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 7 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 7 of 31)
Font size
QR-code for this ebook

to the tax system. The large rentals were received when there was a
lack of facilities and the tax system has operated to change the situation
by encouraging building. Until recently people have not thought about
the tax question to any great extent. Now the men who find them-
selves in time of depression with vacant property upon their hands
are beginning to think about taxes.

An alderman ; a retail merchant :

There has been no effect upon speculation traceable to the system.
Speculators never consider taxes as an element in their calculations.
Moreover it is probable that it has not had any effect upon building.
Saskatoon would have built up as rapidly under the old scheme of

An alderman:

In a new community a middle course should be steered in tax
matters. Some plan should be adopted which would throw a particu-
larly heavy charge on the speculator; and yet buildings should not be
exempt entirely because they are real revenue producers and are needed
as one of the sources of income; therefore the taxation of buildings
on the basis of an assessment of a small percentage of their value
is an attractive plan. Land in itself is not a sufficiently stable com-
modity in a community of this sort to serve as an entirely satisfactory
tax base. Moreover it is not desirable to contract the present tax
base. The present system operates to stimulate building or to compel
the. man to pull out his money.

An alderman:

The system is well liked here and the city will probably never go
back to a higher tax on buildings. It discourages speculation and
encourages building but seems to have no effect upon rents.

An alderman :

Two years ago I was in favor of " going the limit " toward land
taxation. The reports of the good effects produced in Vancouver
were responsible for this attitude. Having heard unfavorable reports
from Vancouver, I am doubtful as to the advisability* of putting all
taxes on the land. In Saskatoon the assessments on buildings will
never be further reduced. One of the reasons why the system was


adopted in the beginning was because it was hoped that it would
stimulate building. It has had that effect. There has been no notice-
able effect on speculation, on land values, or on rents. Rents have
recently taken a big drop, but this is due to other causes than taxation.

An official in a trade association :

I am the father of the single-tax movement in Saskatoon. Joseph
Fels and Mayor Taylor of Vancouver sent me material which was pub-
lished in the newspapers. A further reduction should not be made in
Saskatoon, however, lest it " discourage investors in vacant land." There
is no sentiment in Saskatoon in favor of the appropriation by the state
of land values. The idea is absurd that the individual has no right
to realize something out of the increase in the growth of the com-
munity. The rate of assessment for improvements will probably some
time in the future be further reduced but this will not be done for
a decade or two. The connection between the tax system and growth
of population is not direct. No settler ever inquires about the tax
system. Saskatoon is not at the present time an attractive place for
the man who is heavily burdened with unimproved real estate. The
man who is wise is the man who got rid of his land some time ago.

A wealthy, retired business man:

Under the law governing taxation for rural schools it was possible
long ago to tax lands only for this purpose ; so that the idea was more
or less familiar very early in the history of the town. It is folly to
ascribe our prosperity to our tax system. It has had some good effects,
however. It discourages holding large tracts of unimproved land
and it induces building. Its effect on rent is not clear. Rents have
dropped almost fifty per cent, recently but times have been too feverish
for rents to settle to a normal level. Although not a disciple
of Henry George I believe that it is poor policy to penalize the man
who improves his property. It cannot be said, however, that the
system has accomplished everything which was hoped for it ; but on the
other hand one cannot say that it has been a great disappointment.
Some of the effects have not yet become clear. There is no sentiment
in the town in favor of a further reduction at present but ultimately
the assessment on buildings will probably be reduced to zero. The
whole scheme is more of an experiment than anything else and our
experience must not be taken as significant for New York. " Come
back in fifty years and we shall have shaken down into our proper
place." One thing is evident: reductions should be made gradually.
It is very possible to go too fast.

A real estate man :

The attractions of the system are that it builds up the city, makes
it more compact, prevents the everlasting spreading of the commercial
district and makes it impossible to hold high-priced lots unimproved.
There has been no noticeable effect upon speculation. The city has out-
grown the development of the country around it and is in the midst of
a depression. A very conservative policy should be followed in elim-
inating the remaining assessment on buildings. Reductions should be
made very slowly.

