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

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To become a town a community must contain a population of 1,500.(8)

(1) A possible exception to this statement is the tax levied in municipalities
for support of the municipal commissioner, a provincial officer.

(2) Sessional Papers, no. 1, 4 Geo. V, 1914, p. 4 et seq.

(3) Rev. Stat., Manitoba, c. 116, s. 1.

(4) Ibid., c. 117, s. 1.

(5) Ibid., c. 116, s. 2(a).

(6) Ibid., s. 9.

(7) Ibid., s. 12.

(8) Ibid., s. 14.


As in the case of villages, the area is limited to 640 acres in case the popu-
lation is less than 2,000, and may be extended 160 acres for each additional
1,000 population. (1)

To create a city under the law as it now stands, the community must
contain at least 10,000 people. (2) At the present time one city in the prov-
ince, Portage la Prairie, contains only 7,000 persons.

The general law governing the systems of taxation in all of the various
classes of municipalities in the province, with the exception of the cities of
Saint Boniface and Winnipeg, is included in The Assessment Act. This
act prescribes that " all property shall be liable to municipal taxation,"
subject to certain important exceptions which are enumerated. (3) In addi-
tion to the usual exemptions made in the case of public property and the
property of educational institutions, hospitals, churches and cemeteries, the
law exempts " all grain, cereals, flour, live or dead stock, the produce of the
farm or field, in store or warehouse, and at any time owned or held by or in
possession of any person in any municipality, such person not being the
producer thereof, and being so held or possessed solely for the bona fide
purpose of being conveyed by water, or railway, for shipment or sale
at some other place; and all cord wood; all produce from lands occupied
as a farm or garden ; all horses, cattle, sheep, swine, poultry and other farm
stock; and all farming implements and machinery used by farmers in the
ordinary occupation of farming, and when kept upon the lands or farms
of bona fide agriculturists or farmers." (4) The above exemptions, taken
in conjunction with the clause which relieves from taxation " house-
hold effects and furniture, books and wearing apparel of any kind what-
ever, in use by the person assessed or his family " result, in the rural
municipalities, in the burden of taxation being shifted almost entirely
to real estate. But even real estate, although defined in general to " include
all buildings and other things erected or affixed to the land "(5), is given
special treatment when assessed for taxation in rural municipalities. Here
it is prescribed that all " lands improved for farming, stock raising or gar-
dening purposes shall be assessed at the same value as such lands would
be assessed if unimproved " and " the ordinary farm residences and build-
ings upon any piece of land shall be considered as improvements for
farming purposes within the meaning of this section." (6) In the case
of lands improved for other purposes than farming, stock raising or
gardening, improvements are added to the assessment; but even then the
council, in case the improvement is for the purpose of a local industry, may
order the assessment on the improvements to be reduced one-half.

It is seen that in consequence of these generous exemptions the taxes

(1) Rev. Stat, Manitoba, c. 116, s. 17.

(2) Ibid., s. 21.

(3) Ibid., c. 117, s. 5.

(4) In order to claim exemption of farm stock and implements it is necessary that
the individual be a bona fide resident of the municipality. Ibid.

(5) Ibid., s. 2.

(6) 1 George V, c. 32, s. 1 (28).


are raised in the rural municipalities from a base that is composed almost
entirely of land value.(l)

The rule of valuation prescribed for cities, towns and villages is that
" all real and personal property may be assessed at less than actual value
or in some uniform and equitable proportion of actual value so that the rate
of taxation shall fall equally upon the same." (2) In assessing stock-in-
trade the assessor is directed to list the average stock-in-trade kept on hand
during the twelve months preceding the time of assessment. (3) Poll taxes
and " statute labor " are provided for. (4)

The rural municipalities, then, are practically on a land tax basis.
Towns and villages tax improvements and stock in trade. This is true also
of those cities which operate under the general provincial statutes. (5)

Winnipeg, by amendment to her charter, assesses land and improve-
ments at two-thirds of their value. (6)

The second city in size in the province, Brandon, makes an even
greater concession to buildings than Winnipeg, although it operates under
The Municipal Act and The Assessment Act, which prescribe that both
land and buildings shall be assessed at full value. Without any express
legislative authority whatever the practice is to assess land at or near its
full value and buildings at approximately fifty per cent, of their value. (7)

The city of Saint Boniface, which is almost a part of Winnipeg,
operates under a special charter ; but merely by the direction of the council
and without distinct legislative authorization, the assessment commissioners
of the city undervalue buildings fifty per cent, while assessing land at its
full value. (8)

Portage la Prairie, the fourth city of the province, is supposed to be
controlled by the general provincial statutes but here also improvements

(1) "All buildings and machinery used in connection with a creamery or
cheese factory " whether located in a rural municipality or elsewhere " and the land
actually occupied by said buildings not to exceed one acre in area" are also relieved
from taxes. R. S., M., c. 117.

