Tax by Credit Card; who benefits Home   On Council   Inside Didsbury   Full Bio

Inside Didsbury Entry - Posted: Wednesday, April 14, 2021, 04:09 pm
credtcrd.pngAt the March 13, 2021 Regular Council Meeting Didsbury Town Council set in place by way of a motion a waiving of the administration fee for property taxes paid by credit card for 2021. The reasoning behind this is that Council believes this will help those experiencing financial difficulties with a means by which they can pay their taxes without incurring a late payment penalty. Administration believes this will also encourage Didsbury taxpayers to pay their property tax by the payment deadline, namely June 30.

Typically, residents and businesses paying their property taxes with a credit card would be charged an administration fee by the Town. This administration fee currently sits at 2.75%, an average of the transaction fees charged by the various credit card companies used to pay funds to the Town. It is a budget line in the operating budget of the Town. There are two issues associated with the waiving of the administration fees on credit card payments of property tax; one, the additional burden on the taxpayer and two, is it really helping those struggling with the affects of COVID?

Under normal circumstances where the credit card administration fee is charged to those wishing to pay their property tax by credit card, there would be 2 budget lines in the operating budget, one for the revenue generated and one for the expense charged by the credit card company. The net result of these two budget lines is a wash, a net zero. Because the two entries are a net zero in the operating budget, the administration fees charged on credit card payments do not affect the overall revenue from tax and therefore do not have an impact on the tax rate; the property tax taxpayers are required to pay.

With the waiving of the administration fee on credit card payments of property taxes, this expense now becomes a net loss; a line only on the expense side of the operating budget that must be covered by a corresponding increase in the revenue from tax on the revenue side of the budget or the reduction of another operating budget service to compensate for the waived administration fee. The waiving of this administration fee was enacted by Council for the 2020 taxation year as a measure to help residents struggling with COVID restrictions and amounted to almost a $10,000 cost to Didsbury taxpayers. For the purposes of comparison, during the 2019 tax year where there was no waiving of the administration fee, the administration fee for property tax credit card payments amounted to about $1500.

Although it would appear that this is of benefit to Didsbury taxpayers and will be presented and touted as a wonderful opportunity, the real truth is that it either increases the tax each taxpayer is required to pay or reduces some other Town provided service in the community. But be that as it may, and granted the affect on a Didsbury taxpayer's tax bill will be small, one has to wonder if it is actually providing benefit to the very people it is supposedly designed to help; those people struggling with the financial burdens of the pandemic.

To determine who the waiving of the administration fee will truly benefit requires thoughtful consideration. Although there will be exceptions, those needing help are the people in our community who have lost their job, have been laid off, are struggling financially to maintain ownership of their home, have sold their home in favour of more affordable living, are working whatever odd jobs they can just to put food on the table, whose employment insurance benefit has run out, or have already maxed out their credit card just trying to survive the pandemic. The likelihood of these people, already in financial distress, being able to take advantage of the waiving of credit card administration fees is somewhere between none and nil. So, who exactly is this initiative benefiting?

It will be of absolutely no value to 12% of Didsbury taxpayers whose property is subject to a mortgage and their monthly payments consist of PIT (principal, interest and taxes). They will see no advantage at all because their mortgage company collects and pays their property tax on their behalf. Mortgage companies do this to prevent property being held as collateral on a mortgage from falling into property tax arrears. These taxpayers are excluded from any help the initiative is intended to provide.

It will also be of absolutely no value to anyone renting residential space. These members of our community are not subject to property tax as it is their landlords who own the property and are responsible for the property tax. It could be argued that a considerable component of these members of our community are those who haven't been able to afford to acquire property representing the lower income sector of our community and could really use some help but will not benefit at all from this initiative.

Then there are those Didsbury taxpayers who utilize the monthly Tax Installment Payment Plan (TIPP) offered by the Town. This program allows taxpayers to pay their annual tax through monthly installments, a direct withdrawal from the taxpayers bank account. Constituting 52% of the taxpayer base in Didsbury it is these taxpayers who provide the operational capital to run the Town for the first 6 months of the year, to June 30, when taxes for the calendar year are due. As these taxpayers are like those who maintain a PIT mortgage on their property, these taxpayers, many of whom could be experiencing financial difficulty due to COVID, also have absolutely no opportunity to take advantage of the waiving of the credit card administration fee. (See my next blog entry for a twist on this.)

So who does this initiative really benefit?

Those not in financial distress, those who have navigated the pandemic somewhat unscathed are the ones in a financial position to take advantage of the waiving of the administration fee. The people who have the privileged advantage to chock up additional airmiles or cash back or other rewards offered through use of their credit cards are the ones who benefit. It certainly does not offer benefit to anyone with a mortgage where their periodic payments include PIT (Principle, Interest, Taxes) or those on the Town's TIPP program. It also does not offer benefit to anyone whose credit cards are maxed out in just trying to survive COVID. And it certainly does not offer benefit to those losing or forced to downgrade their home. And it certainly does not offer benefit to anyone living in a rental property. It is a misdirected, empty gesture offered by Council and administration.

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