Fast Facts: Education property tax cut is misguided effort

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July 8, 2021

First published in the Winnipeg Free Press July 7, 2021

Manitoba property owners just received a large cheque in the mail from the provincial Minister of Finance. Why this money and why now?

Under the cover of the third wave of COVID, the Manitoba government made the largest single revenue cut in the province’s history by slashing the Education Property Tax. This massive cut benefits those least impacted by COVID while starving the public purse.

The PC party announced, if elected, they would eliminate the Education Property Tax just two weeks prior to the 2019 provincial election. This change to Manitoba’s tax regime was originally made with a commitment to move forward gradually, only after the budget was balanced and over a ten-year period. While the budget was officially balanced right before COVID hit, the pandemic quickly put Manitoba back in deficit status. Despite this, Manitoba Budget 2021 surprised many by committing to cut the Education Property Tax in half by 2022.

Property taxes are related to wealth and are an acceptable way to bring in needed revenue. Seven out of ten provinces levy an education property tax (BC, AB, SK, MB, ON, QC, NS).

Manitoba does not have the money to pay for this tax cut. The $384 million cost is being deficit financed. If the government follows through on its planned full phase out of education property taxes, it will mean a loss of nearly $1 billion annually. It is deeply ironic for this Manitoba government focused on eliminating the deficit to reduce revenue that will hinder its ability to pay down the deficit and debt in the future.

The tax cut will result in more severe cuts to education. Since 2016, provincial funding for K-12 education has been cut in real dollars by 7.6 percent on a compounded basis. Continued under funding will result in more highly visible cuts like the 130 teachers eliminated from the Winnipeg School Division. To keep up with current commitments and the cost of living, the education system requires funding at the level of inflation, high in 2021 at 3.4 percent, and for 1 percent enrolment growth, at a cost of $75 million more per year.

Students need more support to deal with COVID learning loss, which is estimated to be approximately 3 months to 1.5 years depending on the student’s socio-economic status. Instead of enhanced resources, this huge tax cut is being implemented at the same time as “The Education Modernization Act” legislation. Bill 64 eliminates school boards, locally elected experts with intimate knowledge of public school financing and operations. Cuts implemented by new business managers spells disaster.

The elimination of the Education Property Tax is profoundly unfair – those with economic means are rewarded with a tax cut while the education system is starved of money. Current and future children will pay the highest price with a lower resourced education system. It is a double whammy for students from lower income households, many of whom have parents who lost jobs or hours due to COVID.

Mid and upper income workers, who are more likely to be homeowners, have not been severely impacted by COVID.The Labour Force Survey shows that middle and upper earners did not suffer extensive loss of jobs or hours. Those earning $24 or less have lost jobs and/or hours - and are more likely to be renters.  

Renters will receive none of the so-called “tax relief” being offered to homeowners with the elimination of the Education Property Tax. There is no guarantee landlords will not continue above guideline rent increases after the two year moratorium and tenants lose out from the decreased tax credit from $700 to $525 a year. In contrast, landlords receive hundreds or thousands in rebates depending on how many properties they own. 

Cutting this tax for all residential and farmland property owners is an unnecessary, costly, wide-sweeping measure that most Manitobans do not want. In Manitoba’s own pre-budget 2021 survey, lowering taxes came in dead last among the pre-determined, six major budget priority areas. 

Instead of eliminating the tax completely, targeted measures should be made such as a progressive property tax credit that adjusts to income and inflation for the seven percent of seniors who are low-income homeowners to support them to stay in their homes. Farmland property tax is only 7.5 percent of this tax revenue and a targeted response should be developed for impacted farm families.

Funding for education is necessary now more than ever. The Manitoba government should retain the Education Property Tax and institute mitigating measures to deal with the impacts on low income and fixed income senior homeowners, farm families and renters.

 

About the author: Molly McCracken is the Manitoba director of the Canadian Centre for Policy Alternatives.

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