It's not about the business; it's about the incentives
There's nothing like a tax break for a luxury brand to help fill the opinion pages of your local newspaper. But while the city's plans to provide an incentive for a Porsche dealership in Vanier make for easy headlines, tweets and petitions, we've been debating the wrong issue.
Let's start by dispensing with the idea that a high-end car dealership should be placed in a different category from any other business. All legal businesses should be equal in the eyes of government, and there's no good or bad money in tax policy. So if the city decides to create incentives to stimulate development in a particular area, it can't turn a company down because some people don't like the brand or the net worth of its customers.
There's nothing ethically or inherently wrong with selling something expensive to someone who wants to buy it. Getting self-righteous about a vendor of expensive cars is simplistic, fatuous and arbitrary. We don't seem to get as sanctimonious about expensive restaurants, even though they might be just as out of reach as Porsches for low-income families.
And a luxury dealership might be a better employer and corporate citizen than another business that sells less-expensive products. Indeed, in this case, the members of the Mrak family are long-standing community leaders who have a track record of philanthropy and service.
Does that mean I'm on Team Porsche in this fight? Not exactly.
The issue is not whether one particular business should receive a property-tax incentive from the city, but whether any business should. The argument from proponents, including the local councillor and the mayor, is that you can revitalize a neighbourhood and stimulate development on unused land by giving a bit of a financial nudge to the property owner. And remember: it doesn't cost the city anything because the increased taxes from the property are greater than the rebate. Easy win!
There are several problems with that argument. First, if it were true, then the city should apply it universally. Based on that simple math, anytime someone builds an extension on their home or puts up a building on an empty lot, the city should rebate anything up to 99 per cent of the resulting tax increase. Because, hey, we'd still be ahead, right?
Second, it's based on the false assumption that property development is an infinite game. Politicians love to talk about job creation and increased tax revenue when a new restaurant or grocery store opens, but the total amount of food purchased doesn't change because there are more sellers. Likewise, a new car dealership in Vanier means there won't be one somewhere else, where the city might have collected all the property taxes without any rebates.
As a result, any incentives provided for development in Vanier are not simply the city forgoing a portion of the cash it never would have otherwise received. On the contrary, it's an actual expenditure. Ultimately, this is not really a story about a car dealership capitalizing on a city tax incentive. It's about politicians investing taxpayers' money in a development project. In a zero-sum game, that's money that won't be available to spend on other community benefits. The question we should be asking is not which businesses should be eligible but whether this is the best use of our cash.
It would certainly be nice to see the revitalization of Vanier continue. But it would be better if that happened because businesses saw genuine opportunity there, rather than because the city paid them to put up buildings. The city's role should be to invest in community assets that enhance neighbourhoods and make them safer and more appealing, not to give tax incentives based on the flawed arguments of infinite economic growth and a net gain in taxes.
Mark Sutcliffe is a longtime Ottawa entrepreneur, writer, broadcaster and podcaster. He hosts the Digging Deep podcast, the Mark Sutcliffe show on CityNews, is a business coach and adviser, and is a chair with TEC Canada. His column appears every two weeks.