There is more than a little perspective missing from the debate over whether municipal tax revenues should be imposed on income rather than property.

As three groups push for a shift to income tax as a way to fund municipal services, a problematic assumption has been made: that higher assessments have to equally mean higher tax bills.

Don’t forget: It is not the assessment but the tax rate that a council votes to apply to an assessment that determines whether the tax bill moves higher. While some assessments rise more than others, it is the tax rate that has the largest impact on municipal revenues.

Municipalities in Nova Scotia – in particular, Halifax – successfully pulled the wool over the eyes of taxpayers for years by trying to divert blame for tax increases to property assessors.

As property values were rising, they hauled in millions in increased cash, year after year, while crowing about “flat” tax rates. The situation became so bad, the province stepped in to cap growth in residential assessments, limiting the new revenue municipalities could access.

Assessments aren’t perfect, but in the march to champion income tax as a fairer model of raising revenues for municipalities, a little caution and historical review is in order.

Property is not an automatic indicator of income, but there tends to be a reasonable correlation between the two.

It could also be argued, with similar merit, that an individual’s annual income may not fairly reflect his or her net worth. As any decent tax accountant could tell you, assets can be held in many forms without generating significant annual income.

And what about a case where a home has one income earner, while a similarly assessed home next door, receiving exactly the same municipal services, has two income earners. Should the municipal tax bill be twice as much for the neighbours?

What if an individual owns a second piece of property? If a tax bill is only levied against income, who pays for the services to the second property?

Those who rent their homes don’t pay direct property taxes, but their rents include a portion to cover a landlord’s property taxes. Will they now be asked to pay twice, with an additional hit on their income? Who will make the landlord lower the rent in return?

The hornet’s nest is buzzing, and I haven’t even made it to the business community’s arguments in favour of municipal income taxes.

There is always a tussle between residential and commercial property taxpayers over who is paying more, or shouldering more of the increase, when tax bills rise.

Let’s remember that a few short years ago, Halifax had something called business occupancy taxes. In addition to regular commercial property taxes, a business that rented space was required to pay tax on its business activities within that space. Rates were based on the size of the space.

The business community pushed hard to get rid of the business occupancy tax. It has been phased down to a very small portion, with the tax burden mostly shifted to the overall commercial rate.

In the meantime, property values were climbing. Small-business owners shouldered much of this burden, as they felt the double whammy of rising assessments, higher tax rates and the elimination of the occupancy taxes. But, in fact, the residential and commercial sectors in Halifax have experienced virtually identical percentage increases in their tax burden over the past few years as a share of overall city revenues.

Residential assessment increases still provide extra city revenue, but it is limited to inflation. With the huge gains in property values falling off due to slower economic growth, municipalities are losing the commercial cash cow, too.

The business community is fighting back and finds itself strangely aligned with voices from the political left on the issue of municipal income taxes.

This idea has been championed in Toronto for several years, and in some western Canadian cities. Municipalities are seeking new sources of revenue to feed growing service demands.

There are American cities where municipal income tax is paid. But the levels of total income taxes between Canadians and Americans is so dramatically different, the comparison may not be fair.

Income is one measure of wealth. Property has, traditionally, been another. Market values, and the rates that are applied to assessments, are not a bullet-proof method of taxation. But no tax system is perfect.

Halifax Mayor Mike Savage, who wasn’t born yesterday, has deferred to the province, which has been asked to study a provincewide system of municipal income tax.

Premier Darrell Dexter won’t even touch municipal mergers with a 10-foot pole. Besides, he already said last August he would not advance a municipal income tax agenda. He may have enough on his plate with provincial taxes, never mind the municipal question.

So we are back to Square 1. It reminds me of that old Churchill quote on democracy; property values may be the worst form of municipal taxation except for all of the others.