Copyright
Robert Murray Haig.

The 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

. (page 11 of 31)
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 11 of 31)
Font size
QR-code for this ebook


Hudson's Bay Company. It was not adopted because of its theoretical
attractiveness. The people in Edmonton in 1904 did not know whether
Henry George was a horse or a dog. There is no serious thought
of taxing buildings. The plan stimulates building but thus far has
not interfered with speculation.

An alderman :

The system was adopted in order to reach the non-resident specu-
lator. The city has gone too far in the direction of the single tax.
However, it is a satisfaction to be able to get at the speculators, many
of whom have made enormous fortunes in Edmonton real estate.
Nevertheless the system has not been very effective in discouraging
speculation. It has probably stimulated building. The tax experi-
ments, together with municipal ownership, have had the effect of hurting
the credit of the city.

A city official:

There is no doubt about the attractiveness of the scheme when
land values are expanding very rapidly. There is considerable doubt
about its value under other conditions. Embarrassment may be expe-
rienced in Edmonton very shortly. Last year the tax rate jumped from
twelve to sixteen mills. Expenditures must be increased still further.
There is no increase in land values this year. Unless conditions change
so as to cause a rise in land values, the tax rate is likely to become



104

unbearably high. One thing is sure, land values will not increase
materially in the near future from new additions to the city. It looks
as if the city would be forced to seek some new sources of revenue.

A city official :

Nothing definite can be said about the success or failure of the
tax system in Edmonton. It is still in the experimental stage.

A city official :

The plan in force makes the assessment work very much more
simple and cheap than it otherwise would be and is therefore attrac-
tive from the administrative point of view. The single tax has never
been really tested in Edmonton and it is impossible to say whether it
has been a success or not. It will probably be impossible to give an
answer until another ten years have passed.

A city official :

The plan in force has a powerful appeal because of its simplicity.
It furnishes a system which is easily understood.

A city official :

To say that the single tax does all that is claimed for it is to talk
nonsense. There is no apparent effect upon building or speculation.
" Having lived in both Winnipeg and in Edmonton I notice absolutely
no difference." The system is attractive because it is so simple, not
being complicated by expensive and annoying features like the business
tax. Few people here are really single taxers at heart.

A provincial official:

Enormous land grants to the railroads and the Hudson's Bay
Company furnish the historical background of the sentiment which is
to be found in Edmonton to-day in favor of land value taxation. These
large grants made men wild. The Edmonton charter, adopted in 1904,
which exempted improvements from taxation came to be " looked upon
as an ark of the covenant." No candidate for office would think of
making a speech without prefacing his remarks by saying that he
" believed, of course, in municipal ownership and the Edmonton charter,
including the single tax." The citizens take pride in the fact that theirs
were the first city to have the single tax and back the movement because
it does not hurt them and because it is good real estate advertising.

A leading lawyer :

The system was adopted in 1904 after extended consideration.
The matter was discussed in public meetings some time before it was
adopted. The people could see things in the making. The growth
of the town had increased land values. At least half of the town site
was owned by non-residents who were benefiting because of this
community-created value. It was unjust that the man who let his land
lie idle should pay less taxes than the man who built a building. The
system was devised to reach those predatory persons who grab land
and give nothing to the community in return. No one in the group
which drew the 1904 charter was a disciple of Henry George. None
was in favor of land confiscation. The plan appealed to them as a
sensible way of collecting taxes without involving any inquisition into
the private affairs of the individual. It is very easy ir^ this western
country to see the beneficial effects of private ownership of land. The
civilizing, uplifting effect upon the Slavs and other immigrants is
nothing short of remarkable. Private ownership should not be des-



105

troyed. " At this point I part company with the single taxers." Land
values should not be confiscated. The present real estate situation
in Edmonton is not reassuring. There will be a large number of sub-
divided lots which will revert to agricultural uses and this will react
unfavorably upon the values of other lands. The city has become
involved in unwise and unnecessary expenditures. " Our water and
sewer system, for instance, is constructed on a scale far beyond our
needs." It is quite possible that Edmonton will soon be forced to seek
some new sources of revenue in addition to the tax on land values
if the present real estate depreciation continues, as it seems likely to
do. A return will probably not be made to the tax on buildings. Some
form of business tax will probably be resorted to. The system does
encourage building but the plan has been in force such a short period
of time that any attempt to generalize broadly is unjustifiable.
A banker :

In new and growing towns the single tax goes very well. It seems
to stimulate building but has no efifect upon speculation. The sources
of loanable funds have not been adversely affected by the system.

