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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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Vancouver, but it was found desirable in 1906 to raise the penalty to eight
per cent., at which figure it has since been maintained.

The legal limit of the tax rate in Victoria is fifteen mills for general
purposes, one mill for board of health and hospital purposes, and seven
mills for school purposes, plus " what is required * * * for payment
of interest and sinking fund on any debt of the municipality."(l)

When taxes are two years in arrears, a tax sale is held. Until recently
taxes have been paid up very completely and a very small amount of land
has been sold for taxes. The following table shows the tax arrears for each
year from 1908 to 1913 :







TAX A]


:iREARS






-


Unpaid
Taxes.


Unpaid

Special

Assessments

and Frontage

Taxes.




Unpaid
Taxes.


Unpaid

Special

Assessments

and Frontage

Taxes.


1908


$59,241 63
65,892 99
87,243 17




1911

1912

1913


$97,797 89
142,097 60
261,368 72


$8,046 28


1909






1910


$36,214 89


20,202 78



As will be noticed, the increase in unpaid taxes during the last two
years has been considerable and Victoria faces the necessity of selling con-
siderable quantities of land for taxes. The entire exemption of buildings
in 1911 caused little immediate distress among property owners. But
with the collapse of the boom increasing difficulty is experienced in paying
taxes.



(1) Municipal Act, 1914, c. 52, ss. 201-202.



232

The evidence of the complaints against assessments before the court of
revision seems to indicate no considerable degree of distress. In 1914 there
were but fifty appeals to the court, an increase of five over 1913. Very few
of these appeals were granted.

The average small property holder in Victoria owns a lot which is
worth from $1,200 to $1,500. At the present rate the tax on a lot worth
$1,200 amounts to $26.82 and on a lot worth $1,500 it amounts to $33.52.
In addition to this the property owner, as we have seen, is subject to charges
for local improvements, which at the lowest amount to $30.50 per year.



It appears from the preceding survey that after a very disturbed period
before 1896 during which the assessment of improvements was either in-
creased or decreased almost every year, Victoria settled upon a fifty per
cent, assessment and continued it for fifteen years. In 1911 the tax on
improvements was entirely removed. The change was made at a time of
such great real estate prosperity that no reduction in the tax base resulted.
Moreover, instead of an increase in tax rate a substantial decrease was
found possible. The change in 1911 occasioned little distress, but with the
collapse of real estate activity there has been an ominous increase in the
item of unpaid taxes.

DATA FOR GAUGING THE EFFECTS OF THE SYSTEM

Building Operations
Before 1908 it was the practice in Victoria to require permits for no
buildings except those which were constructed within very narrow fire
limits. The statistics for the years preceding 1908 are therefore valueless
for comparison with the statistics of the succeeding years. The following
table shows the number and value of building permits by months and by
years for the period extending from 1908 to 1914 :

BUILDING STATISTICS.





1908.


1909.


1910.


]


911.




J






»




A








■dumber.


Value.


Number


Value.


Number


•. Value.


*Jumber


Value.


January .


36


$54,725


39


$78,080


35


$128,985


59


$151,455


February


45


72,325


48


122,680


88


151,760


95


182.940


March . . .


60


110,800


58


121,640


64


244,760


121


279,945


April —


53


129,625


66


188,060


79


192,440


86


280,110


May


40


79.295


64


188,620


57


257,290


90


287,335


June


45


74,010


46


90,120


67


302,600


93


250,800


July


53


106,070


45


372,120


60


222,290


109


335,375


August . .


59


132,770


43


141,040


66


212,814


127


429,960


September


38


53,630


47


140,935


67


199,686


112


406,295


October .


54


99,755


37


104,840


56


124,375


117


563,125


November


47


104.710


44


53,585


61


104,295


87


616,625


December.


40
570 $


113,025


36


71,700


46

b) 746 5


131,750


105
1,201 3


242,350


Total.


l,314.240(a) 573 $1.773,420(


>2.373,045(b)


54,126.315 (b)



(a) Includes $83,500 spent on government buildings erected without permits and
$100,000 estimated general repairs.

(b) Includes $100,000 estimated general repairs.



233



BUILDING STATISTICS— Continued.



1912.



1913.



1914.



Number.


Value.


c

Number.


^

Value.


Number.


Value.


