Canadian Personal Finance Blog

Archive for the ‘Property Taxes’ Category

Alternate Property Tax Model

So after whining about my Property Taxes, I think I have come up with a simple(r) model for Property Tax valuations which could make lives simpler (simpler for me).

Simply put, your Property Tax is set when you buy your house. When the price is set, that is what your property taxes will be based on, until the house is sold again.

Sounds easy doesn’t it? The municipalities could tweak it so that they could add an inflationary increase each year, so that their incomes could slowly increase, and maybe a caveat on the valuation at sale (i.e. the City can have an independent body valuate the house at sale time and then base property taxes on that value), in case folks try to sell houses for $1 or the like.

Advantages?

• Property tax increases would be limited year over year to only an inflationary increase, better than current system where Property Tax valuations can wildly vacillate (mostly up)
• If someone stays in their house for a long period of time, they will not end up having to sell their house because their neighbourhood suddenly went “up scale” and their Property Taxes have sky rocketed (as in Vancouver), good for Fixed Income seniors.
• May cause a boom in contracting work for upgrading houses, since it’s value will not increase unless it is sold (i.e. why move to a bigger house, when it ends up being cheaper to add a room to my current home)
• Less yearly paper work with new valuations and warning home owners of the pending change.

Disadvantages?

• Municipalities incomes may not be as large as they need them to be and it may force them to cut services (to run a balanced budget)
• Tom-foolery and shenanigans are still possible given there can be manipulations of these systems, like we have seen with rent controlled properties and such.
• Might throw cold water on the housing market, with folks maybe staying in an older house, instead of buying a brand spanking new one, because it costs more (and the older house has been inhabited in for a while)

Opinions? Should I write this one up and present it to the Ottawa City Council as a progressive and exciting way to move forward in the 21st century? Maybe if I add a Green element to it, it might be an easier sell (it will help the environment, because it will slow housing developments)?

Cause he’s the Tax Man

This time of year is magical in terms of the sheer volume of money that seems to go for taxes in my household.

First we have the CRA and Income Tax coming due in April, which causes lots of excitement as I mentioned in How Do You Dor Your Taxes?, and I am happy to say that this portion of the Magical Tax Mystery Tour is over, with my E-filing this past weekend. I like to get those in early, especially when the government owes me money (and even if you owe them money, you don’t have to pay until the last possible day).

The second exciting part of this Tax Trek is Property Taxes that I owe to the City of Ottawa. Ottawa’s system has a couple of ways you can pay and I choose to make the two payments they ask for in March and May (you can pay monthly if you wish as well), and this makes for the right hook portion of the tax combination punch I receive this time of year.

Property taxes have continually gone up since I started owning a house about 13 years ago, as various levels of Government off-load their own service load and down load them to the municipal governments, but also the City of Ottawa is an interesting story all on it’s own with Amalgamation and the fact that the City of Ottawa keeps growing (and thus it’s thirst for Tax Funds is never quite satiated).

Given I seem to live in my finances in this time of year, I always end up noticing interesting points that these taxes bring into focus for me:

• I pay more in Property Taxes than I do in Mortgage Interest on my house. I guess this is a good thing, but this may change when interest rates go up.
• With Income Tax there is always a chance that I will get a refund from the Government, but this is never going to happen from my Property Taxes (which explains why I seem to loathe Property Taxes more than Income Taxes).
• Property Taxes are the only tax on the Perceived Value of something, as opposed to actual value or income. If I sold my house for $1 tomorrow, but the City said it was in fact really worth $1,000,000.00 they would be right and that would be what the new owner of my house’s valuation would be. I have seen many people successfully argue that their property valuation was too high, but it is a tedious and slow process (and you might end up with a higher valuation if you are not careful).
• If I wanted to pay more Property Tax, in exchange for more services (say better street lighting, better sewers or a fire hydrant near-by), I would not be allowed, and there is no way for me to buy these service improvements from a private firm either (given the city has a monopoly on these services).
• Even though a portion of my property taxes goes to the Schoolboard of my choice, this does not guarantee my child an education with that board. If they feel my child is not suited to their service (behaviorally, or because they have a learning disability or other reasons) they can refuse me this service, and I have little recourse (but I still must pay the fees). That one is always an interesting discussion point to bring up at a party that seems to be too quiet.

I don’t think there is anything too deep in those points, just some stuff I noticed about my property tax bill.

We had another get together of the National Capital Financial Bloggers Association this past week and the regulars were there, but we also had a special guest appearance by Canadian Financial DIY, and he has been added to the prestigious N.C.F.B.A. blogroll in the right hand column. A very interesting chap and with many of the same attributes as yours truly (worked in the same places, from Montreal, etc.,). He also is brave enough to show a picture of himself on his blog (I may one day, but I need to find a top hat and monocle first). 

Financial Blogging This Week

Many interesting posts for this week, and let’s start off with our spotlight blogger this week:

• Canadian Financial DIY wrote an interesting tome about a Modest Proposal for Preventing Older Retired People in Canada… I think I am worried now, hope no politicians take this up.
• Michael James writes about Tax Avoidance on New Homes (in Ontario), which may make for an interesting cat and mouse game between the government and it’s HST and builders. 
• Preet at Where Does All My Money Go continues his educational series about Indexes (and active vs. passive investing) with The Market versus The Index (in a steel cage match). 
• The Canadian Capitalist writes another scathing commentary on Our World-Beating Mutual Fees, seriously folks read this stuff and get the heck away from those high MERs. 
• The Canadian Tax Resource is writing some helpful posts in the series Estate Planning 101 and one I enjoyed is Estate Planning 101 – Death, Taxes, and your RRSPs and RRIFs.
• After getting ripped off No Debt Plan published a helpful 7 Ways to Identify and Avoid On Line Scams. 
• Riscario Insider has an interesting post Preston Manning on Financial Planning, which I enjoyed, but the title is a little misleading. 
• I always enjoy when folks talk about their personal lives and their hobbies and One Caveman does in his article Good Personal Finance Takes Practice.