A conservative banker :

The system is not worthy of high regard. It. seems unjust to
exempt revenue-producing properties which are the direct occasion
of public expenditure. There is a dark future ahead for real estate
values in the city under the single-tax system. Very large taxes are
to be expected.

A very wealthy real estate operator:

The feeling against the Hudson's Bay Company and non-resident
owners of real estate had more than anything else to do with the
establishment of the single tax. The large tracts owned by the Hud-
son's Bay Company and the 150 acre penitentiary site have complicated
the problem of the city by making the extension of public utilities
more expensive than they otherwise would have been. In slow times
the heavy taxes on vacant land hurt but in boom times the people forget
all about taxes. On the whole the system is good. There is no doubt
but that it stimulates building. An example of this is furnished in
a recent transaction by my own firm. Because of the heavy taxes
on a vacant piece of land we felt it necessary to place a building upon
it in order to obtain some revenue. Edmonton has not been so hard
hit as other cities by the present depression. There is more building
going on here than in other places. Most of the distress is being
experienced by people who are loaded up with vacant property which
is not good security for loans. Many people bought up the land at
high prices expecting to pay but one installment and to sell at an advance
before further payments became due. With the bottom out of the
real estate market such people are finding difficulty in paying interest,
the second installment and the taxes on their property. The Hudson's
Bay Company is experiencing difficulty in its attempt to collect the
second installments on the land sold in their great sale a few years
ago. Many persons would gladly sacrifice their first payment if the
company would take the lands off their hands ; but this the company
refuses to do. Some of the property in town has a value which is
greatly inflated. Many of the subdivisions will doubtless decrease
enormously in nominal value in the near future. My firm has owned
large areas of land but we are selling it off. We prefer to put our
money into mortgages at eight per cent.



106

A mechanic :

There have been no noticeable effects which can be attributed
to the single tax in Strathcona.

The proprietor of a large printing establishment :

Edmonton is not a good town from which to judge the effects of
the single tax. The effects which might be expected are not apparent at
all. Land values have increased enormously in spite of the tax system
and rents have not been kept down, although they seem now to be
declining somewhat. The reason that the tax system has had so little
effect is that the town has been increasing so rapidly in prosperity that
the effects of the tax system have been swallowed up. In boom times
the taxes are not taken into consideration. Undoubtedly the system has
operated to stimulate building.

A university professor :

The only real arguments for the system are that it encourages
building, discourages speculation, and it makes it necessary for the man
who owns property to improve it. There can be no doubt but that
it has stimulated building in Edmonton. " As an owner of vacant
property I have felt some of the pressure in this direction." It has
had no noticeable effect upon speculation thus far. That effect depends
upon the rate of increase in land values. Thus far this rate has been
great enough to more than counterbalance the tax. It is difficult to
judge what will be the ultimate effects and worth of the system. There
is considerable distress evident at the present time, a number of people
being able to carry their land only with great difficulty. A proposal
to reduce the tax on buildings ten per cent, annually is somewhat radical.
Some allowance must be made for years of depression. " We can
stand violent wrenches out here."

A barrister; a former city official.

No doubt the desire to reach the Hudson's Bay Company was very
influential in determining the action of the framers of the charter in
1904. They were not believers in the confiscation of land values but
they felt that a man who carried his land idle, at little cost to himself,
should be prevented from doing so. It was thought that the system
would prove beneficial and results have justified the expectation. It
is a very desirable system for a new city. Here it has not operated
to prevent speculation entirely. The taxation question is essentially
a local problem and New York would be a particularly bad place to
try the Edmonton plan. In an old city which has been acquiring
revenue from its bundmgs it would be indeed a violent wrench from
the old order of things to shift the system. There is a day coming
when it will be necessary for Edmonton to depart from the present plan.
The necessity for revenue will compel the adoption of other methods.

