Recently the leaders of a religious denomination launched an ambitious charitable project. After a campaign which raised substantial cash donations the group bought a choice suburban tract and built an institution for the benefit of its members. Provincial and civic dignitaries attended the opening and in fulsome speeches congratulated all concerned.
Well, not quite all. Nobody mentioned one major group of contributors: the property owners of the municipality who, for as long as the institution exists, will have added to their taxes the cost of supplying municipal services to this taxexempt institution. To compound the burden, they are deprived of a reduction in taxes they might have expected if commercial, tax-paying buildings had gone up on the expensive site.
This situation, multiplied in Canada’s forty-three hundred municipalities, is bad — and getting worse. Why should property owners, already under heavy tax pressure, be singled ont to subsidize the real estate holdings of churches, most private schools and universities, hospitals, orphan homes, youth centres, service agencies, veterans’ clubs and other groups in which they may have no stake or interest?
1 do not contend that most of the organizations granted tax exemption are not worthy of help— although it is an interesting question whether it is good for any cause to get backing without having to work for it, without having to “sell” its worthiness to its supporters.
Even if the church, private school or veterans’ club is unquestionably worthy and deserving of help, that merely brings us back to the point: why pick on one group to provide in voluntary support?
Many people answer: because it is a non-profit organization and could not survive if it had to pay
taxes. That may be true, but it still is not a valid answer. Nowadays every organization operates in an ocean of expenditures, be it a bowling alley or an orphan home. Does the electric company fail to charge for current that lights Sunday evening services? Does the grocer tear up his monthly bill for food supplied to a private school?
Why shift the burden?
Why should essentially similar services—garbage collection, police and fire protection, and all the other services a property owner buys via his taxes, be shifted from the church or club to its neighbors? To carry the point almost to absurdity, does a politician who exempts certain property from taxation calculate the proportion of tax-free property in his constituency and forego an equivalent percentage of his public pay?
Of course not. But the property owner, simply because he happens to live in a municipality where a tax-free organization chooses to locate, is automatically made to assume a share of the taxes that organization does not pay. And paradoxically, the size of the taxpayer’s involuntary contribution depends not on the organization’s poverty, but on its wealth. Even from organization to organization the principle of tax exemption creates inequalities, since the net cost to the taxpayer is based on the assessed value of the organization’s property rather than the worth and intensity of its work. A tax-free group that can afford to acquire extensive and expensive property is obviously leaning more on its neighbors than an organization which can afford only a modest property.
Some people argue that tax-free organizations serve the community and therefore make up for the tax exemption. This was largely true in the days of isolated, self-contained
ERIC HARDY IS DIRECTOR OF THE CITIZENS RESEARCH INSTITUTE OF CANADA.
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“An impossible dilemma ... to set a cash value on religion”
ties and is still true in many instances. But today's highly mobile population and the development of countless communities in which the only separation is an arbitrary municipal boundary has made a big difference.
A recent trend has been for city organizations to move all or part of their operations into outlying areas where space is cheaper and more plentiful. They continue to serve the city population while enjoying the bounty of local taxpayers. To add to the inequity, the premises they vacate are often converted into commercial, taxed property, thus actually benefitting the taxpayers of the city that “lost" the institution.
fax exemption can be unfair to property owners in another way: by causing stagnation in civic redevelopment. In downtown Toronto three of the largest religious denominations own extensive church property. Ehe locations are no longer ideal for serving congregations, and the land is extremely valuable. If those properties were owned by a non-exempt person or corporation, the size of the tax bill would virtually force the owners to put them to efficient use—and share the tax burden with other property owners. Since the churches pay no taxes, they lose nothing on that score by holding onto property that no longer serves its purpose well.
On the other hand, many organizations with headquarters in tax-free city buildings extend their work to outlying communities at no cost to the latter's taxpayers. Unfortunately this does not result in an averaging-out of the burden. It means rather that no logical plan exists for distributing the burden.