A real estate man :

The tax system has not made a dollar's worth of difference in
the development of the city. It has not caused more buildings or
fewer buildings. " I have never taken taxes into consideration in my


operations and I think that no one else has." When an opportunity
offered to make fifteen or twenty per cent, by putting up a building
the money was put into the building, and when such an opportunity
did not offer the money was invested in land. " As an owner of vacant
property I am strongly in favor of as much single tax as I can get. If
the rate can be made high enough to induce the holders of real estate
to build sooner or better, so much more rapid will be the increase in the
value of the vacant property which I buy and sell."

A member of a firm which acts as financial agent in lending money :

The system stimulates building and discourages speculation; but
it involves some consequences which are undesirable if imposed
quickly. A change to the land tax basis should be made very gradually.

A university professor:

Things have been too much in a state of flux to draw any con-
clusions as to the effect of the tax system. The plan seems to be
well adapted to a town of this type. A further reduction in the assess-
ment of buildings, however, is not desirable. Many of the buildings
are revenue producing and should bear part of the tax burden. Two
years ago the community was very enthusiastic upon the single tax,
but a reaction has taken place and public sentiment is now decidedly
opposed to further reduction. Personally it does not matter much
where they put the tax, as my lot is worth about the same amount as
the house. Many rich men are having a difificult time of it paying
their taxes at present. There are no fears, however, for the future
of the Saskatoon district. Such evils as are present are artificial, due
to the contraction of the source of loanable funds, the aftermath of
speculation. The richness of the agricultural lands is the real founda-
tion of the prosperity of the town and region and crops are good.
Many real estate men have left the town and a number of others have
transferred their money from vacant land to building blocks.

A minister:

The effects have been very slight in the past. There is at present
some complaint about the weight of the tax burden from men who
own much vacant land ; but probably there would be as much complaint
if taxes were thirty or forty per cent, lower than they are, for any
tax at all would be a burden just now.

A successful lawyer:

In the past taxes have not been taken into account. I certainly
have not considered them in the buildings I have built or the real
estate I have bought. Moreover I do not think that others have
done so to any noticeable degree. But to-day I will not accept
vacant land in settlement of a claim if I can help it because of the heavy
carrying charge I must pay over this period of depression. Reductions
in the assessment of buildings can be safely made only when there are
considerable increases in land values. A proposal which contemplates
a fixed reduction year after year without allowance for years of
depression might involve a decrease too rapid to be easily borne.

A school teacher :

The assessment rate on buildings should be low in a community
such as this where there is much speculation and much non-resident
ownership. Such a system should operate to stimulate building and
discourage speculation. Thus far, however, no such effects are notice-
able in Saskatoon.


A newspaper editor :

The results of the reduction of the tax on buildings have not
justified expectations. It was undertaken in the beginning partly at
the instance of the single taxers. Building operations seem to have
been stimulated somewhat, but there has been no effect on speculation.
Perhaps from this time on the effect on speculation will become more
evident. Owners of vacant real estate, particularly those who own
property near the center of the town, are beginning to feel the weight
of the carrying charge. People are beginning to see that taxes must be
levied on ability-to-pay. Vacant land itself cannot pay. With the
collapse of the real estate boom people found it necessary to have the
tax upon something that is revenue producing. The present rate of
twenty-five per cent, on buildings will probably neither be increased
or decreased for a long time in the future. Personally I should like
to see the rate forty per cent.

A newspaper reporter:

If any change is made in the percentage of buildings assessed it will
doubtless be upward ; and such a change is very likely to be made.

The editor of a weekly paper :

The economic condition of Saskatoon is much more serious than
the people realize. They expect the present depression to be relieved
very soon ; but relief will not come for many years. The fundamental
richness of the country cannot be denied; but the values of the city
real estate anticipate the far distant future. The distant future will
take care of itself very nicely; the immediate present is another
question. Many men who counted themselves rich two years ago and
who did not get rid of their real estate are in real distress. An
acquaintance who owns a half section laid out into lots within the
city limits confided that he was greatly worried about his grocery bill.
With taxes due on a piece of land assessed at $20,000, " I, myself, do not
know where in the world to get the money to pay them with." The
heavy land tax makes it difficult to carry vacant land. Every one feels it.
Up to this time people have paid absolutely no attention to taxes ; they
have been an unimportant detail. People paid them cheerfully. There
has been no public discussion about them and they have not entered
into calculations. Now, for the first time, attention is being called
to them. It is foolish to say that land has not depreciated in value.
The bottom has fallen entirely out of the market. No prices are being
quoted. The real selling value of the land is much below what it was
two years ago ; and unless the property owners are willing to face the
situation and dispose of their holdings at very greatly reduced prices,
sheriffs' sales will result. There has been no effect on building trace-
able to the tax ; not one building has been erected in Western Canada
which would not have been built just the same, tax or no tax.



