Will taxes be the death of small businesses in Vancouver?
Tax reform in Vancouver is an issue that has been simmering behind the scenes for years, September 25th it's about to come front and centre
Some would more simply say that cities develop according to classic capitalist principles of accumulation, profit and creative destruction (see Logan and Molotch, see David Harvey). This is what cities are, what cities do, but in the past 100 years or so they've learned to race to the top or come crashing to the bottom at rapidly increasingly speeds. In the last few decades it's thanks to globalization in particular, as capital flows more quickly and accumulates or flees in ever greater displays, from Dubai to Detroit. Vancouver's experience is the former, let's hope it's never the latter.
This aside, there are some simple nuts and bolts fixes that could potentially go a long way in changing the course that Vancouver is on. Municipal tax reform is one of them. Better connecting our built form to local economic development is another.
Cause and Effect
There's a web of cause and effect between speculation, livability, affordability, taxes and density in this city. While it has been argued by successive city councils and academics alike that density is more environmentally preferable to sprawl, increasing density also causes speculation, lifts property values and thus taxes and rents.
The fact is cities receive 8 cents per dollar of income tax collected by the Federal Government yet are home to 80% of the country's citizens. We are an urban country, but you wouldn't be able to tell that based on how we spend our tax dollars at the national scale.
Local governments are badly in need of revenues to make up for pressures put on them by Federal and Provincial devolution (downloading of responsibilities without corresponding shares of taxes gathered to pay for services) and on paper real estate development appears an attractive option as this particular tax imbalance persists. Some local governments have also become accustomed to leveraging development for a number of amenities or community benefits in the process.
While it may seem that cities, eager for an increase in property taxes and funding for amenities, would benefit from this it is also potentially entropic as far as the local economy is concerned; construction jobs aside (and that's a big aside I'll grant).
Paul Sullivan, former Co-Chair of the Fair Tax Coalition, pointed this out to Vancouver's City Council when his number crunching revealed that the replacement of commercial corridors with condos actually netted a financial loss for the city.
In short, we need to rethink highest best use
Healthy cities are constantly in a state of development, when a city reaches stasis that's not a particularly good sign, but development doesn't necessarily mean growth, nor does it need to result in constantly rising property values.
Development is the process of the city becoming itself, reinventing itself and sustaining itself. Part of Vancouver's current challenges come from the fact that there has been a lopsided focus on high density residential development and that has caused speculative hot spots where a spot rezoning or the anticipation of increasing profitability have sent shocks to local streets and neighbourhoods.
When we have built we haven't built for jobs. Not in our industrial lands, not in our commercial corridors, and where commercial development has happened in a pedestal or podium we've too often seen a large floor plate with a large franchise, well capitalized restaurant group or other corporate entity take up the street front after completion. Because of the way we build and the way we tax, those types of businesses are made more feasible, plain and simple.