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Vancouver
A truly fair business tax rate for Vancouver
If the City were run more like a business, as business insists it should, tax rates would be moved much higher
By Kevin Potvin
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In the world of business, there is famously no room for the word “fair.” Free market zealots remind us daily that only when businesses are allowed to freely buy and sell, and live or die by their own unfettered choices, will we have a truly efficient economy and the optimum distribution of resources. Competition is the hallmark of the business world and the game is all about selling for as much as possible and buying for as least as possible. If in any negotiations between two companies anyone raised the issue of fairness, they’d be laughed out of the boardroom. You want fair? Go back to the commune. Any executive who tried explaining to his board that the reason he paid some amount for a contract or a company was because it was the fair price, as opposed to the price he could have got away with, would be fired forthwith. Business strives to be efficient, strives to be as profitable as possible, and strives to secure its future. It does not strive to be fair and has never claimed to.
Which makes the Vancouver business lobby Fair Tax Coalition a strange beast. Why is a group of business spokespeople suddenly so enamoured with a concept—fairness—that at its very core is anathema to the very businesses they represent? The answer is, they’re liars. The Fair Tax Coalition has no interest in fairness. It is only interested in securing lower civic tax rates for its business members. But “Lower Tax Coalition” wouldn’t sell well in the mouths of their paid hacks sitting on Council, and if business knows one thing well, it’s how to sell that which no one would buy if it were called what it really is. It’s all in the name. “Fair” sells better than “lower.”
The Fair Tax Coalition is currently lobbying hard to have the City of Vancouver shift a significant portion of the civic tax burden from businesses to home owners. Their argument is that the current distribution of tax burden between the business sector and the home sector is “unfair.” Whereas in other Canadian cities the business sector pays a property tax rate three or four times more than the average home property rate, in Vancouver the ratio is more like five or six times the homeowner rate.
The observation is meaningless for a couple of reasons. For one thing, it says nothing about what the actual tax rate is on either business or home property, which is, of course, the only issue. The fact that the Fair Tax Coalition has been mum on how actual business property taxes compare to taxes in other cities speaks volumes. The second and more fundamental reason the observation is meaningless is because the ratio is said to be “unfair,” as though fairness is worthy of consideration in the matter of tax rates for businesses.
Business lobby groups generally have been vocal and unanimous the last few decades in insisting that governments should be run more like businesses, and should seek to optimize efficiency as vehemently as business does. The proper stance for civic government, then, when considering tax rates for business property is to eschew fairness in favour of maximization. The only debate in Council about business property tax rates should be about how much the City can charge before the number of businesses that leave the city because of tax rates reduces the overall haul.
All businesses operate on the assumption that prices are too high for some customers. Ford could sell way more cars if they cut their prices in half. But they calculate that a higher price, while it loses some customers, maximizes the profit by being not so high that they lose too many customers. There is an optimum point where the downward slope of the number of customers line meets the upward slope of the profit-per-customer line, and that intersection is where the price is always pegged.
The City of Vancouver, in determining the best tax rate for business properties, should ignore any statement about fairness, and should even ignore any alarmist statements about businesses leaving for other cities. The only way to know that we have a proper tax rate is if there is some number of businesses leaving every year. That’s a good thing; it means the tax rate is approaching the most efficient rate. The tax rate on business property should be raised until the number of businesses leaving becomes high enough to cause an actual drop in the total haul the City brings in from the entire business property sector. Then lower it a tenth of a percent.
In the world of business, that method of pricing anything is regarded as fair. No one is forced to pay business property taxes. They are all free to calculate the value they get from doing business here against the cost of taxes for doing so, and make their free choice to stay or leave.
Alternatively, if the Fair Tax Coalition was truly interested in promoting fairness, they’d start by advocating for higher minimum wages, higher welfare rates, guaranteed housing and adequate nutritious food for all, and they’d suggest higher business taxes to cover those costs. That would be an approach to a genuinely fair tax rate.
But they’re not really interested in fairness, are they.
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The Republic of East Vancouver masthead
The Republic of East Vancouver supports no party, advocates
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