But here in Calgary, when housing prices rise, mill rates automatically fall – the assessment system is revenue neutral. So, for example, this past year the assessed value of Calgary homes increased, on average, by eight percent. A person whose property value increased by exactly 8 percent had unchanged property taxes. A person whose property value increased by less than 8 percent paid less taxes; a person whose property value increased by more than 8 percent paid more taxes.
There’s a disadvantage to the Calgary system. If there’s wide-spread inflation that increases both the costs of providing city services and property prices by five percent, holding the mill rate constant is a way of protecting city revenues against inflation. A “revenue-neutral” property tax system would actually cause tax revenues to fall in real terms.
But after hearing so many confused discussions of property taxes (“Are we talking about the mill rate here, or about the taxes I’ll have to pay?”) Calgary’s revenue neutral policy seemed very appealing for a while.