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THE EXEMPTION OF IMPROVEMENTS

FROM TAXATION IN CANADA

AND THE UNITED STATES



A REPORT

PREPARED FOR

THE COMMITTEE
ON TAXATION

OF THE CITY OF NEW YORK



BY



ROBERT MURRAY HAIG, Ph.D.

Instructor in Economics
Columbia University



NEW YORK
1915



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,H3




3086-16-2000



y >•! •



COMMITTEE ON TAXATION OF THE CITY OF NEW YORK



APPOINTED APRIL 10, 1914
BY HONORABLE JOHN PURROY MITCHEL, MAYOR



Alfred E. Marling,

Chairman
- Edwin R. A. Seligman,

Chairman, Executive Committee
Frederick C. Howe,

Secretary
Robert S. Binkerd , j gr

^ George Cromwell* '^ ^yyv>^^jjtcL (^f^i^^^"^' - ^ -^

Frank Harvey Field ^ ^...^....^ o^M^^ ^-^^

Joseph N. Francolini . '

John J. Halleran -<2-<> cqU,UoL ^ .^oy,

Hamilton Holt
^ Jeremiah W. Jenks
Ardolph L. Kline
Frederick C. Leubuscher
Walter Lindner
Cyrus C. Miller
George V. Mullan
Louis Heaton Pink
Lawson Purdy
David Rumsey
Oscar R. Seitz
Frederic B. Shipley
Robert E. Simon
Franklin S. Tomlin
Charles T. White
Delos F. Wilcox
Collin H. Woodward



Laurence Arnold Tanzer,

Executive Secretary.



* Resigned January 12, 1915.



^dtfW^t^ tr



OUTLINE AND TABLE OF CONTENTS



PAGE

Introduction 7

Part One — The Facts —

I. The Exemption of Improvements in Canada 11

A. The Eastern Provinces , 13

1. Nova Scotia 13

2. New Brunswick 13

3. Ontario 14

B. Manitoba 17

1. Winnipeg 21

C. Saskatchewan 32

1. Regina 40

2. Saskatoon 55

D. Alberta 70

1. Edmonton 85

2. Calgary 108

3. The Towns 129

(a) Leduc 143

(b) Ponoka 148

4. Lloydminster 155

E. British Columbia 162

1. Vancouver 174

2. Victoria 223

II. The Exemption of Improvements in the Cities of the United States 241

A. Houston, Texas 241

B . Pueblo, Colorado 253

C. Pittsburgh and Scranton, Pennsylvania 255

D. Everett, Washington 258

Part Two — Generalizations and Conclusions —

I. Summary of the Special Land Taxes in Force in Canada and the United

States 261

II. The Effects of the Exemption of Improvements from Taxation 263

A. Municipal Revenues 265

B . Costs of Administration 266

C. Tax Rates 266

^D. Assessed Values and Tax Bases 267

E. Land Values 267

F. Building Operations 269

G. Rents 273

H. Congestion 273

I . Credit Conditions 273

J . Speculation 274

K. Non-Resident Ownership of Land 276

L. Home Ownership 276

M. Employment 277

N. General Prosperity 277

III. The Significance of the Experiments 277

List of Selected References 281

Index 283



Introduction

The following report represents results obtained from an investigation
of the plan of exempting improvements from taxation carried on under
the direction of the Committee on Taxation during the summer of 1914.
The field work of the investigation was begun June 19th and completed
September 17th. During this period the following cities and towns were
visited in the order named : in the province of Manitoba, Winnipeg ; in the
province of Saskatchewan, Regina, Moose Jaw, and Saskatoon; in the
province of Alberta, Edmonton, Leduc, Lloydminster, Ponoka, and Calgary ;
in the province of British Columbia, Vancouver and Victoria, and in the
United States, Houston, Texas. The material presented which deals with
the situation in other cities than those enumerated was gathered by cor-
respondence, by conferences with persons acquainted with conditions in those
cities or from printed sources.

The instructions under which the investigation was conducted were
given through a letter signed by Professor E. R. A. Seligman, chairman of the
executive committee, dated June 1, 1914, and through interviews with vari-
ous members of the committee.

