Finally, Toronto is having an adult conversation about city finances.

This week city council begins public consultations on the 2016 budget. Importantly, the discussion is framed by recognition that the city has a revenue problem. Toronto lacks the revenue tools other major cities have to sustain required services and infrastructure.

The overdue message now coming out of city hall is that a dynamic, successful city needs stronger financial footing. The projected gap for the 2016 budget is variously estimated between $90 and $124 million. Then there’s the problem of how to pay for Toronto’s unfunded capital project backlog that totals $22.34 billion.

Already, a number of worthy ideas are being proposed. These include restoration of past revenue streams like the vehicle registration tax, adding designated tax levies for infrastructure spending, and adopting entirely new revenue sources such as municipal road tolls, sales and income taxes.

Surprisingly, what have not yet entered the conversation are reform proposals to make the current property tax system both fairer and more lucrative.

How the property tax is levied is overdue for change. It’s time to replace our “one size fits all” property tax rate with a variable rate tied to a property’s value. Doing so would allow us to both lower property taxes for many, and increase the overall amount raised by the tax.

Currently, all properties in the same class (e.g. residential, commercial, industrial) are charged the same tax rate. This means that the lowest valued home pays the same tax rate as the highest valued home.

This contrasts, of course, with our income tax system where different tax rates are applied at different income levels. Currently there are five federal tax brackets, ranging from 15 per cent to 33 per cent depending on income. A variable tax rate allows a lower tax “bite” on the less wealthy as the more prosperous shoulder more. With a bigger bite on the wealthy, it also allows more overall revenue to be raised.

This would also be good public policy for a city concerned with budget shortfalls and rising income inequality. Yet we have never applied different property tax rates to different values of property. We should.

It would allow us to lower property taxes for many owners of small commercial and lower valued residential property, making home ownership more affordable. At the same time it would raise taxes on higher valued homes that have benefitted most from Toronto’s rising real estate market. And there is room to raise their taxes — Toronto’s residential property taxes are the lowest of any GTA municipality.

Here’s how a variable property tax rate system could work to Toronto’s advantage. In 2015, Toronto’s median residential sale price was $517,500.

A first property tax bracket should have a tax rate assuring that in 2016 all properties worth under $400,000 pay less property tax than they paid in 2015. Then a second bracket for homes worth $400,000 to $600,000 where the currently planned increase for 2016 was applied.

These two brackets account for about 60 per cent of the city’s property tax payers. Under a variable tax rate system, their tax for 2016 would be less or the same as it would be under the current flat tax.

Then for properties worth more than $600,000 higher tax rates would apply to more expensive homes at varying incremental brackets. The top bracket and highest tax rate would apply to homes worth over $2.5 million. These properties would pay more under a variable than flat tax. But they have also benefitted most from the city’s rising property values.

Provisions for deferred payment until home sale could be offered to homeowners richer in assets than in cash flow. Undoubtedly these cases will exist as exceptions. But they are no justification for taxing homes worth millions the same rate as the lucky first-time homeowner buying a “handyperson special” at a fraction of that cost.

Loading... Loading... Loading... Loading... Loading... Loading...

Hands up, all in favour of raising more revenue from a fairer property tax system.