Patti Bacchus: The rich are revolting over the school surtax

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      “How many people here own homes valued over $3 million?” Almost every hand in the packed, stuffy Jericho Hill gym goes up, including mine. “How many of you will be hurt by this tax?” Almost every hand shoots up. Mine does not.

      Hurt. What do you think of when you consider a government policy that hurts people? I think of cuts to programs and supports for kids with special needs, low-income families, single parents, people with disabilities, and seniors living in poverty and facing eviction from their rental apartments.

      I think of parents scrambling to find affordable housing and childcare and have enough left over to buy food for their kids. I think of the kids who arrive at school hungry on Monday mornings after going all weekend without a proper meal.

      West Point Grey homeowners pack the Jericho Hill gym on West 4th Avenue for the school-tax town-hall meeting on May 27.
      Patti Bacchus

      I don’t think of people who own $7-million homes facing a higher tax bill as being hurt in that kind of way, but some folks in that situation claim they’re “victims” of Vancouver’s overpriced housing market and that B.C.’s new school surtax on homes valued at more than $3 million will hurt them too. It’s an unconvincing argument.

      West Point Grey’s anti-school-tax raging rally

      My husband and I are Point Grey homeowners, and we’ll be paying the new school surtax next year. We bought our first Point Grey home (a condo) in 1990 and bought the house we’re in now in 1999. It was a stretch to come up with the money pay the mortgages over the years, at a rate of about 14 percent when we started. But we liked the neighbourhood and thought it would be a nice place to raise our kids, so we managed to do it. We thought it was worth the pressure it put on our household budget, and it was.

      It also turned out to be an excellent financial decision, which was really just luck. The lot our house sits on is worth seven times what it was assessed for in 2000. Each year when we open our B.C. assessment notice, we marvel that our home earns more in value each year than most couples do working full-time, and it just sits here, not exactly busting its stucco behind. To top it off, our house’s increased value is a tax-free capital gain, while employment income is not.

      We also acknowledge the injustice of this, and how those who have, get more while those who don’t and work hard for their money fall further behind as Vancouver home prices go up and move more out of their reach each year.

      I went to the West Point Grey Residents Association (WPGRA) town-hall meeting last Sunday (May 27) to see what all the fuss was about regarding the increase on the school-tax portion of property taxes for homes valued over $3 million that will go into effect in 2019.

      I arrived early to find a group of outraged homeowners—skewing decidedly to the older, white, and male of our species—gathered on the grassy slopes of Jericho Hill for an anti-tax rally before the meeting got underway in the Jericho Hill gymnasium on West 4th Avenue.

      They were signs variously accusing attorney general and Vancouver-Point Grey MLA David Eby—who was speaking at the town hall—of evicting grandparents from their homes, of being a heartless communist and thief, and claiming that “Eby wants to confiscate your hard-earned home savings” and that the surtax—that will cost the owner of a $4-million home an additional $2,000 a year—is “hurting seniors and working-class families the most”. I kid you not.

      What’s in a name?

      There was no shortage of misinformation to go with the outrage that carried into the town-hall meeting. Apart from more claims that Eby is personally forcing owners out of multimillion-dollar houses (baloney), speakers claimed such nonsense as “the average Vancouver home price is $3 million” (it is not), that none of the tax will go to schools (given the big chunk of the province’s general revenue that goes to education, that’s unlikely to be the case), and that this is just the first move in government’s plans to take people’s homes away (you be the judge).

      West Point Grey homeowners line up to speak at the May 27 school-tax town-hall meeting.
      Patti Bacchus

      A lot of the arguments against the tax seemed to be along the lines of “just because we’re rich doesn’t mean we’re rich”. An Eby comment that Opposition leader Andrew Wilkinson, who was present, held his own meeting at the Arbutus Club, which Eby described as a club for the “super wealthy”—the nonrefundable, nontransferable fee to get on the club’s waiting list is $65,000—was met with howls and boos of indignation.

      A consistent point of argument was that the tax is called a school surtax, which many claimed is misleading. They insisted it’s a brand-new tax that won’t even go to schools and that the provincial government shouldn’t tax property since it’s just paper wealth. It’s a reasonable point at first glance, but also flawed.

      The school surtax is an add-on to the existing school tax homeowners pay with their property-tax bill every year. It will apply to homes assessed at more than $3 million and goes into effect in 2019. The rate will be 0.2 percent on the value between $3 million and $4 million and 0.4 percent on the assessed value over $4 million. An owner of a $4-million home will pay an additional $2,000 in school tax, where an owner of a $5-million home will face an increase of $6,000.

