Bait and switch

Dictionaries define “bait and switch” in the political context as “a ploy of offering a person something desirable to gain favour then thwarting expectations with something less desirable.”

According to many cottage owners across the province, the provincial government’s latest ploy to defer a portion of their 2010 and 2011 school property taxes is an example of “bait and switch” — the “bait” being the simple offering of some measure of property tax relief, while the “switch” is the deferral plan which is mere “tinkering” with the problem of a severe rise in education property taxes paid to school divisions in which cottage owners reside on a seasonal basis.

“It makes no sense whatsoever,” Dave Crabb, the president of the Manitoba Association of Cottage Owners (MACO), told the WREN. “I don’t see where anyone is being done a favour.”

A growing group of cottage owners are of the same opinion as reported in the WREN in the June 25 issue. In fact, owners seem to be downright angry that the province is merely throwing them a “bone” to deal with what has become a major concern in cottage country. 

In complete disregard to the objections raised in presentations to the province, the Premier Greg Selinger government went ahead and passed the Cottage Property Tax increase Deferral Program just before the end of the last legislative session.

MACO, which is part of a coalition opposed to funding education through property taxes that includes WinnipegREALTORS®, the Manitoba Real Estate Association, the Winnipeg  and Manitoba chambers of commerce, the Keystone Agricultural Producers, among many others — Winnipeg council passed a motion calling for an end of funding of education through property taxes — says the deferral plan still requires cottage owners to pay their taxes as well as interest accumulated, when the owner dies or the property is sold. Should a cottage owner die and one of his or her children inherit the cottage, the deferred tax becomes a type of inheritance fee imposed by the provincial government that has to be paid before the son or daughter can take possession of the cottage.

The most recent province-wide reassessment has meant that cottage owners’s share of school taxes has taken a dramatic jump, while permanent residents are less affected. On the other hand, rural municipality property taxes remain relatively fair with respect to services delivered. 

But, school taxes levied are the antithesis, as cottage owners receive absolutely no benefit from the property taxes they pay — cottage owners cannot vote for the schools trustees who levy the taxes nor can their children become students in a division’s school in which their cottage is located. Nor can cottage owners receive an tax break through the province’s education tax credit since they are ineligible as the break only applies to permanent residents.

If the province truly wanted to deliver fairness to the system, it would remove education funding through property taxes and fund schools solely through income taxes instead of passing Bill 5, the deferral plan.

Evergreen School Division, which includes such popular seasonal areas as Gimli and Winnipeg Beach, witnessed an overall assessment increase of 47.1 per cent for cottage owners based on the increase of property values from 2003 to April 1, 2008. Overnight, according to an editorial by Jim Mosher in the Beausejour Review, the value of lakefront property in Gimli’s upscale Pelican Beach, jumped 100 per cent to 200 per cent, while lakefront properties rose just as sharply.

In Victoria Beach, one cottage owner’s bill for school taxes went from $1,575.20 to $1,933.34, while the municipal tax bill rose from $1,402 to $1,437. The municipality kept its tax bill relatively low by adjusting its mill rate, but the school division chose to raise additional taxes by using a higher mill rate.

Actually, the municipal bill included a special levy for a new water treatment plant, which was $326 of the cottage owner’s tax bill that will be in effect until 2014. Removing the annual fee means the cottage owner’s municipal tax bill was just $1,111.

In most cases, school taxes make up two-thirds of a cottage owner’s annual tax bill.

One effect of the exorbitant school taxes is that owners are finding it increasingly difficult to maintain their cottages. It should be pointed out that not every cottage owner is wealthy. Quite a number are working-class Manitobans who have either inherited or purchased a a relaxing home away from home during the summer in order to escape the hectic pace of city life. In other cases, cottage owners are retired seniors on a fixed income. 

Another troubling effect is that many are being forced to put their cottages up for sale as a result of the education tax increase. As school taxes increase, a traditional escape for many Manitobans of modest means will increasingly be only available to the very wealthy.

Many of the cottage owners’s comments published last week in the WREN felt the provincial government’s  deferral plan was acknowledgement that something was seriously wrong with the taxation system.

“I am in favour of paying a fair share, what becomes the real issue is how to determine the right formula for fair,” said one Victoria Beach respondent. “We pay a $5,000 tax bill on a 1,700-square-foot seasonal cabin, most of which is school tax. We pay more than that in Winnipeg, which is mostly school tax.”

The respondent said the system should  be designed in such a manner that “we should pay school tax at our homes as we should, but pay a reduced levy on seasonal residences” in which they derive no real benefit — they can’t elect trustees, nor send their children to the rural-area schools.

“I see this bill (No. 5) as a tax referral loan program meant to appease cottage owners by reducing the immediate impact of unfair and higher taxes,” said another respondent, “but which will actually result in the cottage owners paying interest on top of their higher taxes.”

What the cottage owners is implying is that by passing Bill 5, the provincial government engaged in a “bait and switch” that failed to address the underlying problem of a grossly unfair taxation system.