In Alberta the movement toward land-value taxation has in some
respects progressed further than in any other province. There a Provincial
Government, very favorably disposed toward the single tax ideal, has co-
operated freely with such cities as desired to take steps toward the adoption
of the system and, moreover, has itself initiated legislation tending to shift
the taxes to the land wherever it possessed jurisdiction.

The Province

This province, which lies west of Saskatchewan, includes within its
boundaries approximately 250,000 square miles. In this territory is to be
found a great variety of conditions, economic and topographical. To the
east there are wide areas of clear prairie where wheat-growing is almost
the exclusive occupation. To the west are the mountains. Between are
numerous wide stretches of lightly wooded country where rich soil and
plentiful rainfall make mixed farming a profitable occupation. In some
parts of the southern section of the province, however, irrigation must
be resorted to in order to secure the best results. A very large pro-
portion of the province is underlaid with coal. In the southwestern sec-
tion the mining industry assumes considerable proportions, while even
as far north as Edmonton there are mines which supply the local demand.
In the eastern part of the province wood is almost entirely absent. In
the central portion light growths of poplar appear and nearer the moun-
tains there are very heavy stands of various kinds of timber. Little
has yet been done toward the development of the lumber industry, but
this is expected to assume large proportions with the completion of
the new railway service which will be afforded by the Canadian Northern
and the Grand Trunk Pacific. In addition to these two railways, which are
now near completion, the province has long been served by the Canadian
Pacific system, the main line of which passes through Calgary on its way
to the coast. Branch lines radiate from Calgary in several directions.

Stock raising has since early times been an industry of considerable
importance in Alberta, but recently it has received a new impetus.

Interest is just beginning to develop in some of Alberta's resources.
Only in the last few years has the great store of natural gas been utilized.
There are indications of the presence of large quantities of oil. Steps are
now being taken to drill for this product. ( 1 )

Like the other provinces of Canada, Alberta raises little money from
direct taxes on property. The three direct taxes on property which are
levied for provincial purposes, however, are all interesting types of special
land taxes. They are the unearned increment tax, the wild lands tax and
the timber areas tax. (2)

(1) Cf. infra, p. 110.

(2) Cf. infra, pp. 7Z, 75. An act passed late in 1914 provides for a small acreage
tax on timber areas. Alberta statutes, 1914, c. 15.


As will be seen from the statement of estimates for 1914, 17.4 pet
cent, of the total revenue is received from the Dominion Government in
the form of subsidies and receipts from public school lands. Fees, licenses,
fines and corporation taxes contribute substantial sums. It should be noted
that included in the total are moneys borrowed to the amount of $3,600,000.
One million is expected as the receipts from telephones.