The method followed was first to present to the mayor of the city
under investigation the credentials, signed by Mayor John Purroy Mitchel
and Chairman Alfred E. Marling. In every case the resources of the city
departments were thrown open without reserve. Inquiry was made among
the various officials as to the general economic position, the financial situa-
tion and history of the city and the present system of taxation and its
history. With these facts in hand, attention was turned to securing data
which might be used to judge the effects of the system in force. Such
statistics of value as were available were gathered and the opinions of the
officials and the citizens of the town were sought. Particular care was
taken to inquire as to the exact nature and composition of the statistics
gathered, in order that such comparisons between cities as are desirable
might intelligently be made.

The report is divided into two parts. Part One is an effort to state
concisely all the available facts which may aid in understanding the system
of taxation in force in the various cities or throw light upon its effects.
So far as possible the critical analysis of the data has been reserved for the
second part. Several members of the committee have emphasized their
desire to be furnished with the facts — the raw material — in order that they
may draw their own conclusions. It is hoped that the arrangement adopted
will enable this to be done. One necessary result of such a policy, however,
was the inclusion of some material which is of relatively slight value.

Even though all the cities were not visited by the writer, it was deemed
advisable, in order to make the report comprehensive, to present a brief



8

statement of the facts in regard to the law in force for each city on the
continent which, so far as is known, has made any change in its laws in the
direction of exempting improvements. Moreover, some information is
given as to the progress of the agitation for change in several places where
modifications have not been made, as in the eastern provinces of Canada.

Part Two is devoted to an analysis of the material presented in Part
One. An attempt is made to summarize the evidence, to make comparisons
and to draw deductions. The conclusions reached are, of course, not based
entirely upon the material presented in Part One, for it is impossible to
transcribe the entire complex of facts and conditions which influence an
investigator on the ground in forming his opinions.

Something should be said concerning the use of the term '' single tax "
in the report. What has been done in the cities of the United States and
Western Canada has nowhere resulted in all revenues being raised from
a tax on land values. Therefore it is inaccurate to describe the systems in
force by the term single tax. Nevertheless, the systems in several of the
IS closely approach the single tax and the term is very generally used
by the residents of all of these cities to describe them. Moreover, the term
has been used in this connection in print both by single taxers and by their
opponents. As it is very convenient, it has been decided to adopt it in the
discussion which follows.

The investigator is under deep obligation to many people for assistance
given in connection with this undertaking. City and provincial officials have
in all cases been most kind and generous in giving information and private
citizens in every city visited have been most accommodating and unselfish
in giving their time and attention to the needs of the committee. Specific
acknowledgment of obligation is usually given where the material furnished
is presented in the text, but the number of cases where acknowledgment is
due is so great that many have doubtless been overlooked. It is hoped that
a general expression of appreciation will be accepted by persons of whom

this is true.

Robert Murray Haig.

New York City, March 23, 1915.



PART ONE— THE FACTS



I. The Exemption of Improvements from Taxation in

Canada

General Considerations

The various forms of special land taxes which have been adopted in
Canada during the past forty years are the result partly of municipal and
partly of provincial legislation. The situs of the taxing power in the
Dominion is somewhat different from that in the United States and a word
of general explanation may not be amiss at the very beginning.

In the United States the municipalities secure their authority to levy
taxes from the states. In Canada, in a similar fashion, this authority
comes from the provinces. Here, however, the states also delegate to the
national government its powers of taxation. There, on the other hand,
the provinces do not do so. The Dominion does not depend upon the
provinces for its taxing power. In other words, the states in this country
are ultimate taxing authorities, while the provinces of Canada are not.
They merely exercise specific powers which have been granted to them.

The British North America Act of 1867 authorizes the Dominion
Parliament to legislate concerning " the regulation of trade and com-
merce " ( 1 ) through customs and excise duties or otherwise and concerning
" the raising of money by any mode or system of taxation." (2) These very
comprehensive powers are limited by specific grants to the provincial legis-
latures of exclusive authority in respect to " direct taxation within the
province in order to the raising of a revenue for provincial purposes " and
in respect to " shop, saloon, tavern, auctioneer, and other licenses, in order
to the raising of a revenue for provincial, local or municipal purposes." (3)
These sections go far toward insuring separation of the sources of national
and provincial revenues (4) and place the direct taxes under the control of
the provinces. The language of the North America Act has been so con-
strued as to permit the provinces to delegate to municipalities the power to
levy direct taxes. (5)

The delegation to the Dominion of the right to levy customs and excise
duties involved the surrender of privileges by the provinces. In return
for these and for other concessions, a system of subventions was evolved
which provided for the transfer annually of considerable sums from the
Dominion to the various provincial" treasuries. Without going into the

(1) Solomon Vineberg, Provincial and Local Taxation in Canada (New York,
1912), p. 17 et seq.

