No solid foundation for Edmonton to adopt mansion tax, report suggests

The Magrath Mansion on Ada Boulevard in northwest Edmonton was up for sale in 2020 with an asking price of $5.25 million.  (Jane Robertson/CBC - image credit)
The Magrath Mansion on Ada Boulevard in northwest Edmonton was up for sale in 2020 with an asking price of $5.25 million. (Jane Robertson/CBC - image credit)

Edmonton's tax experts say the city should not adopt a progressive tax system, but one city councillor believes asking luxury homeowners to pay a higher property tax rate is feasible.

Coun. Michael Janz asked city administration last summer to outline options for the city to create a higher tax bracket on homes valued at $1 million or more.

"Those who can pay a little bit more should pay a little bit more," Janz said in an interview Friday, citing the city's limited means to address the ongoing affordable housing and homelessness crisis.

The report released Thursday says administration has considered several approaches to a progressive tax system but most are "inadvisable" given legislative limitations.

But Janz said taxation reform could help offset the high amount of income some people spend on rent or mortgages.

'If there's a way that we can reduce taxes for them by recouping more revenue from those in the two, three, $4-million home range… then we should do so," Janz said.

Under the city's current property tax system, everyone pays the same rate but the amount varies based on the assessed value of a home.

The city report shows that increasing the rate by 10 per cent on Edmonton's estimated 4,800 homes valued at $1 million could generate $5.3 million a year.

That translates to 0.3 per cent tax reduction for properties below the threshold.

Edmonton has 700 properties assessed at more than $2 million, which could translate to $1.65 million a year or 0.09 per cent tax reduction for homeowners under $1 million.

'Serious reservations'

Anton Szabo, director of the city's assessment and taxation branch, said they don't recommend switching to a progressive system.

"We have serious reservations, I'll put it that way, about trying to do a tiered approach to property tax rates."

Cities, towns and municipalities in Alberta are governed under the provincial Municipal Government Act, which Szabo says is fairly prescriptive about how property tax and subclassing can function.

"We have some serious legal concerns about whether that's even within our authority and there are also a lot of practical concerns."

Unlike federal and provincial governments collecting income tax, the city has no way to gauge  how much money a homeowner makes.

"We have no access to income information and to even go down that road would require quite a bit of effort," Szabo said. "How would you prove it?"

A progressive tax rate may lead to increased complaints for properties above the threshold, the report says.

"A property valued at $999,500 and a property valued at $1 million would pay drastically different amounts of tax, and there's a question there around equity," Szabo said.

The report outlines the option for the city to create a residential subclass, an idea Janz hopes to discuss with colleagues at an executive committee meeting Feb. 15.

Janz also noted that some people in Edmonton own several homes.

"I think we need to treat the people who are using housing as an investment commodity to make money and have a return on investment — we need to treat them differently than people who need a home for shelter and belonging."