Education property taxes — neighbouring Saskatchewan implemented reform by setting standard mill rate

WinnipegREALTORS® is a member of a coalition headed by the Manitoba Real Estate Association calling for education finance reform. 

One of the concerns expessed by the coalition is the inequity existing in the assessment basis between the province’s school divisions which can create disparities  in the amount each division raises in local taxes. 

Another is that the education property tax credit was frozen at $650 in this year’s provincial budget, which had been earmarked in a previous provincial budget to rise to $700. The property tax credit is not a long-term solution to the ever-increasing costs of funding education on the backs of property owners. 

Despite declining student enrollments costs continue to rise. Even with provincial tax incentive grants created to freeze taxes, property owners in many divisions will pay higher education taxes.

One development this year making things interesting is the 2010 property reassessment. In terms of who bears more of the share of the overall tax burden, there has been a shift from commercial to residential. This means more property owners will have to pay more property taxes — municipal and education — even with a city of Winnipeg tax freeze and limited school division increases.   

Next door to Manitoba, some fundamental education finance reform has occurred. As in Manitoba, Saskatchewan had depended far too greatly on property owners to help finance an expensive funding delivery model for public education. Saskatchewan’s reform entailed a standard provincially-set mill rate, which eliminated the inequities between the school divisions. 

Bill Madder, a former executive director of the Brandon Real Estate Board who is now the executive officer of the Saskatchewan Association of REALTORS®, explained the changes in Saskatchewan in the following article.

Property tax reform

The reform was sparked by Saskatchewan REALTORS® who led an eight-year campaign. 

It had two thrusts.

First, the local school tax was abolished. The majority of school costs were shifted to the province and a standard provincially-set mill rate was adopted. 

Second, a genuine provincial-municipal revenue sharing plan was started. The reform tackled both main drivers of property tax and set the stage for major change. 

The highest hurdle to change was the fear of a backlash over removing school boards’ powers to levy taxes. For decades, governments of every political hue feared any change to “school board autonomy.” The backlash never materialized. A single Regina board member announced he would not run again, but otherwise, the change went all but unnoticed.

Saskatchewan was hardly a pioneer in school tax reform, as Alberta did it several years ago. The vast majority of Canadian provinces either made the change some time ago or never had a school tax. Manitoba is now the only province with a locally-levied school tax. 

The shift is important. It puts accountability for school funding on the province where it belongs; education is a provincial responsibility. It stops property from being a dumping-ground when the province wants to off-load costs.  And, it begins to simplify the web of taxing authorities who have fed off the property taxpayer for decades. We are now on the road to tax transparency. It’s a vital first step in bringing the power of voter democracy to bear on property taxation.

What’s next? First will be abolishing the school property tax now controlled by the provincial government. A promising strategy is to set up an infrastructure fund with revenue coming from property. School costs would come entirely from other sources that are more directly driven by the benefit of education, such as on income and sales taxes.

The basis for property tax should change. Rather than taxing property value, a shift could be made to a flat rate, or to a square footage or front footage charge that reflects the service a property requires. 

And before too long, the whole notion of taxing property should be reviewed. Property is capital. It is the most widely-held kind of capital and the largest asset many families, farmers and businesses hold. Governments are now removing the corporate capital taxes that retard investment in industry. It’s time we began a parallel lowering of the tax on property capital. 

The benefits in affordability (paying less in taxes means more money can go to pay down principal and interest), investment (will add to net worth and balance sheets) and to equity (if it’s good for corporate capital, why not for family capital?) will pay handsomely.

Public awareness campaign

WinnipegREALTORS® has just launched a public awareness campaign on Manitoba’s land transfer tax. It speaks to the unfairness of having the highest tax rate in the country starting at the lowest price point of $200,000. In light of what Saskatchewan is doing with education taxes, you may be interested in seeing what is charged on land transfer taxes in a Prairie Provinces comparison chart at Compared to Manitoba’s LTT, Saskatchewan’s is less of a tax grab from home buyers. It appears that the Saskatchewan government is more sensitive about allowing property owners to keep more of the equity they have built up in principal residences over a lifetime than the Manitoba government. The Saskatchewan model also allows first-time buyers easier access to the housing market, as there are significantly less closing costs to cover before obtaining a title to a first home.