Canadian cities receive only 10 cents for each tax dollar they pay

By Mike Layton

With all the talk about tolls and taxes, I feel I need to admit something: I don’t mind paying taxes.

The reason I don’t mind paying taxes is simple — taxes are the price we pay for living in a great city like Toronto, the city I think we can make even better.

Yes, I want to make sure my taxes are going to important things: transit, roads, parks, shelters, and childcare for families. Our society and economy are made more prosperous by the taxes we pay to support them.

Yes, I want to make sure my taxes are not being wasted. I want to make sure taxes are fair and everyone is paying their share based on their personal benefit and what they can afford.

After three years on the Toronto Budget Committee, I have come to learn a couple of things that I’d like to share with you.

First, no matter what you hear on talk radio or read in the newspaper, Toronto has a revenue problem — not a spending problem. Sure, some long-term decisions seem frivolous, like spending billions to maintain an elevated expressway east of Jarvis Street and building a one-stop subway in Scarborough where more people could be served by a seven-stop at grade rail system for less money. But these are only two very politicized decisions, ones whose alternative solutions would also cost money, and only two out of thousands of ways the City of Toronto spends our money for our benefit.

Each year city staff and councillors identify more efficient ways of delivering services for less and find between $100 and $300 million in savings. But despite these savings, we still struggle to meet the increasing costs to deliver and expand services to meet the growing needs of our communities. This is because our taxes are not keeping pace with the increasing costs. Can you believe that Canadian cities receive 10 cents of each tax dollar they pay? This is simply not enough to deliver the day-to-day services we expect and deserve.

Second, promises to freeze taxes without lowering services is a farce. We all know costs of services will keep going up; even if we find millions in efficiencies (which we regularly do), and if we don’t raise the money to pay for existing services, service levels will eventually suffer. We might be able to last a year or two on our reserve funds, but once they run out (and they quickly are), we will be hit with the hard reality of a city without resources to provide services people depend on and expect.

To make matters worse, the main source of revenue for cities is property taxes, but they don’t increase with inflation. The federal and provincial governments not only have greater taxing powers, but many of their taxing sources increase automatically with inflation. So, cities without the power to raise needed revenue must contend with a decreasing share of revenues. And, unless we keep our taxes at least at pace with inflation, we will keep falling behind.

Third, while tolls sound great, they are not the best way to raise money. Tolls are terribly expensive to collect (every $1 collected costs about $1.40 to collect) and they disproportionately impact those who live in the outer areas of our city and depend on their cars because they don’t have access to transit. Property taxes, sales tax, and income tax are all revenue tools that are much easier to collect and can be implemented more fairly than tolls.

Toronto City Council recently voted in favour of a regional sales tax, tolls on city maintained expressways, and a new hotel tax. I supported all three. Council did so because the Toronto mayor and councillors were under the impression that the Province of Ontario would grant Toronto the power to implement tolls, but not any other tools. Sadly, despite whatever agreement the mayor and premier had, the premier has decided not to give Toronto the power to implement its transit and affordable housing agenda.

Don’t get me wrong — the new gas tax revenue will be helpful, but it will barely cover the maintenance costs of the Gardiner and the Don Valley Parkway. Far more concerning is the fact that the province is rejecting the city’s request for powers that will help to make Toronto more financially stable.

Finally, it is becoming increasingly common that politicians all want someone else to pay. While it is important that those who benefit from services, even if they don’t live in Toronto, should help pay for them, it will not be enough. Our city needs to find the best tool that will pay for much needed infrastructure while balancing its operating budget and maintaining fairness in how we raise revenue.

Tolls, parking levies, and sales tax can help achieve that, but many politicians simply don’t want to have a difficult conversation with their constituents and admit that we will need to pay for the city we want.

Mike Layton is the city councillor for Ward 19, Trinity-Spadina.

Correction: The original post of this article listed the date as February 2016.

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