      It hardly seems like a truly hurtful hit to someone sitting on millions of dollars of unearned equity, and those who are house rich and cash poor and are over 55 (which most at the rally appeared to be) can defer property taxes through a government program that charges a rock-bottom-low interest rate of 1.2 percent, and then pay it off when they sell their homes. There’s a similar deferral option for families raising kids.

      Many complained that Eby and the government are being deceptive if all the money isn’t going to schools. If you follow that argument, we’ve all been duped for years by previous governments that collected the tax through the school-tax portion of property taxes. The school tax collected with property tax all goes to government coffers, and school funding comes out of general revenue. Education spending tends to be about three times the amount that’s collected via the school tax, and the rest comes from general revenue.

      In Vancouver, with its relatively dense tax base. Vancouver property owners actually pay more than 100 percent of what the Vancouver school board (VSB) gets in annual operating funding, which is a much larger portion than property owners in most school districts pay (the average is about 35 percent). But if you add what goes to private schools and VSB capital projects, Vancouver’s current school-tax portion wouldn’t cover what comes back to the city in education funding each year.

      But that’s really neither here nor there. If government had tried to call this tax something else but still collected it via the school-tax portion of property tax (the existing mechanism for the provincial government to tax property), it would have been a brand-new tax. If they’d done that, I expect the howls from the angry multimillionaire homeowners would have been even louder and angrier.

      Where will the surtax revenue go?

      Eby was clear the money collected via the surtax will go to support the government’s fiscal and service plans, which include a big funding boost for public education, amongst many other things, including low-income housing, and increases for health care and childcare.

      Given that the existing school tax only generates about a third of the provincial education budget, at least a portion of the $200 million the surtax is expected to raise will probably end up going to education.

      This sign is posted in front of a home in Point Grey. The property is assessed at $2,146,200, which means its owner will not have to pay the school surtax.
      Patti Bacchus

      Government should have made a firm commitment to use it for education, whether by paying for teachers or speeding up the seismic-upgrade process or funding badly needed schools at the Olympic Village or in Coal Harbour. They could—and should—still do that.

      The surtax opponents make a valid point that this additional tax levy wasn’t mentioned during the election campaign. If the NDP planned to bring it in, they should have said so. No one likes surprises that cost them money.

      I have a ton of respect for Finance Minister Carole James. She has one of the toughest jobs in government: figuring out how it can deliver on its many promises to make life more affordable for struggling British Columbians without plunging the province into debt. I think she’s done an admirable job of finding ways to raise revenue to help those who need it most in a way that inflicts the least amount of pain on B.C. residents.

      Keep the tax, but earmark it and explain it better

      Government got this tax mostly right. They need to tweak it by clearly designating the proceeds for schools and doing a better job of educating the public about the school-tax levy homeowners already pay and how government funds education.

      Those who have more, should give more.

      I consider myself and my family some of the lucky ones that should be tapped to pay a little more in tax to make life more manageable for people who’ve found themselves on the other side of the crazy real-estate market. While our gains may only be on paper until we sell our home, they’re there and they give us a lot of good options for our future. We’re lucky. If we don’t want to pay the additional tax, we can defer and pay it off when we sell and we’ll still have lots of equity left over.

      A woman spoke at last weekend’s West Point Grey meeting about the surtax and complained that her house was assessed at $6 million but probably wasn’t worth that much. Eby suggested she appeal her appraisal. She said that wasn’t the point and that she couldn’t afford the tax. She asked what she should do. Eby said she could take advantage of the one-percent deferral rate. She said she didn’t want to. She said the tax wasn’t fair and told Eby to take it “somewhere else”. I wonder where that might be.

      My goodness. I imagine most British Columbians would be thrilled to have such problems and options. For many, real debt—the kind where your liabilities exceed your assets—is a grinding reality with no relief in sight.

      I don’t know what happened to the values we learned in school, where those of us who have more should share with those of us who have less.

      Hearing those people—many who pay dearly to send their kids to exclusive private schools and to join private clubs—boo and hiss Eby, who is taking real action to tackle the money-laundering and corruption that’s feeding the real-estate market, was deeply disheartening and, yes, revolting.

      A local doctor wrote in the Vancouver Sun that the tax is divisive and “pits citizen against citizen and foments conflict, envy and disrespect”.  He’s wrong. It is growing inequality that divides us. Our out-of-control real-estate market is creating winners and losers, and that’s what leads to conflict, envy, and disrespect.

      The surtax is one component of government’s plan to tackle that, and it’s a comprehensive plan that is long overdue after the previous government turned a blind eye for so long.

      Patti Bacchus is the Georgia Straight K-12 education columnist. She was chair of the Vancouver school board from 2008 to 2014.