Criticisms of the property tax system are routine and growing. For Nova Scotia, the system of property taxation and assessment dates back to the 1880s. With the property tax system so generally and roundly condemned, the consideration of alternatives obviously becomes necessary.

The two alternatives that are most commonly contrasted to the property tax are taxes on consumption or income.  We could also consider simply adjusting the property tax, or building a hybrid model that in some way blends property/consumption and income taxes. In the HRM, we already have a blended tax base based on user fees (consumption taxes), property taxes and indirect income taxes in the form of transfers from other levels of government.

In, This Rose, By Any Name, Stinks, AIMS Author Juanita Spencer considers the proposition of a municipal income tax in light of national and international experiences and by applying Adam Smith’s four maxims on taxation: Equity, Certainty, Convenience and Efficiency.

Spencer finds that national, international and local experience clearly demonstrates that the connection between property values and ability to pay is tenuous at best. She proposes that, to adhere to the maxims of effective taxation, municipalities should move to a blend of consumption and income taxes. Consumption taxes should be used wherever possible to deliver “luxury” services but also to act as a brake on free riding and rent seeking, where organized interests seek to secure a benefit for themselves at the expense of others.

Spencer recommends that income taxes should replace property taxes as the principal source of local revenue. After assessing three tax options, she found that income taxes are simpler to administer, involve less local enforcement effort, are convenient for the tax payer and, provided they are simple and predictable, income taxes are more equitable than property taxes. While competition on rates is to be expected, even encouraged, this transition from property to income taxes should occur on a province wide basis to ensure maximum comparability for taxpayers and maximum administrative efficiency and cost containment by government.

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