Estimated Balance, 1913 $859,175 00

Dominion Subsidy ($1,440,375.00)—

Government and Legislation $180,000 00

Population, 600,000 at 80 cents per head 480,000 00

Debt Allowance 405,375 00

Compensation for Public Lands 375,000 00

, I 44(3 375 00

School Lands Fund ($260,000.00)—

Interest on Principal Moneys and other sources 260,000 00

Treasury Department ($2,915,000.00) —

Interest on Bank Balances 25,000 00

Insurance Branch 50,000 00

Taxation Unearned Increment on Land 210,000 00

Interest on Advances made on Account of Elevators. 30,000 00

Part Proceeds of Loan under Act, 1913 (2nd

Session) 2,600,000 00

2,915,000 00

Attorney General's Department ($1,260,300.00) —

Fines and Forfeitures 100,000 00

Commission and Notary Fees 3,300 00

Clerks of Courts 145,000 00

Sheriff's Fees 40,000 00

Magistrates' Fees 7,000 00

Land Title Receipts 640,000 00

Succession Duties 60,000 00

Liquor License Fees etc 250,000 00

Sundry Receipts 15,000 00

1,260,300 00

Provincial Secretary's Department ($350,000.00)—

Licenses and Fees under Statutes 145,000 00

Corporations Taxation Act 130,000 00

Railway Mileage Tax Act 75,000 00

350 000 00

PubHc Works_ Department ($200,000.00) —

Steam Boiler Inspections and other Fees 20,000 00

Coal Mines Act 7,000 00

Surveys 173,000 00

200,000 00

Education Department ($5,000.00)—

Examination Fees 5,000 00

Agriculture Department ($318,500.00) —

Fees : Game Licenses, Sale of Estray Animals and

other Fees 38,000 00

Reimbursement of Advance on Butter and Poultry.. 200,000 00

Repayment, Account Seed Grain 5,000 00

Repayment, Loans to Creameries 2,500 00

Demonstration Farms 70,000 00

Poultry Breeding Plant 3,000 00

310 500 00

Railways and Telephones Department ($2,000,000.00) —

Receipts from Telephones 1,000,000 00

Part Proceeds of Loan under Act 1913 (2nd

Session) 1,000,000 00

2,000,000 00


Municipal Affairs Department ($110,000.00)—

Educational Taxes 100,000 00

Tax Certificate Fees 5,000 00

Redemption and other Fees 5,000 00

110,000 00

Legislative Assembly ($5,000.00)—

Private Bills 5,000 00

Government Printer ($8,000.00)—

Official Gazette, Printing etc 8,000 00

$9,731,350 00(1)

The public accounts for 1913 show that at the end of that year the
pubHc debt of the province amounted to $18,998,133.31. Of this amount
the sum of $3,664,599.99 was in the form of short term treasury bills. The
debt was incurred for the following purposes:

(1) The following statement shows the revenue and expenditure account of the
Province of Alberta for the year ending December 31, 1913:

Revenue —

Dominion Subsidy $1,260,105 40

Seed Fair 1,613 65

School Lands Fund 223,612 30

Treasury Department 1,031,680 36

Attorney General's Department 1,111,230 50

Provincial Secretary's Department 333,934 64

Public Works Department 232,771 78

Education Department 5,245 01

Agricultural Department 199,099 86

Municipal Department 87,457 13

Legislative Assembly 12,876 31

Executive Council 1,900 00

Government Printer 9,797 57

Telephones 880,559 44

Miscellaneous 8,020 68

$5,399,904 63

Expenditure —

Public Debt $576,582 38

Civil Government 392,400 25

Legislation 183,056 08

Administration of Justice 703,430 51

Public Works 515,062 67

Education 713,733 36

Agriculture and Statistics 428,880 40

Hospitals and Charities 117,657 11

Public Institutions 188,618 59

Miscellaneous 569,107 65

Remissions 4,338 96

Telephones 815,788 96

Government Printer 16,927 22

$5,225,584 14

Surplus of Revenue over Expenditure $174,320 49

The proceeds from loans amounted in the year 1913 to the sum of $10,513,605.54 ;
and the expenditure on capital account during the same period amounted to
$10,168,453.32. In addition to the item credited to telephones in the income account
as given above, the sum of $5,738,150.08 was received as a part of the telephone revenue
from the proceeds of the sale of debentures, treasury bills etc., making the total
revenue of the telephone department $6,618,709.52. The expenditure on capital account
including the redemption of treasury bills in connection with the telephone department,
amounted to $4,780,678.64.

Public Accounts of the Province of Alberta for the year ending December 31,
1913. — Edmonton, Government Printer, 1913. P. 5 et seq.



