Few if any of us appreciate paying our property taxes, more so with the obligatory increases now being planned by municipal governments. At the individual level, we can see where some of the money goes, at least locally: roads, recreation facilities and the like.

You pay taxes and you get services … at least in theory. That’s not the case with businesses, which pay even more exorbitant rates, further, well, taxing the value-for-money proposition.

For small businesses in particular, the high property taxes pile on top of a tough economy, runaway provincial and federal taxes, nanny-state regulations, labour legislation and skyrocketing electricity rates.

In Woolwich, the local government collects the taxes, but keeps less than a quarter of what comes in, bearing the brunt of public ire while passing on the bulk to the Region of Waterloo (57 per cent) and the school boards (20 per cent).

Teresa Armstrong, Woolwich’s manager of revenue/tax collector, explains there is a  misconception of where funds go once residents have paid their property taxes.

“We send the tax bill out, they pay it here, so they think you have all of my money – we keep our small portion and then we write cheques four times and say, ‘here is your money that we have collected on your behalf,’” she said.

Using their portion, the township pays for things such as governance, parks and recreation, roads and fire, while the regional piece focuses more on maintaining regional roads, police and ambulance services, social services, public health and the library services, as well as transit.

Referencing the actual services funds from the property tax go towards, regardless of whether you’re talking about residential or commercial property taxes, Woolwich director of finance Richard Petherick  says that they are arguably the most answerable.

“It’s probably also the most transparent and accountable tax,” said Petherick, referencing annual income, sales tax amounts in comparison to property tax paid. “From a government level, we are so close to the people we serve that there is just that transparency and we are accountable to each other.”

Looking at the commercial property tax specifically paid in the township, fairness is up for debate.

According to a Canadian Federation of Independent Business study that looked into how Ontario and its municipalities tax business properties, “business owners in Ontario pay a much larger share of the property tax bill, even though residents remain the primary beneficiaries of municipal services. On average, business owners pay two to three times as much in property taxes compared to residents in their local municipality pay on the same property value. This represents an unjustifiably large burden placed on businesses. While some progress has been made to address the imbalanced property tax load in Ontario, businesses continue to be overtaxed.”

Of all the municipalities examined, the report named Woolwich as having the fifth highest total commercial to the residential tax gap. Commercial property owners paid 3.01 times more than residential property owners or $3,064 per $100,000 of assessed property value compared to the $1,019 paid by residents.

The report also argues the unfair nature of having business owners subsidies taxes, and ultimately the cost of services for residents who primarily get more use from them.

“There is not a good economic rationale for charging businesses higher property tax rates than residential properties, and yet everybody does it,” said Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto.

She notes that from an economics point of view there are a couple of things one may look at, the first being the fact that property taxes are levied to pay for services that the local governments provide.

“There has been a bit of a literature on this that suggests that residential properties use more services than business properties. For example, business properties often had their own security, their own fire prevention, their own garbage pickup – they don’t necessarily use as many services as residential property taxpayers. So there is an argument that they should pay less, not more, based on the benefits received from local government services.”

Secondly, stemming from the fact that those businesses tend to be more mobile than residential taxpayers.

“Business move around more in response to, say, taxes than residential homeowners do, so that is a reason to charge business less, not more because they are more responsive to taxes.”

So with there being some key reasons on why businesses should not have their property taxes be higher than residential, why does everybody charge businesses more?

Slack offers, “Well, probably because residential taxpayers vote.”