103


$319,885


125


$415,980


45


$323,950


156


1,671,070


131


358,950


74


128,465


171


861,770


128


631,075


82


205,980


151


514,850


154


666,315


80


661,020


183


662,165


110


319,460


49


252,775


152


617,860


98


365,985


46


229,740


149


702,840


67


166,575


36


92,560


152


430,815


78


158,815


29


102,520


143


377,540


81


228,805


25


18,140


131


387,215


75


159,060


21


98,875


149


788,505


62


194,390


19


19,135


124


742,855


58


104,145


19


10,500



January

February

March

April

May

June

July

August

September

October

November

December ....

Total 1,764 $8,077,370



1,167 $4,037,092 (a) 525 $2,243,660 (b)



(a) Includes $268,437 of "extras."

(b) Includes $100,000 of " extras."

In the statistics presented in the above table, removals, that is, the value
of the work done in moving buildings from one site to another, are not
included. Permits which are taken out and afterwards cancelled are not
eliminated. The importance of this item is insignificant, however.

The table which follows shows the various kinds of buildings con-
structed in Victoria during 1912 and 1913 :

DETAILED STATEMENT OF THE TYPE OF BUILDINGS CONSTRUCTED

1912-1913



1912.



1913.





^ r




^


Number.


Value.


Number.


Value.


720


$1,236,065 00


409


$788,375 00


431


1,128,985 00


144


458,550 00


161


813,115 00


78


407,150 00


28


34,960 00






60


38,600 00






140


79,205 00


i24


60,576 kh


45


61,045 00


32


16,010 00


17


89,150 00


10


66,700 00


13


221,890 00


2


49,000 00


15


450,700 00


11


219,950 00


3


65,500 00


1


25,000 00






1


60,000 00


15


103,240 00


• • • •




8


33,425 00


• • • •




25


20,430 00






12


51,400 00






29


46.200 00


40


63,425 00


1


10,000 00


....








1


45,666 66


4


436,500 00


• • • >




2


531,000 00


1


175,666 66


1


42,500 00






1


1,000.000 00






1


175,000 00


«...




1


250,000 00







Dwellings, 1 story

Dwellings, 1 J^ stories

Dwellings, 2 stories

Dwellings, Alterations

Dwellings, Additions

Garages

Stables

Brick Buildings, 1 story

Brick Buildings, 2 stories

Brick Buildings, 3 stories

Brick Buildings, 4 stories

Brick Buildings, 5 stories

Brick Buildings, Alterations

Brick Buildings, Additions

Alterations, Wood

Additions, Wood

Small Stores and Offices

Reinforced Concrete Buildings, 2 stories.
Reinforced Concrete Buildings, 5 stories.
Reinforced Concrete Buildings, 6 stories.
Reinforced Concrete Buildings, 8 stories.
Reinforced Concrete Buildings, Additions

Stone Buildings

Steel Frame Buildings, 6 stories

Steel Frame Buildings, 10 stories



234



1912.



1913.



Number. Value. Number. Value.



Greenhouses

Warehouses

Apartments, Wood

Apartments, Brick

Churches

Schools

Factories

Sheds

Machine Shops

Dry Kilns

Alterations and Additions

Opera House

Sand and Gravel Bunkers

Cold Storage

Observatory

Dominion Theatre

Balmoral Hotel

Victoria Theatre

Cookson Building

British Columbia Permanent Loan Bldg.

Post Office Alterations

Addition to St. James Hotel

Addition to Lee Dye Building

Addition to F. Foster Building

Addition' to Leming Bros. Building

Addition to Hibben & Bone Building. . .

Addition to Scott Building

Court House Alterations

Canadian Puget Sound Lumber Co

Hindoo Temple

Y. M. C. A. Alterations

Provincial Government Buildings

Total



12

16

16

7

9



22



15,550 00

64,200 00

127,700 00

168,200 00

190,300 00

530,950 00

47,880 00

13,480 00



18,000 00


2,500 00


8,900 00


2,300 00


3,500 00


11,300 00


33,185 00


25.000 00


9,000 00


10,000 00


7,300 00



28

'"5

10

7

18

4

2

226



24,200 00
368,000 00

108,566 "66

29,150 00

31,800 00

3,000 00

71,200 00

9,000 00

370,075 00

250,000 00

1,500 00

56,500 00

11,900 00

10,000 00

10,000 00

80,000 00

3,500 00

80,000 00

15,600 00



69,337 00



?,208,155 00(a)



$4,037,992 00



(a) Because of the inclusion of buildings for which no permits were issued this
total does not agree with that in the preceding table.

