Low taxes can impede profits
Profit is good. It is the lifeblood of our economic system. It provides money for reinvestment, higher wages, expansion and the promise of profits provides incentive for investors.
The business community went before city council last week and asked if the tax rate for businesses could be lowered over 16 years, therefore allowing them to earn a larger profit. Residential property owners would have to make up the difference.
Council rejected city administration’s recommendation that the business rate be decreased and kept the tax rate steady until 2017 — a rate that the Canadian Federation of Independent Business says makes us the second best place to do business in Canada behind Calgary. Evidently the lack of a struggling professional hockey team hurts our ranking.
If Saskatoon is the second best place to do business in Canada, ranked only behind one of the world’s premier cities, why do we have to lower our tax rate? It was a case of the North Saskatoon Business Association and Kent Smith-Windsor’s Greater Saskatoon Chamber of Commerce failing to make a persuasive case, and the debate being more or less put aside for four years.
While some are happy to see the debate go away, because it’s never fun to pit competing interests in Saskatoon against each other, it is a discussion we need. How we fund our civic operations will go a long way toward deciding what kind of city we will have in the future.
The big question on the table is: What makes a city successful? Smith-Windsor never misses an opportunity to claim our last business tax cut predicated the economic boom in Saskatoon. What is often lost is that the global boom in the price of oil, potash, uranium and farm commodities occurred at the same time.
I know that the chamber and city council have some clout, but it’s a far reach to suggest the economic boom is connected to a small tax cut for local businesses.
There is very little connection between lower taxes and economic growth in cities. Most of North America’s vibrant and prosperous cities have much higher business and personal tax rates than does Saskatoon. Some of the lowest tax rates on the continent are found in places where hardly anyone is starting a business or moving there to live.
People want to live in a city where we can enjoy a decent quality of life. In Saskatoon that would include the Meewasin Valley, a new art gallery, our many festivals and, if Mayor Don Atchison is correct, a short commute across one of our many bridges. All these amenities cost money to build and — despite our budgetary practices around here — to maintain. Almost all of that cash comes from tax dollars.
Not only do the citizens who work and shop here love the amenities, but our business community relies upon roadways that are maintained and cleared of snow for deliveries, a public transit system to bring staff and customers to their establishments, and police, fire and ambulance services to keep our streets and citizens safe.
While the taxation stream is different, we are all very much dependent on an educated workforce that is a big part of a region’s competitive advantage. All this is dependent on tax revenues to operate.
When civic services don’t function properly, the cost to business is far more than what they pay in the mill rate. I was downtown last winter for all of Saskatoon’s storms and — you know what — even a couple of days after the last flakes fell, the streets were empty. Parking spots weren’t cleared, and the deep snow piled along the curb meant that I was constantly helping people over the snowbanks to get from their car to the sidewalk. Then I was pushing them back out so they could go to their next errand. Ours wasn’t a business friendly downtown.
Two days of an empty downtown after each big snowfall. Once, the snow wasn’t removed along major downtown streets for four days. I started to hear from business owners at the time that the problem wasn’t the taxes they were paying, but it was the lack of value they felt they were getting in return.
We are a winter city that can’t figure out how to do business in the winter, partly because our low tax rate makes it impossible. Businesses aren’t paying a lot of taxes, but at the same time they aren’t getting much value for their dollars either.
Taxes should be kept low as possible, but we need to be careful that we aren’t starving ourselves as a city. Profit is good, but without a vibrant and functioning city in which to do business, profits are awfully hard to come by.