By Trevor Busch
Town of Taber councillors will suffer an indirect pay cut in 2019 following a split vote on the implications of new federal legislation that eliminates a previous one-third tax exemption for elected officials.
Under previous federal tax law, such an allowance amounting to more than one third of the official’s salary plus allowances qualified for a federal exemption. Introduced in 1946 under the Federal Income Tax Act to “recognize the value of the work of elected officials” the exemption sought to compensate officials who were incurring expenses without being adequately reimbursed. The exemption was extended to municipally-elected officials in 1953.
Federal legislation (Bill C-44) passed in 2017 eliminates this tax exemption effective Jan. 1, 2019, and will result in “substantive changes to after tax compensation” for elected officials. The decision has been left up to each individual municipality if or how they might act to counteract the effects of the change.
“In effect, what it means is a 10 per cent reduction in our take-home pay,” said Coun. Garth Bekkering at town council’s Dec. 17 regular meeting. “Depending on your income level, of course, but it’s the average.”
Bill C-44 was justified on the basis that the exemption “provides an advantage that other Canadians do not enjoy.” While reimbursements for specific expenses accompanied by receipts are not taxable — and will remain so — the federal government took the view that a special allowance that does not require receipt accounting substitutes for salary is therefore a taxable benefit.
According to documentation from the Federation of Canadian Municipalities (FCM), without enhanced compensation at the municipal level the tax changes will significantly reduce an elected official’s after tax compensation.
“Over the last 15 years, some larger municipalities have opted out of the tax exemption with the stated objective of bringing more transparency to government,” reads a statement in the FCM background information reviewed by council. “For example, Ontario amended its Municipal Act in 2001 to provide flexibility to municipalities wishing to do this. Calgary’s city council eliminated its exemption in 2006.”
In September 2017, FCM adopted a resolution to press the federal government to retain the exemption, but the government refused to budge from their position on the issue. In responding to the change, some communities have decided that an overall increase in total remuneration for elected officials is necessary to fully or partially replace lost compensation.
“What did our neighbours to the north here do, the M.D. of Taber?” questioned Coun. Jack Brewin. “They just went through this, I can’t remember their recommendation. I think they went to option one (compensating the salary increase in full) I believe, but I’m not sure of that.”
Debated at the M.D. of Taber’s Dec. 11 regular meeting, that council passed a 4-3 resolution to take no action with regard to the compensation afforded its elected officials.
“I don’t think any of us got into this to make a buck at it, so let’s just get on and do the vote on this,” said Coun. Joe Strojwas.
While FCM acknowledged that taking no action effectively decreases take-home compensation for affected officials, it also eliminates the need for a municipality to find cost savings or contemplate property tax increases.
“This (tax change) may discourage participation in municipal administration, especially among youth,” reports FCM. “This is a real threat for the smaller municipalities that may struggle most to boost salaries — and where current compensation rates can be a barrier to more inclusive participation.”
Following discussion on Dec. 17, council voted 6-1 to take no action and accept the change in “one third” federal tax exemption for information. Brewin opposed the motion.
In March 2017, previous council approved a salary increase for the mayor’s position and that of councillors. Starting with the present 2017-2021 council mandate, the mayor’s compensation saw a 39 per cent increase to $42,817, while councillors received a 32 per cent raise to bring the councillor average to $24,765.