Instead of the farmers paying 100% of the tax to the municipality, then getting 75% back from the province, the farmers only had to pay a rate that was 25% of what it was before the Harris changes. That tax was paid to the municipality still, but no rebate would be required by the Ontario government. In the years after Dalton McGuinty became Premier, there has been no change to this system.
South Dundas - August 28, 2012 - Ask anyone who has served or currently serves on a municipal council in Ontario what the single biggest issue for municipalities is, each and every one of them will say it is taxation. Not just taxation rates or increases, but the fair and equitable collection of taxes from the ratepayers.
In primarily urban municipalities the issue of tax fairness comes down to the rates paid by residential, commercial, and industrial ratepayers. That is hard enough to balance. That challenge in the rural municipalities is even greater thanks to the Ontario government hamstringing councils and factoring in farm land.
Before 1998 farmers paid a rate on their farms that was set by each municipality and that rate was a separate rate, just as residential, commercial and industrial is. However since farms are considerably larger in land size than the average residential property, farm operators paid more taxes than the average home owner. After the property tax was collected however, farmers would get a rebate from the provincial government, amounting to 75% of what they paid. In the end, the farmers only paid out 25% of the total assessed tax out of their own pockets, but municipalities would see 100% of that tax assessment.
The Harris Government "simplified" things in 1998. Instead of the farmers paying 100% of the tax to the municipality, then getting 75% back from the province, the farmers only had to pay a rate that was 25% of what it was before the Harris changes. That tax was paid to the municipality still, but no rebate would be required by the Ontario government. There was no net change in the end to the bottom line of farmers. It was win-win for the province, no more pesky rebates and they didn't alienate the important farm vote because the net-rate paid by farmers didn't change. It has become however a lose-lose situation for rural municipalities.
To add insult to injury, while the taxes being collected at the rural municipal level was being cut drastically, the municipalities were also hit with downloaded social services, former provincial highways, 911 Operation and Ambulance services. All without extra funding.
This issue is not the fault of the farmers, but the fault of short-sighted simplistic accounting prinicples by provincial governments on both side of the political spectrum. It also doesn't just affect the municipalities, but also the county level of government. In the years after Dalton McGuinty became Premier, there has been no change to this system. Granted some of the services that were downloaded to the municipalities are being "re-uploaded" to the province, albeit in a gradual, phased manner over many years, it does not make up for the shortchanging of municipal coffers.
Even with services being assumed by the province, there is still woeful underfunding to the municipalities, where residents see the effects the most. There is still far more crumbling infrastructure that is failing faster than it can be fixed. Also the infrastructure needs of municipalities keep increasing, in part by changes in regulations and requirements by the province. Those changes don't include funding, just the municipalities being told that they need to comply.
The best solution to the issue is a comprehensive overhaul of the property tax system. No government has the intestinal fortitude to tackle that. In the more immediate term, the province should revert back to the previous method where farmers paid the full amount of the tax bill and then receive a rebate from the province. This enables municipalities to be better funded while farmers are still see the benefits they received before. With funding restored, it will enable municipalities to keep taxes down and maintain infrastructure to keep pace with growth for all residents.