Former Mayor Larry Di Ianni and Mr. Ecklund's daughter Erika

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LARRY'S CORNER- Hamilton's Former Mayor Speaks

former Mayor of Hamilton, Larry Di Ianni The Virtues of Tax Increases (Or Not!)

By Larry Di Ianni
(posted July 9, 2009)

There were two headlines on the same page of the local paper this week that would have caught residents’ attention: “Tax increase likely for city homeowners” and “City will ease in rate jump for minor hockey”.

The first headline dealt with Council’s yearly ritual of giving staff a target to aim at in setting their preliminary budgets for next year. Staff was told to work with a 2% increase to their yearly budget.

The second issue had to do with the city’s policy of subsidizing hockey rates for minor hockey by 50%. This subsidy is a $5M dollar cost to the city, or nearly a 1% hit to the tax bill. Council had been encouraged to bump up the subsidy to 57% by the hockey users who leveraged their considerable numbers to force Council into paying more. The hockey users got their way, if only for one year.

What was interesting for me to read in the above headlines was the seeming inability of most of Council to connect the dots between these two issues. On the one hand some had argued for the necessity of limiting tax increases on residential property taxpayers; on the other, Council increased the cost to those taxpayers by bumping up the subsidy for hockey.

If there is one issue I hear the most about now that I am out of politics, it is the one having to do with the tax burden. Hamilton is one of the highest taxed municipalities in the country some would say. The reasons for this are well known and have to do with the downloading of social services to the municipality by the Harris government of the day. The province has been slowly uploading the burden, and has been helping Hamilton with a yearly special handout to tide us over. All this is good; but Council has been unwilling for years to slay the budget monster to bring our services in line with affordability.

Some on Council suggested freezing taxes, arguing that “It’s difficult and painful for the residents paying the taxes” and others, notably the mayor argued that a ‘tax freeze is unreasonable’. Who is right?

Well, they are both right. A tax increase guarantees programs and guarantees subsidizing transit, sports, and seniors to name just a few deserving recipients, but it also guarantees high taxes. Remember, if a tax increase is only two percent as has been suggested, it would still leave citizens paying the highest property taxes in the land, according to some. As well, especially in an economy which has eaten away at retirement savings and has forced people into layoffs, any tax increase further jeopardizes the ability of some to remain in their homes.

So what should Council do? It should have adopted a zero increase, or maybe even a slight decrease. This target would have been a signal to staff to look for savings. It would have forced Council to look at service levels to see if they are sustainable. It would have also forced Council to harmonize their budget decision-making with the budget realities being faced by the city. I know of at least one councillor who objects to decisions on spending being made outside of the budget process. It would be wise if all councillors adopted this same concern. There is a link between decisions taken, such as the increase in the hockey subsidy, and their impact on the property taxes we pay.

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