In Victoria there is a restriction in force upon the height of buildings.
Section 357 of the Building By-Law of 1912, as amended, states that:

(a) No building to be erected within the city of Victoria shall
exceed the height of one hundred and thirty feet; (b) no building
hereafter to be erected within the said city of other than steel frame or
reinforced concrete construction shall exceed the height of eighty
feet; (c) no building hereafter to be erected within the said city
shall exceed in height the following times its lowest dimensions at
the base : for buildings with skeleton frame, four times ; for buildings
with masonry walls, three times; for frame buildings, one and
one-half times (this also applies to wings of buildings) ; (d) no
wooden or frame building intended to be used for human habitation
hereafter to be erected within the said city shall exceed the height of
forty feet; (e) it is to be understood that in all cases the height
of the building is to be calculated from the street grade to the top
of coping.

However, in case of refusal of a permit, an appeal is provided from
the building inspector to the board of supervisors, consisting of the chair-



235

man of the fire wardens, the state engineer, and the fire marshal. The de-
cision of this board is final. The only case where the legal limit has been
exceeded is a ten-story building at present (1914) under construction. This
building will measure 140 feet in height.

The number of apartments in Victoria is steadily increasing, twenty-
three having been constructed in 1912 and twenty-eight in 1913. All of
the apartments which are in existence to-day have been built within the last
three or four years. Both public opinion and the city administration frown
upon this movement toward apartment building, the people of Victoria in
general being inclined to resent any movement which tends to make the city
anything but a community of individual homes.

Credit Conditions

Victoria is a city of rich men. It is the only city visited in Western
Canada which secures the bulk of the money for building purposes from its
own residents. Not only is this true, but Victoria capital has in addition
been used to a considerable extent for financing building operations in
Vancouver and other cities of the Canadian West. One real-estate man
estimated that the life-insurance companies and the debenture companies
provided between thirty and forty per cent, of the total loans made in Vic-
toria for building purposes.(l) Another real estate man estimates their
share at only twenty-five per cent. It is the practice to loan funds only to
the amount of forty or fifty per cent, of the value of land and building
involved in the enterprise.

The universal testimony of the real estate men and bankers who were
asked concerning the effect of the tax system was that the transfer of the tax
from buildings to land has had absolutely no discernible effect upon the
readiness with which loans are made for business purposes or upon general
credit conditions.

Rents

The rent situation in Victoria is very similar to that in Vancouver.
Until quite recently rents have been very high. About a year and a half ago
a decHne began and at the present time rents are in general but half what
they were in 1912. '

Congestion

Victoria is more completely built up than most of the western cities.
Surrounded by other municipalities, it has not been able to expand its
corporation limits so readily. The records in the building inspector's
office show that there were 10,948 buildings in Victoria at the end of 1913.
If the number of lots in the city is 20,000, and if allowance is made for



(1) There seems to have been no scarcity of capital at the high rates of interest
paid. This gentleman is agent for a life insurance company which has advised him
of its willingness to lend money in Victoria. He has not placed a single loan for his
company.



236

the considerable number of buildings which occupy more than one lot, and
for residences whose grounds include more than one lot, the result would
indicate that between sixty and seventy per cent, of the land in Victoria
is built upon. The rough estimate of the ofificials in the office of the
building inspector, based upon their general impressions, is that approx-
imately thirty per cent, of the land in the city is vacant.

The standard lot in Victoria is unusually wide — fifty feet. Moreover,
there is a very large number of estates of several acres in extent. There
is no indication that the tax has been heavy enough to prevent the better
classes from making liberal use of land for residential purposes.

With an area of 4,500 acres and a population of 55,000, the density
is 12.2 persons per acre.

Home Ownership

The character of Victoria makes it natural that the percentage of
persons who own their own homes should be very high. The city assessor
estimates that eighty per cent, of the houses in the city are owned by the
persons who occupy them. The manager of the British Columbia Land
and Investment Company estimates that not more than twenty-five per cent,
of the houses in the city are rented.

Non-Resident Ownership

The assessor estimates that approximately ten per cent, of the land
in Victoria is owned by non-residents. There are approximately 20,000
lots in the city. Six or seven years ago an investigation revealed the fact
that approximately 1,500 lots were owned by non-residents; so it would
appear that the non-resident ownership of land in Victoria was slightly
on the increase.

