due to the City’s tax shift policy, but they can be largely attributed to the underlying issue of unmanageable spending growth.
“The point is, the bulk of the taxpayer’s property tax headaches are not due to the City’s tax shift policy, but they can be largely attributed to the underlying issue of unmanageable spending growth.”
Property tax shifting policies, such as those implemented in Calgary, Vancouver and currently Moose Jaw, provide small businesses with far more cost savings relative to the minor cost increase incurred by residents.
This is because there are far more residential properties to spread tax increases across than there are commercial properties.
While Moose Jaw’s tax shift has helped to ease the cost of doing business for some local firms, the addition of sustainable municipal spending to that equation would provide both residents and business owners with some affordability relief.
Governments should be able to walk and chew gum at the same time.
Municipalities can keep property taxes fair for businesses while making sure their property tax burden remains manageable for both businesses and residents.
Tyler Slobogian, CFIB Senior Policy Analyst for the Prairies and Bradlee Whidden CFIB Policy Analyst for Western Canada
Editor’s Note: The preceding is the personal opinion of the author and may or may not reflect the opinion of MJ Independent.
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