A minister :

The system slipped into force in 1904 without a hitch. Everyone
likes it and feels that it is the fairest plan. A man should certainly
not be penalized for putting up a good building. The plan does stimu-
late building. There has been no perceptible effect upon rent or upon
speculation. When it comes to speculation in land " the people are like
sheep."

A newspaper editor:

The single tax in Edmonton is an accident. In 1904 practically
all the improved real estate belonged to the people in the town and prac-



107

tically all the unimproved to non-residents. The citizens, meeting
together to decide what to tax, decided to tax the other fellow. They
had no idea that they were creating a single-tax city. None of them
was a single taxer theoretically. Some one came along later and told
them that they were single taxers and they believe that they are. Most
of them are badly mixed in their philosophy. None of them is
conscious of anything peculiar in the tax system. The system stimu-
lates building and compels the owners of valuable lots to improve
their property to some extent at least in order to cover carrying charges.
An example of this effect is furnished by one of the banks, which has
purchased a valuable piece of property and is forced by the high tax
to erect a " tax payer." The competition of such buildings means
lower rents. Of course the stimulus does not distinguish between
buildings. It stimulates all kinds, both desirable and undesirable.
The effect of the single tax has undoubtedly been to reduce land values,
or rather to retard their growth and prevent them from becoming
so great as they otherwise would have been. Few people realize this,
however. Edmonton will never go back to taxing buildings. It is
a political impossibility. The average man owns a house and lot of
about equal value. The total value of land in the city greatly exceeds
the value of the buildings. When you approach the average man
with a proposal to tax his house in addition to taxing his land you
are asking him to increase his share of the tax burden. Few voters
will favor altering the system to their own economic injury when the
injury is so plainly apparent. " If I have a house worth $2,000
and a lot worth $2,000 and I now pay a tax on my land
alone, you cannot persuade me to tax my building also, unless
the rate be cut in half, as it cannot be here in Edmonton.
The average man's thought on taxation does not get beyond
this elementary reaction against higher taxes." There is a theoretical
possibility that some disturbance would result in New York from an
annual ten per cent, reduction but probably such a disturbance would
not actually materialize. " The dose would not be so bad as it looks.
Don't be afraid."

A newspaper man :

The land tax has been an utter failure in the small towns. There
are some things to indicate that it has not been entirely successful in
the larger places. One thing is certain : Edmonton is having more and
more difficulty in getting money. "If we had gone along the old-
fashioned way our credit would be better. I do not see how the experi-
mental legislation in this section can have any other than a disquieting
effect upon the minds of those upon whom we depend for our muni-
cipal funds. The increasing difficulty in securing funds is partly due
to such legislation, in which the tax legislation plays such a prominent
part." " I do not know whether the tax has had any effect upon
building but I think it has not had any effect. The great majority
of the people are not in favor of the confiscation of land values and
very few have grasped the single tax philosophy in its completeness."



108



2. Calgary

THE CITY



Calgary lies in the foot-hills of the Rocky Mountains about 130 miles
north of the international boundary. The city extends over a small plain be-
tween the Bow and the Elbow Rivers and over the surrounding heights,
from which a beautiful view of the distant mountains is obtained. Incorpo-
rated as a town in 1884 it had grown to sufficient size to secure a charter as a
city in 1894. Estimates of its present population vary from 75,(X)0 to 90,000.

Calgary has vast stores of coal close at hand. Anthracite mines are
within seventy miles of the city and soft coal within forty miles. Natural
gas is available in large quantities. ( 1 ) The mountain streams on which
Calgary is situated have a sufficient fall to furnish water power, which is
being supplied at present at the price of one cent per kilowatt hour with ten
per cent, discount for prompt payment. In one case the power is being sup-
plied at three-fourths of a cent per kilowatt hour.