Speculation

No evidence is available which would indicate that the tax system
has thus far operated to discourage speculation. The few facts presented
under the heading " Non-Resident Ownership of Land " are interesting from
this point of view. The assessor states that "a large number" of the
residents of the city own an extra lot, which they hold for speculative
purposes.

Employment

There is nothing distinctive in the unemployment situation of Victoria.
Not so large a proportion of the population is dependent upon employment,
particularly in the building trades, as is the case in other cities, and there-
. fore in time of depression distress should be less keen there than elsewhere.
But nevertheless there is considerable distress. The absence of pubhc
employment bureaus make statistical statements impossible.



237

General Prosperity

BANK CLEARINGS (a)

1900 $32,038,700 00 1907 $55,330,588 00

1901 30,607,315 00 1908 55,256,013 00

1902 28,680,679 00 1909 70,695,882 00

1903 30,817,928 00 1910 101,566,164 00

1904 32,993,113 00 1911 134,929,816 00

1905 36,890,464 00 1912.... 183,544,236 00

1906 45,615,615 00 1913 176.977.074 00

1912. 1913. 1914.

January $11,902,519 00 $15,987,507 00 $11,639,478 00

February 12,610,627 00 13,950,100 00 10,086,102 00

March 13,246,577 00 15,335,494 00 11,043,187 00

April 14,683,203 00 15,294,112 00 10,987,272 00

May 14,814,154 00 16,555,539 00 11,185,071 00

June 14,775,923 00 15,180,040 00 10,915,671 00

July 17,067,927 00 15,428,229 00 11,981,270 00

August 16,254,587 00 14,133,320 00

September 15,266,380 00 13,852,444 00

October 17,772,643 00 15,227,359 00

November 18,119,381 00 12,772,795 00

December 17,030,315 00 13,260,135 00



Total $183,544,236 00 $17-6,977,074 00



(a) For the years preceding 1910 the statistics are taken from the Year Book of
British Columbia, 1911, 1914, p. 327. For the later years, the data were transcribed
from the books of the secretary of the Clearing House.

POPULATION (a)

1891 18,538 1911 31,660

1901 20,919 1914 55,000(b)

(a) The Dominion Census.

(b) Estimated.

SCHOOL ENROLLMENT (a)

1889(b) 1,038 1898 2,427 1907 2,846

1890 1,243 1899 2,456 1908 2,927

1891 1,389 1900 2,584 1909 3,045

1892 1,606 1901 2,726 1910 3,299

1893 1,935 1902 2,754 1911 3,849

1894 2,123 1903 2,705 1912 4,401

1895 2,096 1904 2,739 1913 4,957

1896 2,166 1905 2,774 1914 4,900(c)

1897 2,265 1906 2,772

(a) The information in the table was furnished by W. F. C. Pope, secretary of
the Board of School Trustees, Victoria, B. C.

(b) The enrollment for each year is given for the month of October.

(c) Estimated.

GROSS POSTAL REVENUE

1900(a) $42,835 82(b) 1907 (nine months) $53,465 83

1901 47,247 57 1908 84,769 67

1902 50,840 09 1909 88,895 07

1903 52,778 84 1910 96,807 55

1904 55,525 10 1911 108,344 85

1905 56,332 48 1912 135,285 96

1906 61,466 75 1913 171,533 21

(a) Before 1907, the data are for the fiscal year ending June 30th ; in 1907 they are
for nine months ending March 31st; in the other years, they are for the twelve months
ending March 31st.

(b) The figures are taken from the annual reports of the Postmaster General.



238



STATUS OF PUBLIC OPINION



In Victoria little interest is manifested in the tax system. One news-
paper editor who was interviewed called the assessor by telephone to make
sure whether buildings were taxed or exempted. There is a strong feeling
among the city officials whose duties are connected with the administration
of the finances that the increases in the tax rate which are in prospect if
the assessment is retained on the present basis will raise the question of
returning to the tax on buildings in the near future. Here, as elsewhere,
the mass of the people seem not to be " confiscationists."

Summaries of Interviews

A high city official, an avowed single taxer :

The system is excellent and Victoria will never return to the old
plan of taxing buildings. The system has encouraged building opera-
tions. Thus far, however, it has no effect upon speculation. This is
because the plan was adopted at the time when the boom was at its
height. From now on, an effect in curbing speculation should become
apparent.