(2) 1 George V, c. 32, s. 1 (29).

(3) Ibid., s. 1 (35).

(4) Ibid., s. 113.

(5) The following table gives financial data for the cities of Manitoba in the
year 1913:

Assessed Value
of Real
Population, and Personal Tax Imposed. Debenture
Property. Debt.

Brandon 17,280 $13,873,904 $395,949 $2,864,639

Portage la Prairie 7,000 4,459,335 110,511 912,702

St. Boniface 11,469 18,253,480 374,014 2,695,079

Winnipeg 184,730 259,419,520 3,372,453 37,006,727

(6) For a full description of the situation in Winnipeg, cf. infra, p. 21.

(7) Acknowledgment of indebtedness is made to Mr. Harry Brown, city clerk,
for the information given above in regard to the city of Brandon.

(8) Information given in regard to Saint Boniface was furnished by J. B. Cote,
city clerk.


are undervalued, being assessed at approximately sixty per cent., while
land is assessed at its full value. ( 1 )

The question of securing direct legislative authorization for still further
reductions in the tax on improvements as compared with land, has been
the subject of live interest in Manitoba for some time. The reduction
secured for Winnipeg in 1909 was followed by an unsuccessful demand for
further reduction in 1911. In the platform adopted by the Liberal Party
at the time of the elections held in the summer of 1914, was included a
plank calling for " municipal autonomy in local taxation." The convention
resolution dealing with this matter reads as follows:

" Resolved : That this convention go on record as favoring legislation
which will give municipalities local option as to classification of properties
for taxation." (2)

This was generally accepted as a declaration in favor of exempting im-
provements. Although the Liberal Party suffered defeat by a narrow mar-
gin, several of their candidates were elected, one of the number being Mr.
F. J. Dixon, a prominent single-taxer who stood for election in one of the
districts in Winnipeg. What effect this may have upon the opposition of the
provincial authorities remains to be seen. (3)

(1) Acknowledgment of indebtedness for the information given in regard to
Portage la Prairie is due Mr. W. R. Grieve, secretary-treasurer.

(2) Winnipeg Free Press, June 20, 1914.

(3) On May 12, 1915, the resignation of the Conservative Ministry was announced.
The new Government is to be Liberal. New York Times, May 13, 1915.


(1) Winnipeg


In Winnipeg, the largest city in the Canadian West and the capital ofl
Manitoba, improvements are assessed at two-thirds of their value. Ther
population in 1914 vras 203,255, which is a substantial increase over 19197
an almost unique distinction in this region. The city is located in the
south-central portion of the province in the heart of a rich agricultural
section. Provided with ample railway facilities, ( 1 ) it is the center into
which is brought the great grain crop of the prairie provinces. (2)

In addition to the business centered in Winnipeg connected with the
marketing of grain, there are extensive manufacturing plants which are
attracted largely by the cheap power. (3) The city-owned plant, generating
current from water power, supplies it in large quantities at rates as low
as eight-tenths of a cent per kilowatt hour.

The city owns an unusually large number of business enterprises. In
addition to the electric plant mentioned above, it owns stone quarries, a
gravel pit, an asphalt plant and a sand bank. It also owns the water
works, including a high-pressure system for fire protection. (4)

The city finances are, of course, greatly affected by these facts, the
receipts of the revenue account for the year ending April 30, 1913,
amounting to the large sum of $4,462,965.47. If, from this sum, however,
the receipts from the water works and the electric system be deducted, the
total revenue of Winnipeg for the fiscal year was $3,454,330.87. Of this
amount "general taxes" are credited with $2,828,103.11, or 81.9 per cent.
There is a tax on the Winnipeg Electric Railway Company, consisting of
five per cent, of the gross earnings and twenty dollars for each car, which
yielded the city $111,448.74. $131,890.80 was received from licenses. (5)

(1) Winnipeg is served by the Canadian Pacific, the Great Northern (Midland),
the Grand Trunk Pacific and the Canadian Northern railroads.