Calgary's location, moreover, in reference to the surrounding country,
makes it a natural center for the marketing of products and for the whole-
sale trade. The city is served by three transcontinental railways. The
Canadian Pacific reached Calgary in 1883 ; and in 1913 the Canadian North-
ern Railway and the Grand Trunk Pacific extended their lines to the city.

The headquarters for the Canadian Pacific Railway irrigation project
are located in Calgary. This is claimed to be the second largest irrigation
project in the world.

The region to the west is particularly well adapted for ranching and
the city has developed into a center of considerable importance for the
marketing of cattle and hogs. (2)

Because of the advantages which Calgary has been able to offer, of
which cheap power is perhaps of greatest importance, and because of the
encouragement which has been offered by grants and concessions, a number

(1) At present the city is supplied with gas by a private company, which brings
it a distance of 182 miles. The charge varies according to the amount used and the
purpose for which it is used, from fifteen cents to thirty cents per one thousand cubic
feet. Under the conditions of consumption in 1913 the company received approxi-
mately 21.2 cents per one thousand cubic feet.

Gas in small amounts has been discovered within the city limits. Moreover,
since drilling for oil has begun, large quantities of gas have been found forty miles
away. In the summer of 1914 two companies were seeking a franchise from the city
to furnish gas at the rate of ten cents per one thousand cubic feet. The franchise of
the present company does not expire, however, for several years.

(2) The removal of the United States tariff is said to have stimulated Calgary's
trade in live stock. During 1913, 6,414 cars of live stock were received, the receipts
consisting of 6,366 horses, 70,416 cattle, 78,318 sheep and 128,591 hogs. This entire
business has developed in the last eight years, being practically negligible in 1905.
Steps have been taken by the city to encourage the development of this industry by
the purchase of a union stock yard with public money. A by-law has been passed
authorizing a loan of $350,000 for the purchase of a site for stock yards, in con-
nection with which it is proposed to erect a municipal abattoir. Municipal Manual,
City of Calgary, 1914, p. 7 ; By-law 1579, Sept. 30, 1913.



109

of manufacturing establishments of various sorts have located there. Among
the concessions granted have been cash bonuses, exemptions from taxation,
low rates for water, power and light and free sites. At present the
city claims more than 100 factories. ( 1 ) Most of these concerns are en-
gaged in the elementary manufacturing processes : flouring mills, lumber
mills, tanneries, sash and door factories, concerns for making brick and clay
products, packing plants and creameries are among the most prominent.

From very early in its history Calgary has pursued the policy of mak-
ing special concessions to industries locating in the city. As early as 1892
a grant from the public treasury of $800 was made to a tannery for the
purpose of purchasing a site; and a grant of $5,000 to a flour mill. (2)
In 1898 the city gave a $25,000 bonus to the Canadian Pacific Railway for
establishing their shops in Calgary. Liberal amounts have been allowed
from the public treasury for publicity campaigns. For several years before
1914 the city spent approximately $12,000 a year for advertising. In 1914
this policy was discontinued because of an adverse vote of the rate payers.

In addition to the city's activity, the Board of Trade, through its indus-
trial commissioner, makes it a practice to do everything in its power to
secure new industries. This organization receives about $2,000 from the
city each two years, and it has spent as much as $8,000 in advertising in a
single year. Moreover, large sums are spent in securing conventions for the
city.

One of the most interesting methods adopted to aid in securing new
industries is the city's purchase of industrial sites. Some four years ago
the city acquired a tract of approximately 160 acres, which was served by
railroad trackage ; and this land has been held for sale only to manufacturers
who propose to locate in Calgary. The land is given to such persons at
cost, which is $1,200 per acre. Similar land is worth at present from $4,000
to $5,000 an acre. Moreover, the manufacturer is given easy terms of
payment. Recently a law has been passed by the legislature of Alberta
forbidding bonuses to industries; (3) but Calgary was able to secure con-
cessions which practically exempt it from this law. In the first place cer-
tain tracts now included within the city limits were brought within the
corporation lines in 1907 with the understanding that such manufacturing
plants as might locate there would be exempt from taxation until 1923 on
their buildings, improvements, machinery and stock ; and that until 1918 the
assessed value of their land should be limited to the sum of $3,000 per acre
and for an additional five years to $5,000 per acre. (4) Moreover, it was
p)rovided that upon vote of two-thirds of the rate payers similar conces-
sions might be made to manufacturers locating upon any land within the
city limits. (5) The city is also permitted to dispose of its industrial sites

(1) Book Edition, The Morning Albertan, 1914.