(2) British North America Act. art. 91,

(3) Ibid., art. 92.

(4) Subventions, of course, form a large part of the provincial income.

(5) Dow V. Black, L. R., 6 P. C, 272, in i Cartr., 95. Quoted by Vineberg, op. cit.,
p. 2L



12

details of this arrangement here, it may be said that these sums are so
substantial as to make the problem of provincial financing much more simple
than it otherwise would be. This in turn has operated to encourage the
separation of the sources of provincial and local revenues, which has pro-
ceeded to a point of great completeness. This fact is of large significance
in connection with the question in hand. The Canadian system is flexi-
bility itself compared with the tax system in the American states, and one
cause for the ease with which radical legislation is adopted is that the
action of one community does not directly affect other cities. Where a
tax base is used to supply only one municipality it may, of course, be changed
much more readily than when a number of municipalities depend upon it for
their revenues.

Another cause for the flexibility of the Canadian system lies in the
comparative freedom of legislation from court interference. Specific
guarantees of the rights of property in written constitutions, strictly inter-
preted by the courts, which are the stumbling blocks of so many radical
proposals in the United States, are noticeable for their absence in Canada.
" Taxpayers' suits " seem to be accorded a less hearty reception in the
courts. The eflFect is of considerable importance.

As a rule the larger cities of Canada operate under special charters
and the less important municipalities under general municipal acts passed
by the legislatures. Wide differences exist between the provinces in the
readiness with which the legislatures co-operate with the municipalities in
their attempts to secure changes in their tax systems. In Saskatchewan,
Alberta and British Columbia, the legislatures have opposed no obstacles in
the way of the consummation of the plans of the municipalities. Indeed,
in these provinces the legislatures have in some instances been the aggressive
forces in the movements toward the special taxation of land. In Manitoba
and Ontario, on the other hand, the land-tax advocates have found the
legislatures opposed to their plans. (1)



(1) Such opposition seems to be at least partly ineffective, however, for in both
provinces the municipalities disregard, in large measure, the existing statutes requiring
uniformity of assessment.



13



A. THE EASTERN PROVINCES

Although no definite action has been taken in the eastern provinces,
the proposal to reduce the tax on buildings has been seriously discussed. In
Nova Scotia, New Brunswick and Ontario the agitation has developed con-
siderable strength. In Prince Edward Island and Quebec, however, little
interest seems to have been aroused.

Nova Scotia

In Nova Scotia great dissatisfaction has been expressed with the present
tax system. A number of innovations have been proposed, among them the
municipal single tax.(l) The Union of the Nova Scotia Municipalities, at
its meeting in 1912, was asked to consider this proposal. (2) But "while
the tone of the convention was favorable, it was decided to urge upon the
Government the desirability of investigating thoroughly by commission the
municipal assessment and taxation system with a view to improving the
Nova Scotia systems." In 1912, moreover, there was introduced into the
legislature of Nova Scotia a bill having for its object the lower assessment
of buildings. Each year since that time a similar bill has been introduced,
but each time it has failed of passage. (3) Several times it has passed the
lower house, only to meet with defeat in the Legislative Council. The bill
as introduced in 1914 proposed to make possible the reduction of the assess-
ments on improvements and personalty, either through action of the local
councils or by vote of the electors at an election secured by petition. (4) In
case of council action a two-thirds vote was required. The election method
required a petition from the rate-payers representing twenty-five per cent, of
the total assessment and a favorable vote from fifty per cent, of the whole
number of persons entitled to vote on such questions. It was provided
further that the assessment could not be reduced more than twenty-five per
cent, in any one year.

New Brunswick

In the cities and towns of New Brunswick for a number of years
there has been great interest in the question of reducing the tax on build-
ings. On September 28, 1911, the council of the town of Newcastle peti-
tioned the provincial legislature for an act permitting municipalities to
reduce or abolish " taxes on polls, improvements, personal property and
income, or any one or more of these, and raise its revenues by means of a
land tax, with or without a poll tax and with or without a system of business

(1) Canadian Municipal Journal, IX, p. S3 (February, 1913).

(2) Ibid., VIII, p. 386 (October, 1912).