(2) Winnipeg claims to be the largest grain center in the world. Its receipts in
1913 were wheat, 174,710,050 bushels, and oats, 78,540,150 bushels. Municipal Manual,
1913, pp. 122-124.

(3) In the "Blue Book" issued by the Winnipeg Industrial Bureau in 1913,
Z66 factories of various kinds are listed and twenty-six new factories had been located
in the city between the date of issue of the book and June, 1914. At the end of 1913,
it was claimed that approximately 18,000 hands were employed and that the invested
capital amounted to approximately $43,000,000. Mun. Man., 1914, p. 125.

(4) In addition the telephone system is owned by the province.

(5) A great variety of license charges are imposed, varying from a forty-cent
charge on automatic candy machines in theatres to $500 on circuses of above a certain
size. Some of the more interesting charges are : business colleges, with seating capacity
of fifteen persons or less, ten dollars, with fifty cents additional charge for every seat
above that number; restaurants, ten dollars, plus one dollar for each seat above ten;
dog kennels, fifteen dollars; and ice dealers, $200.


The city's bonded indebtedness at the end of 1913 is shown in the
following table :


General $7,734 707 27

General— Schools Repayable by School Board . . . ." .* , , 2,'500,'000 00

General — City's Share of Local Improvements 1162 018 60

Water Power 6!542,'000 00

Water Works 6,579,985 62

Local Improvements, Special Assessments 12]488'oi5 65

Q- u- T7 ^ • XT ^ '■ $37,006,727 14

Smkmg Fund in Hand 3,863,604 55

(a) December 31, 1913. Municipal Manual, 1914, p. 59.

It will be seen from the table, special assessments play a large role
in the financial system of Winnipeg, approximately one-third of the total
outstanding debt being based upon assessments levied to pay for local
improvements. Special assessments and special taxes of various types
are levied for a great variety of purposes, including, in the order of their
importance in 1914, pavements, sewers, sidewalks, street openings, orna-
mental street lights, boulevard maintenance, boulevards, sewer connections,
private approaches, plumbing, areas and coal chutes, tree planting and
ornamental gateways. The table also shows the measure of assistance
given to local improvement projects by the city from general funds to be
approximately nine per cent, of the total cost. In general, aid is given
very sparingly. For example, no repaving costs are paid from general
funds, the entire charge being met by the property owners. The abundance
of building materials near at hand makes the cost of local improvements
relatively low.


In Winnipeg, as has been seen,(l) dependence for the bulk of the
revenue is placed upon the business tax and the real estate tax.

The Business Tax

The business tax was introduced in Winnipeg in 1893. Previous to
this time personal property had been taxed. (2) The adoption of the busi-
ness tax seems to have found its origin in the desire on the part of the whole-
sale houses in the city to extend aid to the retail concerns during the period
of depression which then existed. (3) The personal property tax was swept
away and a rate was levied upon the rental value of the premises occupied
for business purposes. The rental values assumed for the purpose of this
tax were, however, very different from the actual rentals paid; for the
rentals paid for the business premises where much space was used at a low

(1) Supra, p. 21.

(2) 9 Ed. 7, c. 78, ss. 20, 21 and 29. Cf. Solomon Vineberg, op. cit., p. 49 et seq.
Obligation is acknowledged to Mr. J. F. Kennedy, Secretary of the Retail Mer-
chants' Association, for information furnished.

(3) This is the explanation given by Assessment Commissioner J. W. Harris. Cf.
also Proceedings of Eighth Annual Conference of the National Tax Association, 1914,
p. 442.


rent were weighted so as to throw a heavier burden upon such businesses as
compared with those businesses which were forced to pay high rentals for
small space. Minor changes were made from time to time in the discrimi-
nation between the various classes of business. At one time the range of
variation in the assessment of different classes of business was from three
to seven and one-half ; at another time the range was from three and one-
half to five.

The arrangement was originally adopted in 1893 as a temporary
measure, but it was continued from year to year until 1907, when modifica-
tions in the assessed rentals depending upon the space occupied were swept
away and a flat rate of eight and one-third per cent, was levied upon all
business rentals.(l) Because of the objections, however, of retail merchants
and hotel owners, this plan of taxing rentals without qualification was
abandoned in 1908, and the old system was re-introduced for that year. In
1908 a commission was appointed to investigate the situation, and its recom-
mendation was that the plan used in 1907 be re-introduced. " The members
of this Commission," reads the report, " unhesitatingly consider that the
proper basis for this assessment is that of rental value." The only exemp-
tion recommended was that of business colleges ; and the only case of dis-
crimination in treatment that of hotels. The proposal of this commission
was adopted, and since 1909 the city of Winnipeg has levied a business tax
based upon rental values at the rate of six and two-thirds per cent. Hotels
are assessed on the annual rental value of ground floors only.