Victoria Day Weekend

Given it is an early long weekend here in Canada, don’t look for anything on Monday, I will be enjoying a day off, but look for a new video for the weekend enjoyment.

The three year marathon that was the U.S. Federal election ‘08 has finally completed and we can get back to normal, but unfortunately as we can see from a cursory read of some of the Financial Blogs around, what is Normal any more? Oh and when does the sprint to 2012 start? Luckily we have a Quebec election to fill our time up with for now.

This Week’s Personal Finance Highlights

• Michael James showed his artistic side giving us a graphical rendition of Market Timing in Pictures that i is missing the Big Cajun Graph where the Sell is on the bottom and the buy is on the top (look at the pictures and you’ll understand that one).
• Nancy Zimmerman did a Case Study: What to do when you get screwed financially, that makes me cringe when I read what some people have had done to them. 
• No Debt Plan talked about the Frugal Life Skill: Learning to Fix Stuff Yourself, which I subscribe to in areas where I think I have expertise, however, in some areas, like my car, I leave that to the professionals.
• Money Smart Life asks Eight Financial Questions for Success in a Bad Economy, go ask yourself some of these questions, maybe you aren’t as prepared as you though?
• I wish the One Caveman good luck with his procedures, which he outlines in a post When Life Gives You the Opportunity to Start Over, Take It!
• For my fellow bloggers who might use Wordpress, TechCrunch posts this important warning about Fake Wordpress Site Releasing Backdoor Code. 
• Stats Canada mentions that there still are about the same number of Rural Folk in Canada (6 million) however due to the growth of Urban areas, the Rural folk are now a much lower percentage of the population.
• W Revenue dot Com quotes Gordon Gecko from Wall Street when he says Greed is Good, but asks about Profits Gone Wild: Government’s Role in Business . 
• On an odd note, Rolling Stone points out a downside of elections, sometimes you Lose Band Members? As April Wine said, “.. no one ever warned the boy, Rock N Roll is a vicious game…”
• For we religious folk that might want to make a wager, a bookie in the U.K. has put odds at 4-1 that God Exists, I think I’d put a few quid on that.
• The Canadian Tax Payers Federation wants Property Taxes pinned to the Rate of Inflation, which might be nice given in Ottawa the numbers being passed around are MUCH higher. 
• Finally the Canadian Capitalist and a few other bloggers have been looking at Manulife Income Plus: The High Cost of Peace of Mind. The N.C.F.B.A. met last night and there was the usual friendly banter but the discussion around this topic made me very concerned about what new tricks the financial services industry will pull out of their bag in the future? Read these posts carefully (Michael James has some data on it as well).

Than the day I bought it about nine years ago, which is not a bad investment. I base this all on the wacky assessment notice that I got from MPAC . I don’t actually believe the evaluation as a real value that I would get if I sold my house (without taking into consideration all of the associated costs with selling a house), however it is an interesting number to start with. 

The actual evaluation will not be implemented right away, it will be gradually raised until 2012 when this value will be in place, which is more interesting, since if the housing market in Ottawa remains robust, my house may be worth even more by then? Maybe not, but it is something else to consider in this wacky equation.

Does this mean I will be paying more property taxes? Given that my evaluation has gone up about 11% from the evaluation I had in 2005, I think my property taxes will not go up that much in reference to this evaluation, however, my guess is other charges from the City of Ottawa will increase my property taxes by a fair amount this coming year. My first property tax bill arrives some time in January.

Percentage of Home Ownership

If I am to assume that this evaluation is relatively close to what the market will pay for my house, it does change how much (as a percentage) of my house that I own. Figuring out how much I still owe on my property, I actually own about 60% of my house currently, which is a reassuring feeling, however, it’s not like I can jettison 40% of the house and thus be out of debt. 

The other problem is, all other houses around me are appreciating in value as well, so the value of my house as an investment is not that great, in that it is unlikely I will move out of it and into a much cheaper house in the near future.

Gas Below 90 cents a Liter

Speaking of wacky, in Ottawa gas dropped below 90 cents a liter for a little while, which is very interesting. The Canadian Dollar has swing like a pendulum, but now with lower gas prices, suddenly traveling becomes much cheaper than it was going to be six months ago. Will gas prices stay down? Don’t know, but it’s nice to see for now, as it makes running my cars (and snow blower) much cheaper right now.

Stocks Still Dropping

The world continues to be jittery about stocks and they continue to drop in value for now. Rate cuts continue in most countries trying to stimulate spending, but a lot of folks are just worried and are going to keep their money in their wallets for now, until they are sure their jobs are safe.

More Job Cuts

Rumor has it that my former employer will soon be adding to the employment pool, by laying off another 18% of their work force (I have heard, this is unsubstantiated rumor), which will make looking for jobs in Ottawa that much harder. Not all the job losses will be in Ottawa, but their continues to be a steady flow out.