Manitoba Premier Brian Pallister says he’s committed to phasing out education taxes on farmland and other property over 10 years starting in 2022 when the Manitoba government’s books are expected to be balanced.
It’s a promise welcomed by farmers who say the burden of funding schools in rural areas has shifted disproportionally to them because the assessed value of farmland has risen faster than other property (see further down).
While some people are skeptical given it might not be a priority for future governments, what surprises others is that Pallister says he’ll eliminate the tax without replacing it to make up the $800 million in lost tax revenue.
“Our commitment is real,” Pallister told reporters by phone following his government’s throne speech in the Manitoba legislature Nov. 19. “We’ve demonstrated our competency in terms of delivering on tax reduction already,” he added, alluding to fulfilling a promise July 1 to cut Manitoba’s provincial sales tax by one per cent.
Why it matters: Manitoba farmers have long complained education tax on farmland is inequitable because it doesn’t reflect landowners’ ability to pay. But they say it’s more unfair than ever because land prices are rising faster than on other property.
As the education property tax, which includes homes, is phased out, the shortfall will be made up “by our growing economy,” some of which will be the result of increased value-added processing of agricultural products, Pallister told reporters.
“We’re going to find additional tax revenues without having to go back to Manitoba farmers and business people and saying, ‘hey, we need you to pay more on this category over here so we can pretend we’re saving you money over here,’” he said. “The thing that farm families know… is that net is what matters, not gross. So we want to leave the net incomes of Manitoba families higher, not lower, and that means lowering the tax burden effectively without increasing it somewhere else and offsetting the gains that you’re hoping to give people.”
Finding a more equitable way to fund education has been at the top of Keystone Agricultural Producers’ (KAP) agenda since its founding in 1984.
While Manitoba’s general farm organization was often circumspect about how to do it, sometimes members mused about using income tax, or a tax on homes, including farmers’.
KAP welcomed the Progressive Conservative Party’s promise to phase out the education property tax during the election, and did so again after the throne speech.
“On the issue of education property tax, we will note that the disparity between what farmers are paying and what the average homeowner is paying continues to grow,” KAP stated in a news release Nov. 19. “According to the government, once fully implemented, the average homeowner will save more than $2,000 annually, while many farmers pay 10 times that amount. We are ready to join the province in working together collaboratively on the implementation details as this is something we have been focused on for decades.”
However, KAP doesn’t want the tax cut to result in substandard education for rural students.
“KAP also believes that the next provincial government needs to take steps to ensure that rural and urban students continue to have equitable access to educational opportunities, and that this move doesn’t represent a long-term cut to the education system,” KAP president Bill Campbell said in an interview Sept. 4.
KAP says overall it’s pleased with the government’s throne speech.
“We look forward to working together on the issues that matter most to Manitoba farmers,” KAP’s release says.
The throne speech says the government will focus on “five key guarantees”: lower taxes, new jobs, better health care sooner, new schools, and a made-in-Manitoba climate and green plan.
Commitments related to agriculture and rural Manitoba include cutting red tape so farmers can serve local markets, implementing the Sustainable Watersheds Act and doubling the $52 million being invested in the Growing Outcomes in Watersheds (GROW) Trust, and hiring eight more conservation officers to help enforce the ban on night hunting and other wildlife regulations.
“Your government will eliminate provincial regulatory barriers that restrict the ability of our farmers to produce food for local markets, and free consumers to connect directly with local producers,” the throne speech says.
To reduce greenhouse gas emissions the government will raise the ethanol and biodiesel standards to 10 and five per cent, from the current 8.5 to 10 per cent, and two per cent, respectively.
“By displacing fossil fuels these measures will reduce emissions by 375,000 tonnes over three years, or the equivalent of planting 25 million trees,” the speech says. “These fuels will be based on Manitoba-grown corn and canola — a win win for our agriculture industry and the environment.”
The throne speech also promises action on crime and public safety, including in rural areas.
Attorney General Cliff Cullen will announce the details soon, Pallister said.
Farmland and education property taxes explained
The Keystone Agricultural Producers (KAP) says farmland owners are paying an increasing share of education taxes relative to other property owners.
Based on provincial government figures Manitoba farmland and building owners contributed $64 million of the $850 million in education property taxes collected in 2018-19. That’s 7.5 per cent of the total and accounts for the $42 million farmland owners received in education tax rebates of 80 per cent to a maximum of $5,000.
Averaged over about 10 million cultivated acres there’s about $6.40 an acre in farmland education taxes. But some farmers with higher-value land pay almost $30 an acre. On a 2,000-acre farm, that’s $60,000 a year in education taxes alone.
The shift in the education tax burden to farmers is due to two major factors. First, the province’s contribution to funding K to 12 schooling as a percentage is declining over time, while the municipal (local) share raised by taxing property, rises.
The other is the rapid increase in the assessed value of farmland, which has more than doubled in many parts of Manitoba since 2015. (Property values, along with mill rates, are used to calculate the amount of municipal and education tax property owners pay.)
Many Manitoba farmers were shocked when they opened their tax bills in the fall of 2016. Edgar Scheurer in the RM of Springfield saw his taxes (municipal and education) jump 95 per cent.
A farmer in the Municipality of Emerson-Franklin saw taxes on one quarter section up a whopping 111 per cent to $4,091.52 from $1,934.99.
Farm Credit Canada data showed, on average, the value of Manitoba farmland doubled over the previous four years.
Manitoba farmland values are still going up. This spring the Manitoba government mailed property owners the latest assessed values to be used in calculating 2020 municipal and education tax bills.
The assessment for a quarter section owned by this reporter and a family member in the RM of Lorne was up 12 per cent. Over five years its value went up 136 per cent and since 2013 is up 182 per cent.