I must emphasize that l have no quarrel with the fact that churches and other worthy organizations are being helped: only with the illogical choice of the source of the help. I submit that the way to rectify the situation, if it could be accomplished, would be do away with municipal tax exemptions and substitute some broader and fairer method of subsidy. Because so many tax-exempt services now cut across two, three or more municipal boundaries, the assistance would probably best be organized at the provincial level. Even if it were decided that the greater part of deserved help should come from the municipality, it would still be fairer for the subsidy to be in the form of a controlled grant rather than a blanket tax exemption.
Apart from giving the property owner a break, the substitution of provincial and local grants for tax exemption would have the advantage of being more flexible. This method could be used to apportion help to universities, private schools, and various welfare and recrea-
tional organizations according to need and worth rather than by the present tax exemptions based on neither of these factors.
Indeed, some municipalities now practice a limited form of "judgment subsidies." In most provinces, municipalities are required by law to exempt religious and school properties from taxes (in Prince Edward Island each local government decides for itself). But in addition municipalities may exempt "non-profit and philanthropic organizations” at the discretion of the council, and may even vote cash grants to such bodies in addition to the tax exemption.
This leads to a variety of procedures. Thus in some places an organization may be voted a tax exemption and given money for its work, while elsewhere another branch of the same body may get no grant and be required to pay full taxes. Officials of such organizations may not always agree with the verdict, but at least it is an on-the-spot decision made by representatives of local taxpayers and presumably based on their appraisal of the organization’s work.
I agree, though, that churches should not have to depend on municipal council decisions for support. In principle, assistance to religious denominations in its present form is hard to justify; in practice, tax exemption with all its shortcomings at least provides a tie facto way of measuring the amount of help given, and takes the onus off local elected representatives.
It would be dynamite to expect a municipal council to make decisions on aid to churches. That would face its members with an impossible dilemma: to express publicly their highly personal judgment of the worth of one denomination against the other, and the total amount deserved by all denominations combined. In other words, to set a cash value on religion.
As far as churches are concerned, the best that might be done would be to transfer financial obligations for their basic support to the provinces, in the form of payments to municipalities in lieu of taxes lost through exemptions. The money would still, of course, come from the taxpayers, but this procedure would avoid inequalities in taxation caused by the unilateral decision of a given organization to locate in a given municipality.
Whether or not the provincial governments would accept this plan with any enthusiasm is another matter. They might argue, with justification, that the sheer volume of bookkeeping required to keep track of thousands of payments to muni-
cipalities in lieu of taxes from tens thousands of properties w'ould make the idea impractical. And I concede that, human nature being what it is, there might be a tendency for municipalities to over-value tax-exempt properties order to increase the provincial government grant. A hundred-thousand-dollar church property that pays no taxes might grow overnight into a two-hundred-thousand-dollar property if its value set the level of subsidy.
But to admit all such difficulties does not destroy the basic argument that the present situation is far from ideal. Grants in lieu of tax exemption would lead to a healthy reappraisal of the value of each organization to the community — not only by governments but by the body itself.
The exemption granted veterans’ clubs and memorial halls, for example, is splendid gesture of appreciation to those who fought for their country. But is their continuing subsidization by local taxpayers. a decade and a half after World War II, the best way of recognizing society’s debt? With a little ingenuity and effort the management of a veterans' hall can—and often does—pay its owm way without subsidy.
A good case can be made for the value of the private school in developing special talents and qualities of leadership and in buttressing unhappy family situations. But surely private schools should not depend for help on the very people required to support public schools. Not only do private schools largely duplicate the facilities offered by public schools, they usually draw their students from other areas than the municipality in which they are located.
An even stronger case can be made for supporting universities that produce the men and women on whom the progress of the nation largely depends. So strong, in fact, that their dependence on local bounty to any extent becomes absurd. The better the university, the wider the area from which students are drawn— and the wider the area to which they scatter on graduation.
The same argument applies to other tax - exempt units — hospitals, orphan homes, youth centres. Behind my point of view is no wish to make life more difficult for any of the various service undertakings. On the contrary, the abolition of property tax exemptions, where it could be worked out, would create two big improvements from their point of view. It would enable governments on all levels to meet obligations more intelligently; and the voluntary services themselves would stand in greater public favor if their sources of support were open and equitable.
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