Kimberley City Council had a robust discussion around the flat tax Monday evening, with Coun. Kent Goodwin leading the charge to start the process of ending the flat tax and Mayor Don McCormick arguing that it resulted in a net zero for the city and could in fact slow Kimberley’s new start housing, which has been doing well.
The flat tax was brought into play years ago to try to compensate for widely varying property values in Kimberley. In the early 2000s for example, you could have a house in the downtown area valued at $50,000 while a new home on the ski hill might be valued at $600,000 or more. The flat tax meant that both the properties paid the same amount as a portion of their taxes rather than relying solely on the mill rate.
Goodwin has argued against the flat tax for some time, saying it was unfair and regressive. He campaigned on that idea in 2014.
“Kimberley is one of only five communities in B.C. with a flat tax,” he told Council. “And our flat tax is the highest in B.C. Reducing it slowly over the next 10 years is a good step forward.”
Coun. Bev Middlebrook, who called into the meeting as she has been on medical leave, said she strongly supported Goodwin’s motion.
Coun. Albert Hoglund said he wouldn’t support it; it was wrong, he said.
“The flat tax was put in when the mill rate was outrageous for higher level homes,” he said. “
I don’t think that disparity has changed that much. I’m afraid it will stop the building we have now. This will increase the taxes for higher level homes substantially.”
Coun. Darryl Oakley said he did support it and thought it was a good thing if done slowly over ten years.
“The time has come to say goodbye to the flat tax,” he said.
Mayor Don McCormick said that the flat tax was designed to use in conjunction with general taxation. In 2015 the flat tax accounted for 27 percent of general taxation.
“The flat tax taxes lower value homes at the same rate as higher value. It keeps the mill rate taxes lower and in a community like Kimberley it’s important,” he said. “We have to keep tax rates attractive for resident attraction. We are in competition with other communities on these lifestyle immigrants.”
The direct result of knocking $80 off the flat tax, the mayor says, is a three per cent increase in the mill rate. And that will be a really big increase for homes valued at over $400,000, which is about what it costs to build a new home these days.
“The assertion is that lower tax properties are owned by people unable to afford the flat tax,” McCormick said. “But there is a tax deferral system in place for those who can’t afford the taxes. You defer them until the home is sold. A large number of the lower priced properties are vacation homes and rentals. The landlords can afford to pay the flat tax.
“Kimberley relies on residential taxes. 86% of our taxes are residential.”
McCormick argued that Council had not fully researched the consequences of lowering the flat tax. He offered a deal — defeat the motion and a task force to examine it more closely would be formed.
Council didn’t take the offer. Councillors Goodwin, Oakley, Middlebrook and Kitto voted to reduce the flat tax by $80 this year.
McCormick was disappointed in the vote.
“It doesn’t work with our strategic priorities. There’s no new money even though the majority will pay more. We are trying to keep this year’s tax increase to 3.46 percent. With this the mill rate will go up a further three percent.
“We are going to price ourselves out of the market with these mill rate increases. If we could get rid of the flat tax without detrimental effect, that would be one thing.”
In the end, McCormick says as it stands it’s only for this year.
“I guess at the end of the day, taxpayers will weigh in on this.”