Telephone Expenditure $5,336,199 99

Elevator Expenditure 1,000,000 00

$6,336,199 99

Public Expjenditure 12,661,933 32

Total $18,998,133 31

The cost for the debt service for the year 1913 was $576,582.38.(1) The
amount called for in the estimates for 1914 on account of interest and capital
in connection with the public debt was $675,000.(2)

The province makes it a practice to distribute from general provincial
funds considerable sums of money as grants to municipalities, towns and
villages for educational purposes. (3) In 1913 the sum of $480,000 was
distributed in this manner. The amounts going to the various cities of
the province were as follows :


Edmonton $38,346 28

Calgary 37,628 60

Lethbridge 9,719 35

Medicine Hat 4,048 94

Wetaskiwin 2,212 20

Red Deer 1,972 40

Grants are also made to localities to aid in paying the expenses of libraries
and hospitals.

In those parts of the province which lie outside of the limits of any
organized school district a special educational tax is imposed under the
direct supervision of the provincial government. The administration of this
" Educational Tax Act " is intrusted to the minister of municipal affairs. (4)
The rate is levied on the acreage basis, although upon petition to the
department of education, land values may be used instead. The charge
amounts to one and one-quarter cents per acre. Land held on grazing lease
from the Dominion of Canada is taxed only one-half cent per acre. Land
which is being acquired on the homestead plan is exempt for four years.
The sum of $80,620.67 was received during the year 1913 from this
source. (5)

Land lying outside of any organized municipality is subject to a tax
of three and one-eighth cents per acre for public works.

The Increment Tax

A new source of revenue of the Province of Alberta is an increment
tax on real estate. This seems to be the first increment tax adopted by any

(1) Public Accounts, 1913, p. 266.

(2) Estimates, 1914, p. 4.

(3) Statutes of Alberta, 1913, second session, c. 15. An Act Concerning School
Grants (assented to 1913).

(4) Statutes of Alberta, 1907, c. 18 (assented to March 5, 1908); ibid., 1910,
second session, c. 2 (assented to December 16, 1910) ; ibid., 1911-12, c. 4 (assented to
February 16, 1912) ; and ibid., 1913, second session, c. 2 (assented to October 25, 1913).

(5) Public Accounts, 1913, p. 20.


taxing authority on this continent. It was " assented to " October 25, 1913,
and was put into operation immediately. The idea was obtained from the
famous Lloyd-George Budget of 1909. Five, per cent, of the increases in
land values are appropriated by the provincial treasury. The law is so
drawn that only in rare instances is the rate apphed to other than urban

Section three, subdivision one, of the act reads :

There shall be payable upon the registration under The Land
Titles Act of any transfer of land a tax of five per cent, on the
increased value of the said land over and above the value thereof
according to the last preceding value for the purposes of this Act,
excluding in all cases the cost of improvement or development work
actually made or done upon or in connection with the said land.

In addition to the allowance for the cost of improvements, exemption
from the tax is extended to farm land, with certain limitations. Farm
land is described as " undivided land of which at least ten per cent, was
under cultivation and which was actually and bona fide used by the trans-
feror for agricultural purposes during the twelve months preceding the
transaction which results in the transfer" (Sec. 3, sub. 3). Excess area
of such land beyond 640 acres, " in which the transferor was beneficially
interested immediately before the transaction which results in the making
of the transfer " is subject to the five per cent, levy, but only " to the extent
of the excess value of the land transferred beyond the sum of fifty dollars per
acre without improvements" (Sec. 3, sub. 3). The revenue from such a
levy on farm land would of course be negligible but the real purpose of
this provision is doubtless social rather than fiscal. It is evidently intended
to discourage the practice of building up large estates.

The 1913 municipal assessments were adopted, at the suggestion of
Provincial Treasurer C. R. Mitchell, as a level from which increases in value
should be measured. This course saved the Provincial Government the
expense of making a general assessment. But assessments were available
only for the lands included within the limits of the municipalities at the time
of the passage of the act, October, 1913, for, until recently, direct taxes
in Alberta on land in the country have been levied on an acreage basis.
To meet this situation the act provides that lands brought within corporation
lines after that date be given an arbitrary initial valuation of fifteen dollars
per acre (Sec. 14). Much of the land which has been or is about to be an-
nexed to the various municipalities is worth more than this amount, a great
deal of it being valued at more than one thousand dollars per acre. An initial
valuation higher than fifteen dollars per acre may be obtained if the owner
cares to demand it of the registrar of land titles within a year. But the initia-

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 7 of 31)