(2) Manual, 1914, p. 25.

(3) Alberta statutes, 1913, c. 41, s. 22.

(4) Ordinances and Statutes Comprising the Charter of the City of Calgary, con-
solidated, to the 31st day of December, 1912, p. 21, s. 25, sub. c.

(5) Ibid.



110

at cost, to supply coal, light, power and water at cost, to subscribe to
stock with the consent of the rate payers and to spend as much as $20,000
a year on advertising. Until recently the sentiment in Calgary has favored
exemptions to manufacturers. During the last few months considerable
sentiment has developed in oppostion to such proposals.

No new industries have been established recently. Business condi-
tions are dull.

Under the provisions of a by-law passed in September, 1913, (1)
authorization was made of a loan of $250,000 for the construction of an
industrial building. This building was planned as a public " incubator "
for infant industries. It was proposed that space in the building be rented
at cost to manufacturers who were seeking to locate in the city. The advent
of dull times has had the effect of postponing the construction of this
building.

In October, 1913, petroleum was discovered near Calgary. The dis-
covery of one well started a wild speculation and a large proportion of the
citizens of Calgary have been devoting their attention during the past twelve
months to the promotion of companies to drill for oil. Great sums of
money are being invested. Trading in oil shares had developed to such
an extent in the summer of 1914 that seven stock exchanges were found
necessary to handle the business. What effect this speculation will have
upon the economic situation can only be conjectured at the present time.
Calgary, like the rest of the Canadian West is in the midst of a general
business depression. There is very little activity in real estate. Moreover,
there is little prospect of an immediate revival. What the immediate
future will bring forth will depend largely upon the outcome of the oil pro-
jects. Unless these wells should prove to be very productive all agree that
general economic conditions in Calgary may be expected to become acute.

In Calgary, as in the other cities discussed in this report, the importance
of the city finances has increased remarkably during recent years. The
total revenue and expenditure for the last seven years are shown in the
following statement:

REVENUE AND EXPENDITURE (a)







Total Revenue.


Total Expenditure.


1907

1908

1909

1910

1911

1912

1913




$353,180 23
480,577 89
699,713 94
1,071,457 19
1,555,852 88
2,813,368 16
4,567,165 96


$232,762 79
304,098 34
408,907 24
579,829 92
930,518 46
1,767,116 53
4,284,874 48


(a) Municipal Manual,


1914, p. 238.






(1) By-Law 1579.





Ill

The figures in this statement include the receipts and expenditures of
the public utilities owned by the city, which consist of the water works, the
street railway and the electric light and power company. The financial
reports for 1913 show a favorable balance for both the street railway and
the electric light and power departments. The water works department
showed a deficit of $7,775.98.

The great bulk of the non-commercial revenue of Calgary is raised
from the tax on property. The following table shows the income from the
tax on property, interest on taxes overdue, and from the taxes on polls:

RECEIPTS FROM TAXATION

Property Taxes. Interest on Taxes. Poll Taxes.



n 16


1,862 90


348 88


2,751 00


1,199 51


6,089 60


2,614 83


7,581 20


2,221 29


8,840 20


2,206 11


15,416 40


6,245 94


11,375 40



1905 $108,866 55 $409 41 $1,944 00

1906

1907 212,764 72

1908 296,086 72

1909 387,766 15

1910 408,874 11

1911 691,711 30

1912 1,303,304 01

1913 2,285,169 71



The following somewhat abridged transcript of the revenue account of
the city for 1913 may aid in making clear the financial situation of the city.



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 11 of 31)