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Residential property taxes are on the rise in many Canadian municipalities, although the reasons for the upward pressure may vary from region to region. While all homeowners feel the burden of rising property taxes, concerns are often raised for elderly homeowners since most of them live on fixed incomes. Tn fact, some municipalities offer tax rebates for senior homeowners. Other policies, such as tax credits in some provinces, aim to relieve the housing cost burden for all low-income individuals and families.
Taxes can be regressive or progressive. A tax is termed regressive if its rate decreases as income rises. And property taxes are demonstrably regressive with respect to family income (Boadway and Kitchen 1999; Chawla and Wannell 2003; Maslove 1973; OFTC 1993). The income tax system is progressive since to some extent it is based on ability to pay.1
Property tax, on the other hand, does not take this notion of ability to pay into account, and is instead levied on the assessed (market) value of property owned. Indeed, elderly low-income homeowners pay a greater proportion of their income on property taxes than their non low-income counterparts: 11.7% compared with 4.2% (Chawla and Wannell 2003). On the other hand, non low-income families have their income taxed at a rate more than five times that of their low-income counterparts (17.8% compared with 3.4%). Rising property taxes may create economic hardship for elderly homeowners with low incomes.
Concerns about the property tax burden for seniors are often related to the long period that many have lived in their homes, resulting in a discrepancy between the assessment base (the current market value of the home) and their ability to pay. The recent surge in residential housing prices has often been greatest in mature neighbourhoods with concentrations of older homeowners. Thus a general rise in mill rates (tax paid per dollar of assessment) and a relatively high increase in assessed value can create a problem for many elderly homeowners in these neighbourhoods.
Furthermore, senior families generally live on fixed incomes with little prospect of their income rising to meet expense increases that exceed cost-of-living adjustments to their public pensions. In contrast, young low-income families are at the start of their careers, and most can expect their earnings to...