(3) Ibid., p. 381; IX, p. 16 (January, 1913).

(4) Through the kindness of Mr. R. M. MacGregor, who has been responsible for
the introduction of these measures in the legislature, a copy was secured of the bill
which was introduced in the session of 1914.



14

licenses."(l) In the summer of 1911 it was reported that a committee
appointed by Mayor Frink of St. John had recommended the adoption for
that city of the system in force in Vancouver and Edmonton. (2). The
Union of the New Brunswick Municipalities, at its convention in 1912,
placed itself on record as in favor of the land-tax plan. (3) The resolution,
which was passed by a large majority, was in substantially the same form
as the measure passed by the Newcastle council. (4) The action of the
Union of New Brunswick Municipalities was followed by applications from
the cities of St. John and Moncton and from the town of Campbellton for
authority to reduce the tax on buildings. No action has been taken by the
legislature, however.

The prospect for the immediate adoption of the plan in New Brunswick
is not bright. Land values are not increasing rapidly and taxes are already
considered fairly high. (5) It is thought that certainly nothing will be done
during the presence of the disturbed conditions caused by the war. (6)

Ontario

The reduction of the tax on improvements has assumed the importance
of a political issue in the Province of Ontario. As early as 1909 the move-
ment was under way. In 1910 the first bill was introduced into the legis-
lature. In the summer of 1911 the convention of the Union of Municipalities
of the province adopted a resolution asking that the municipalities be
empowered to " discriminate between different classes of property by placing
a lower tax rate on buildings, improvements, incomes, and business assess-
ments than on land values, or by assessing buildings and improvements at
a lower proportion of their value than land values; any change in rates of
assessments to be determined by the municipality." (7) Three hundred
and sixty-seven of the municipalities signed a petition asking the Provincial
Government to grant them the rights outlined in the above resolution. (8)
Measures embodying these ideas were again introduced into the legislature
in 1912 and 1914, but failed of passage.

The law as it stands in Ontario provides for the assessment of both
land" and buildings at full value. That this requirement is not observed
in practice was the contention made in an article which appeared in the
Toronto Globe. (9) In this article it was pointed out that many municipali-
ties were, without the sanction of law, actually assessing improvements at

(1) F. J. Dixon, Progress of Land Taxation in Canada.

(2) Single Tax Review, XI, p. 39 (July- August, 1911).

(3) Canadian Municipal Journal, VIII, p. 50 (February, 1912).

(4) Ibid., p. 385 (October, 1912).

(5) Letter from Prof. W. C. Kierstead, of the University of New Brunswick,
dated December 16, 1914.

(6) Letter from Mayor James H. Frink, of St John, under date of December 10,
1914.

(7) F. J. Dixon, op. cit.

(8) C. B. Fillebrown, Thirty Years of Henry George, p. 5 (Boston, n.d.) ; The
Square Deal (Toronto), XII, No. 134 (November, 1914).

(9) Quoted in Canadian Municipal Journal, IX, p. 50 (February, 1913).



15

a much lower rate than land. The following data were submitted in sup-
port of the statement :

PERCENTAGE OF REAL VALUE REPRESENTED BY THE ASSESSMENTS
IN SELECTED RURAL MUNICIPALITIES IN ONTARIO

Land. Improvements.

Artemesia 60 SSYs

Burbrook 75 25

Brownley 66^ 50

Cairstor ' 30 33j^

Draper 66j^ 50

Emily 80 66%

Garapaxa 66?^ 33^

Hervey 70 25

Hinchinbroke 33j4 12j4

Hungerford 100 30

Keppel 50 15

Longuenil 58 33^

Macaulay 62j4 45

Margillivray 80 35

Metcalfe 95 60

Raleigh 80 30

In Toronto the agitation has reached an acute stage. In 1912 Mr.
James C. Forman, the assessment commissioner of the city, was delegated
to visit the cities of western Canada for the purpose of inquiring into the
systems of taxation. Upon his return he prepared a report(l) and published
this as his conclusion :

In view of all the circumstances, and having regard to the rapid
growth of the city (Toronto), and the ever-increasing demands
. caused by the city's development, I am of the opinion that no change
should be made in the present system of assessment. However, were
it not for the needs of the city, and speaking personally, I would
favor a lower rate of assessment on the value of improvements. (2)

