When planning their budgets, cities take fiscal transfers from Quebec into account in their revenue calculations. Quebec cities suffer from a double dependency; on the one hand to property tax and on the other hand to tax transfers.
In addition, the Quebec government had to come to the aid of cities in managing the health crisis. It is once again the lack of autonomy of the cities that is highlighted by this situation. It is also the lack of budgetary predictability which is in question and which makes the budgetary exercise more complicated when it is adopted.
Cities can already act using the fiscal powers they hold. This will have the effect of reducing the proportion of income coming from property tax. These tax measures will also have the effect of inducing better individual behavior in environmental matters.
If cities want to increase their fiscal autonomy, the use of eco-taxation is not sufficient. Especially since the revenue from these budgetary measures should decrease, as the positive changes in behavior take hold.
Cities are in the best position to know the issues in their territory and be able to respond to them. This is why they should have more financial autonomy to improve their action on the ground.
In some cases, cities encounter more complex urban issues, such as homelessness, the housing crisis, strong commercial and industrial activity or a higher rate of air pollution.
This is why Quebec should negotiate new transfers of responsibilities with several cities that must manage social, environmental and economic issues that are more complex than others. Quebec could thus change the Cities and Towns Act and create new powers for certain cities. It is time to put an end to the uniform legislative measures which apply indiscriminately to all cities.
Allow the use of municipal income tax
To achieve this, cities must have the means to finance these responsibilities. This is also necessary in order to make them accountable for these new responsibilities. One of the most promising avenues is municipal income tax. Several states around the world allow cities to use this progressive fiscal power. This is the case, for example, in France and the United States. Instead of receiving a transfer negotiated with Quebec, the cities could themselves go and find the sources of revenue that they really need.
Municipal income tax would be fairer than property tax. The latter is based on property valuation, which is based on real estate speculation. This would help reduce the pressure on property owners by reducing the share of property tax. There would be a direct impact on access to property.
By reducing dependence on property tax, all-out real estate development in many Quebec cities could also be slowed down.
However, this measure must absolutely be accompanied by a new formula for calculating Quebec tax transfers. This calculation should be based on the risks to come in connection with the various crises that cities will have to manage. These transfers should no longer be random at the whim of the various Quebec governments. This is why we must create a permanent municipal emergency fund to secure cities in their crisis management.
This measure would also avoid multiple ad hoc cycles of requests from cities. Better predictability of funding in times of crisis will help cities to better adapt and maintain their services to citizens. For example, at the start of the health crisis, if this emergency fund had existed, cities could have acted more quickly knowing that the money would be there. It is the same with the different weather events caused by global warming.
Cities need to be able to be more resilient in times of crisis. Quebec can help them by allowing them to be more autonomous and more responsible. It is urgent to review the fiscal pact between Quebec and its municipalities. It is also imperative that cities make more use of the fiscal powers they already have. This will have an impact by reducing the upward pressure on property taxes. This will also allow Quebec to reduce its share of income tax. Ultimately, it is the services to citizens that can be maintained and improved in order to guarantee and improve the quality of life for city dwellers, despite the various crises.