Figure 1; Taxation Growth - Past, Present and Future
Taxes Growing Out of Control
The revenue from taxation increased by $8.4 million, or 38%, over the fiscal years 2011 to 2020. For comparison the Consumer Price Index (CPI) increased by only 18.3% during this same period.
As shown in Figure 1 above, the increase in revenue from taxation was fairly linear from 2011 to 2020. This greatly increases the confidence in a linear projection of tax revenue into the future as shown by the dashed lines. This linear projection, or Trend Line, shows that revenue from taxation has been increasing steadily at an average rate of $914,781.00 per year.
The 2022 tax revenue in the approved 2022 budget is $32.5 million which is shown on the graph by the yellow star. This represents an increase of slightly over $2.1 million from 2020. It's noteworthy to see that this lies slightly above the trend line which has a projected value in 2022 of only $32.2 million. This is an indication of the accuracy of the Trend Line. Therefore we can say with some degree of confidence that if Council continues on the path of increasing taxes at the same rate, the city’s revenue from taxation will reach $37.7 million in the next 6 years or $15.7 million greater than it was in 2011.
If, in 2011, Council had directed that all future tax increases be limited to inflation, then revenue from taxation in 2020 would have been $26,155.388 or $4.3 million less than what actually occurred as shown by the green line in Figure 1. When we project this into the future it gets even more dramatic. If inflation continues at the same rate and if tax increases had been capped at CPI in 2011, then taxes would reach $29,948,668 by 2028 which is actually $2.5 million less than what they are today.
The reason why tax increases climb exponentially, is the compounding impact that annual increases have on the end result. For example, a hypothetical council imposes a tax increase of 3% to a $1,000,000 budget in year one resulting in a new budget of $1,030,000 or an increase of $30,000. If it again imposes a 3% increase in year 2 the new budget would be $1,060,900 or an increase of $30,900. In other words the dollar value of the budget grows a little bit faster every year even if the percentage increase remains the same at 3%. That is because the percentage increase each year is not only applied to the original budget but also to all of the pervious increases of past years. The net result is that even if the percentage increase is small and remains the same each year, the size of the budget grows exponentially resulting in the size of the budget doubling in 24 years.