It must be carefully borne in mind that the Winnipeg rate is applied
to rental values and not to actual rentals paid. In many cases the rental
value as determined by the assessor does not agree with the rental paid.
Perhaps the most frequent cause is that of long time leases under whose
terms a business man may be paying after a lapse of some years a rental
considerably less than the rentals which are being charged for similar
accommodations in his vicinity. The administrative officials in charge
of the tax system in Winnipeg feel that any other basis than estimated rental
values as a basis for the business tax would be an impossible arrange-
ment. (2)

In 1911 considerable dissatisfaction was expressed with the business
tax, but the opposition did not make itself effective. In 1914 the retail
merchants of the city decided to inaugurate a campaign to secure a change
in the system. They felt that, because they were compelled by the nature
of their business to occupy expensive quarters on the main streets, they
were discriminated against under a tax which was levied on the rental

(1) It seems to have been the practice to impose the general rate on the rental
values. In 1900, however, when the general rate was 23% mills, the business rate was
twenty mills. It was twenty mills the following year also when the general rate was
20H mills.

(2) According to Assessment Commissioner Harris the plan of levying the tax
upon actual rentals paid has been tried with very unsatisfactory results in some of
the smaller cities of Manitoba. . ^ '.


basis as compared with the wholesalers, who carried on an enormous busi-
ness in commodious quarters in the low rent districts. ( 1 )

A change in the business tax involves an amendment to the city charter
and an opportunity to secure such an amendment from the provincial legis-
lature did not present itself in 1914. The agitation for a change still con-
tinues, however. (2)

On the whole there is little criticism of the judgment of the assessors
in calculating the rental values of the land, although there are occasional
instances of extreme dissatisfaction. (3)

The revenue obtained from this source is very considerable. The busi-
ness assessment and the amount of the tax levied on this base for each year
from 1893 to 1914 are shown in the following statement :


Assessment. Tax Levied.

1893 $3,034,100 00 $59,468 36

1894 3,240,380 00 63,51144

1895 3,043,480 00 60,869 60

1896 3,061,770 00 61,235 40

1897 3,086,090 00 61,72180

1898 3,181,020 00 68,39193

1899 3,469,630 00 73,729 63

1900 3,761,460 00 76,201 40

1901 4,050,170 00 81,515 65

1902 4,676,950 00 108,739 09

1903 5,399,490 00 116.089 03

1904 7,108,080 00 120,837 36

1905 8,941,560 00 176,148 73

1906 (b) 10,887,175 00 194,880 43

1907 2,960,808 00 246.734 00

1908 13,316,220 00 199,743 30

1909 (b) 3,093,774 00 206,25160

1910 (b) 3,362,007 00 224.133 80

1911 (b) 4,037,475 00 269.165 00

1912 (b) 4.619.280 00 307.952 00

1913 (b) 5,882.958 00 392,197 20

1914 (b) 6,573,951 00 438,263 40

(a) Comptroller's Report, 1913. The 1914 figures are furnished by Assessment
Commissioner Harris.

(b) Not capitalized; subject to direct percentage rate.

(1) An example was given of a wholesale house occupjnng a seven-story building
with a frontage of fifty feet and a depth of one hundred and fifty feet, and doing
a business of approximately $1,500,000 a year, whose business tax under the present
arrangement amounted to $833.40; and a piano store that occupied quarters with thirty-

j/five feet frontage and seventy-five depth with basement, with an annual turn-over
• of less than $250,000, whose business tax was approximately the same — $800.

(2) Letter from J. F. Kennedy, Secretary, Manitoba Provincial Board, Retail
Merchants' Association of Canada, under date of January 19, 1915. Cf. The Com-
mercial (Winnipeg), October 3, 1914, p. 16 et seq.

(3) A letter from a retail merchant reads: "We have just received our notice
of assessment for the business tax for 1914 and the city proposed to charge us a
rental value of $10,800 per annum, which, while less than our actual and exhorbitant
rent, is considerably more than that charged the firm in a larger store across the
street from us ; and needless to say many times more than that charged big wholesale
warehouses doing from ten to twenty times the business. We do not propose to stand
for this state of affairs, and will be glad of your help and advice in the matter."


