With the City of Toronto introducing a budget with a property tax “freeze,” it’s worth remembering that when it comes to property taxes, a tax freeze really means a tax cut.
Property taxes are set as a specific dollar amount of revenue to be raised, which is then divided up among properties (by contrast to income or sales taxes, which are set as a percentage and rise automatically with wage increases and inflation). If the city doesn’t “raise” property taxes, then it gets exactly the same number of dollars as the year before from them — which means in effect a tax cut, since inflation has eroded the value of those dollars. I used to find this very confusing, so a couple of years ago I wrote a long post investigating how the property tax system worked and why, which explores this whole question in depth.
So, effectively, the City is proposing to cut property taxes by the rate of inflation (probably about 1.8%). The strange thing is, Rob Ford is certainly aware that property taxes need to be raised every year just to keep real municipal revenue steady — when George Smitherman promised a one-year property tax freeze during the election, Ford replied that it was a bad idea and that the City should raise property taxes by the rate of inflation to maintain its revenue. Why he suddenly proposed a tax freeze after becoming Mayor when he hadn’t even promised one in the campaign remains a mystery. Possibly once he was Mayor he became informed of the full size of the surplus left by the previous administration’s budgeting and decided to use it to budget more aggressively.