The city council, nevertheless, decided to refer the question to the elec-
torate. As put before the people in January, 1913, the question read : " Are
you in favor of applying for legislation to assess buildings, business tax,
and incomes on a lower basis than land ? " This proposal was carried in
January, 1913, by an overwhelming vote. (3) A committee waited upon the
Premier, Sir James Whitney, to urge him to stand sponsor for this measure,
but they received no encouragement. (4) The opposition of Sir James
Whitney and the Conservative Party apparently continued to be an obstacle
which prevented favorable action on the question by the provincial legis-
lature. In the elections held in the summer of 1914 the question was made
one of the issues by the Liberal Party. It was mainly because of the attitude
of the Conservative Party on this question that the Ottawa Citizen decided

(1) Report on Taxation of Improvements by Assessment Commissioner of
Toronto (1912, 11 pp.).

(2) Ibid., p. 10.

(3) 25,773 to 6,440. The Square Deal, loc. cit.; Fillebrown, op. cit., p. 5; Dixon;
op. cit.; Canadian Municipal Journal, IX, pp. 52-53 (February, 1913).

(4) Single Tax Review, XIII, No. 1, p. 73.



16

to withdraw its support from the Conservatives, and for the first time since
confederation to support Liberal candidates. ( 1 )

The tax issue, however, was only one of a number of issues of influence
in the election, which resulted in a victory for the Conservatives. Too much
weight, however, should not be given to the returns as an indication of the
status of public opinion in Ontario on this question, for the other issues
were of more importance. The chief figure among the opponents to the
plan to reduce the tax on buildings. Sir James Whitney, died in the fall of
1914, and the land-tax advocates expect his successor to assume a more
favorable attitude toward their plan.



(1) Quoted in The Leader (Regina), June 24, 1914.
The following extract is taken from an editorial of June 23rd:
" The Citizen has been aggressively advocating local option in municipal taxa-
tion for over five years. Sir James Whitney obstinately refuses to grant this funda-
mental measure of reform. The municipalities need it, and most of them want it.
The rate-payers of the city of Toronto last year voted 4 to 1 in favor of it. The
Ottawa City Council on three different occasions has voted for it Mr. Rowell
(Liberal) has definitely promised to grant it if he is returned to power. Hence The
Citizen, for the first time since confederation, will support the candidates who are
opposing the Provincial Conservative Party."



17



B. MANITOBA

The Province

The Province of Manitoba embraces within its boundaries most of the
great agricultural region lying directly north of the states of Minnesota and
North Dakota. It is the easternmost and the best developed of the three
prairie provinces, and its chief city, Winnipeg, is the center of the grain
business for the greater part of this immense area.

No provincial revenues are raised through land taxes. (1) The total
receipts of the province for the year ending November 30, 1913, were
$12,352,257.64, of which more than one-half is credited to the following
three items: balance from the year before ($3,552,083.87) ; " Open Ledger
Accounts" ($2,117,441.21); and "Trust Accounts" ($626,714.16). The
"ConsoHdated Revenue Fund" shows receipts of $5,788,069.98. Nearly
one-third of this sum ($1,688,244.98) was in the form of subventions from
the Dominion of Canada. The department of telegraphs and telephones
contributed approximately a second one-third ($1,814,407.45). The sale of
provincial lands yielded $323,769.41 ; fees for land titles, $328,137.05 ; cor-
poration tax, $143,413.12; railway tax, $205,358.11; and liquor licenses,
$162,466.25.(2)

The Municipalities

Municipal government is administered in Manitoba under four types of
organization : the city, the town, the village, and the rural municipality. At
the end of 1913 there were within the limits of the province four cities,
sixteen villages, twenty-nine towns and one hundred and three rural munici-
palities. Two of the four cities, Winnipeg and Saint Boniface, operate
under special charters. All the other municipalities carry on business under
" The Municipal Act "(3) and under " The Assessment Act." (4)

Under the terms of The Municipal Act, a rural municipality consists of
"a municipality other than an incorporated city, town or village." (5) In
order to secure incorporation as a village a locality must contain 500 per-
sons whose residences are " sufficiently close together to form a corpora-
tion " (6), which means that they must be included within the limits of a
tract of not more than 640 acres. (7) This is the limit of the area of a vil-
lage unless the population should exceed 2,000, in which case 160 additional
acres may be added for each additional 1,000 population.



Online LibraryRobert Murray HaigThe exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York → online text (page 1 of 31)