As municipalities do not have access to income or consumption taxes, and as senior governments are reluctant to grant municipalities access to them, local governments generally are obliged to use the real property tax as their major source of revenue.
The property tax is determined by multiplying the assessed value of a property by the tax rate. Positive attributes of the property tax thus include its simplicity of structure and calculation, even if there are differing tax rates for different classes (e.g., residential, commercial, institutional) of property.
Correspondingly negative attributes include its reliance on the accuracy and fairness of property assessments, and this has long been a source of legitimate criticism of both over- and under-evaluations, the former clearly punitive, the latter naturally beneficial.
Were the federation and the provinces to distribute a portion of income, sales, and payroll taxes to the municipalities, difficulties due to a degree of inelasticity in the property tax are mitigated. This is the instance in a number of foreign jurisdictions, such as Denmark.
As further example, a policy of the Council of Europe states in regard to the Netherlands that a fundamental right of local government is its power to impose local taxes and establish their rates. Even so, Dutch municipalities derive over 60% of their revenues from the real estate tax.
In the United States, many municipalities have access to direct income and sales taxation, and often to a vast array of other revenue sources. For example, municipalities in Illinois have access to some two hundred sources.
Swedish municipalities derive 100% of their revenues from income taxation; those in Belgium, Finland, Switzerland, Denmark, the Czech Republic, Iceland, and Luxembourg derive over 80% of theirs from income tax.
Whether Canadian senior governments legislate more flexible taxing capacity to the municipalities or whether they redistribute revenues, the result will be similar.
More of the story and on taxation, and the observations I collected on local government, appear in my two books on how to survive local government in a small town.