A city official :

The single tax does not appeal to one's sense of justice. The
benefit theory of taxation is the correct one and the single tax cannot
be reconciled with this theory. The buildings in Victoria have not
been erected because of a stimulus from the tax system. The big
increase in population, due to the attractiveness of Victoria as a place
of residence, made the building necessary.

A city official :

The present assessment is very near cash value and the people feel
that the tax rate of twenty mills is very high. If the tax base is not
altered this tax rate will probably have to go higher. Therefore,
Victoria is very likely to return to the old plan of assessing buildings.
The question has never been much discussed in the city and has up to
the present time not been a matter which has aroused much interest.
It has caused people to economize in the use of land. It has oper-
ated to penalize the man who wishes a garden. There is force in
the claim made by some persons that the buildings should contribute
at least enough to pay for the fire department. The effect upon build-
ing operations is not easily discernible. On the whole it tends to
encourage the rich man to put up a big building which has the effect of
forcing out the little ones. Under the system those most able to pay
do not pay.

A city official :

A return to the old system may be expected very soon. The
present land values are entirely too high. The assessments are on a
boom basis and a reduction is inevitable. To raise the necessary
revenue by means of the land tax alone will require a higher tax rate
than the people will endure. The effect of the tax is to bonus the
man who builds. It is wrong to bonus a big building because it aids
a rich man to put up a skyscraper which can wipe out the profits of



2V>

the smaller building. The skyscraper is unjustifiable under present
conditions in Victoria and competes unfairly with the low buildings.
Men naturally prefer to be in a large building.

A city official :

The system in force gives general satisfaction. There are prob-
ably not twenty people in the city opposed to it. Formerly I was in
favor of collecting some taxes from the buildings to contribute toward
the expenses of fire and police protection, but I have changed my
views and now favor the tax on land only.

A very prosperous real estate man :

The system stimulates building and operates to the disadvantage
of owners of vacant property. I and my partners are very decidedly
in favor of the system. I have heard " not a word " of complaint or
of a proposal to return to the old system.

A prominent banker :

I do not care to make any comment or express any opinion except
to state that so far as I have noticed, the system has had no effect on
land values, and has caused no credit disturbances,

A newspaper proprietor:

I formerly believed in the single tax and my newspaper took a
favorable attitude toward it. But now I will not let my paper " touch
it." It is outrageous that the owner of a big building which earns
sixteen per cent, or seventeen per cent, should pay no more than the
man who owns a vacant lot next door who cannot get money to build.
There has been a big reaction against the system in these days of
depression.

A very keen and well informed real estate man and financial agent :

The system has stimulated building. There are now buildings
going up which would not be under construction were it not for the
necessity, forced home by the land tax, of putting the property on a
revenue-producing basis. It has had no influence upon sources of
loanable funds. It may be necessary to return to taxing buildings for
revenue purposes before long. The citizens of Victoria are in no
sense " land confiscationists " and when the rate on land gets high they
turn to buildings. Public opinion on the question in the town is divided.

A newspaper editor:

My newspaper has always favored the single tax and still favors
the system. The present movement against it has not much strength.
The single tax stimulates building and has a tendency to rnake the town
compact, which saves expense in paving and the extension of public
utilities.

The manager of a large real estate and investment company :

The system works well enough in boom times. Then taxes really
do not count. But in times of depression it plays right into the
rich man's hands. The man who can afford to do something with
his property can save himself. The poor man cannot iniprove,
sell or give away his land. Many people to-day are willing to
sell but cannot and find it very hard to pay taxes. It penalizes a
few who deserve it, as, for instance, the Hudson's Bay Company,
which refused to sell; but the majority of the people are perfectly



240

willing to sell if they can do so. " The aldermen of Victoria made the
mistake of their lives when they took the tax off buildings." They
will have to go back to taxing them if the depression continues. The
majority of the people are probably in favor of this move. The tax
has had no discernible effect on loanable funds and there have been
no credit disturbances traceable to the system,
prominent drygoods merchant:

I favor the system, but for no particular reason. I have a general
impression that it is all right. There is no agitation about it and
everybody seems satisfied.



241



II. The Exemption of Improvements in the Cities of the

United States



Although there has been considerable agitation in the United States in
favor of special land taxes there has been little action. If one ignores
the single-tax colony of Fairhope and the numerous cases of undervaluation



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 25 of 31)