There are two big problems with our property taxes: they are too high, and too low.

How can that be? Well, it’s because in Ontario, as across Canada, property tax is actually two taxes: a tax on land, and a tax on buildings.

Taxing land value is fair, because a site’s value stems from the community around it; land rent is higher in the middle of a bustling city than in a quiet village, and higher in a town than in a remote wilderness.

When realtors say the three most important things are location, location and location, they are right; the value of a site comes from what you can do there, determined by what is around it. Roads, services, and customers are all vital links for a business, so even though remote land is cheaper than land near a city, smart businesspeople pay more to be where they can easily access inputs and markets.

On the other hand, taxing the value of buildings is harmful, penalizing those who maintain or improve their properties while rewarding those who let them run down.