The Real Estate Tax

Before 1909 real estate in Winnipeg was assessed under the following
charter provision :( 1 )

The assessment of lands shall be so made that taxation shall fall
equally upon the same according to a pro rata value, and buildings
shall be assessed at actual value.

In 1908 a commission was appointed to consider changes in the tax
system and upon its recommendation the assessment of buildings was reduced
to two-thirds of full value. In the report of the commission was included
the following paragraph :

It is well known that there is a strong sentiment in favor of
lightening the load of taxation in respect of buildings. Some repre-
sentations were made to the Commission on different occasions in this
connection. While the Commission would not think of going so far
as to adopt the views of advocates of what is known as the single tax
system they nevertheless think that while land should be assessed at
the full proportion of its value, buildings should not be assessed at
that full rate, but a reduction in such cases should be made, and the
assessment of buildings based on a proportion of two-thirds per
cent. (2) of the value.

Very promptly the provisions of the charter prescribing the manner of
assessing real estate were changed to read as follows :

297. Land, as distinguished from the buildings thereon, shall
be assessed at its value at the time of the assessment.

2. With regard to land having buildings thereon the value of
the buildings shall be the amount by which the value of the land is
thereby increased.

3. In assessing land having buildings thereon, the value of the
land shall be set down in one column. In another column shall be
set down the sum which shall represent two-thirds of the value of
the buildings thereon. The value of the land and the said proportion
of the value of the buildings shall together form the assessment in
respect of the property. (3)

This reduction in the tax on buildings to 663^% in 1909 has been
variously construed. The single taxers have hailed it as a recognition of
the truth of their contentions. On the other hand the 1914 Report of the
Assessment Commissioner (4) contains the following statement:

It should perhaps be here mentioned that this relief as applied
in the taxation of buildings was not intended by the Commission as
a step towards the introduction of the " single tax " system of
assessment, but as a permanent means of compensating for deteriora-
tion by wear, loss by fire, vacancy, and other causes to which buildings
generally are liable during the course of the year.

Since 1909 there has been a continuous agitation of varying strength
in favor of a further reduction of the tax on buildings. In 1911 the city

(1) Charter, s. 297.

(2) Evidently 66% per cent, is intended.

(3) 9 Ed. 7, c. 78, s. 25.

(4) P. 3.


council petitioned the legislature for authority to take a referendum vote
on the question, but the petition was not granted. (1) In the provincial
elections of 1914 this question was raised as an issue with partially successful
results. (2)

The assessed values of real estate in Winnipeg for each year since 1893
are given in the table which follows :


Total Rateable Property Exempt
Year. Land. Buildings. Assessment. from Taxation.

1893 $11,946,450 00 $6,712,150 00 $18,658,600 00 $4,500,330 00

1894 11,730,250 00 7,030,700 00 18,760,950 00 4,424,330 00

1895 11,716,010 00 7,409,500 00 19,125,510 00 4,518,780 00

1896 1 1,689,560 00 7,809,100 00 19,498,660 00 4,696,880 00

1897 11,622,630 00 8,123,300 00 19,745,930 00 4,876,820 00

1898 11,571,230 00 8,099,450 00 19,670,680 00 4,882,920 00

1899 11,614,340 00 8,435,550 00 20,049,890 00 4,996,100 00

1900 11,971,720 00 9,344,280 00 21,316,000 00 5,657,650 00

1901 12,259,730 00 10,095,870 00 22,355,600 00 5,949,600 00

1902 12,662,550 00 11,276,310 00 23,938,860 00 6,558,060 00

1903 17,920,600 00 12,953,310 00 30.873,910 00 7,722,770 00

1904 25,186,160 00 15,920,710 00 41,106,870 00 9,489,030 00

1905 33,293,110 00 20,492,960 00 53,786,070 00 11,876,170 00

1906 42,253,060 00 26,546,960 00 (c) 69,624,550 00 15,128,030 00

1907 59,504,110 00 34,321,850 00 93,825,960 00 18,587,940 00

1908 62,745,070 00 40,040,100 00 102,785,170 00 21,737,990 00

1909 65,449,220 00 42,548,100 00 107,997,320 00 23,405,520 00

1910 108,674,070 00 (b) 48,934,150 00 157,608,220 00 28,261,920 00

1911 118,407,650 00 (b) 54,269,600 00 172,677,250 00 27,511,350 00

1912 151,795,740 00 (b)62,564,700 00 214,360,440 00 33,241,140 00

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 2 of 31)