Yes, Toronto may have to raise taxes. Why is that such a bad thing?

OPINION: Provincial cuts have put the city in a tricky fiscal position — but higher municipal taxes are an option that both the left and the right should support
By Matt Gurney - Published on May 23, 2019
Toronto Mayor John Tory and Ontario Premier Doug Ford
Toronto mayor John Tory and Premier Doug Ford have been at odds over provincial funding cuts. (Cole Burston/CP)

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Premier Doug Ford on Tuesday spoke in Ajax to a group of chambers of commerce representing the municipal governments in the eastern GTA. The message he delivered was a familiar one: governments need to get more efficient. Ford announced that the Progressive Conservatives would make more than $7 million available to large municipalities and school boards to cover the cost of line-by-line spending reviews, intended to help those entities realize Ford’s target of 4 per cent cuts.

“We’ve heard from a few municipalities that they will need to raise taxes,” Ford told the crowd. “That new taxes or deep cuts to services are the only solution ... I am here to tell you there is another way out there, my friends, because there is only one taxpayer.”

Toronto mayor John Tory’s ears must have felt a bit toasty at that moment. Toronto has been outspoken in asserting that the province’s decision to cut the funding it provides to jointly funded programs leaves the city in a fiscal pinch. The exact figures are disputed: Toronto says the annual impact will be $180 million; Ontario says it’ll be closer to $130 million. In either case, since the province revealed its plans only after Toronto had locked in its budget for the year, this is a real challenge.

Given that the mayor and some of his council colleagues have already argued that the cuts — specifically, to Public Health — will put lives in jeopardy, it would be very difficult for the city to go ahead and cut the services. (Once you play the “people will die” card, you’re kind of committed to saving them.) Realistically, then, unless Ford blinks (and that’s always possible), Toronto will likely have to raise taxes in the middle of a fiscal year.

Would that be such a terrible thing? If Ford sticks to his guns and the provincial cuts stand, and if Toronto makes up the revenue shortfall by raising taxes, isn’t that actually something both left and right should — dare I say it — support?

To state the obvious, the budget cut, much like the slashing of council last year, has been handled badly by the province. Reducing the size of council and altering the city’s share of joint-funding arrangements are within the province’s purview and were entirely fair ideas to consider. Surprising Toronto with them and ramming them down the city’s throat was callous, perhaps deliberately so.

But what we’re left with might not be so terrible.

Consider: How many times have we heard in recent years that Toronto’s revenues are too low? That John Tory’s decision to keep Toronto’s property-tax increases “at or below the rate of inflation” has, slowly but surely, eroded the city’s revenue base? How many warnings have there been that Toronto is massively exposed by its reliance on revenues from the land-transfer tax, which can swing wildly up or down according to trends in the real-estate market? My colleague Ed Keenan was writing about all these issues just a few months ago in the Toronto Star. He noted that Toronto’s property-tax rates are, by GTA standards, actually quite low, and that even if the city were to raise them by as much as 20 per cent, that would simply match the GTA median.

I don’t mean to pick on Keenan or to caricaturize his argument. I simply offer him as a representative example of a long-running, serious contention in this town: that we don’t raise enough revenue of our own, that we need to raise taxes, and that the reluctance of council to do so is a real but politically insurmountable problem.

Well, folks, opportunity may be knocking. I can’t imagine that anyone on the left would have wanted to do it this way, and it needs to be pointed out that any tax hike here would simply sustain the status quo. That is, it wouldn’t make new funds available for new or expanded programs; it would just hold the line. But it would at least be a crack in the keep-taxes-low monolith that has loomed over all of Toronto’s politics for a decade now. And if a future provincial government were to restore some of the now-withdrawn funding, Toronto would have a few extra bucks to spend on its own priorities.

The idea has appeal for those of us on the right, too. While I can’t condone the way in which the cuts were announced and implemented, the province isn’t lying when it says that it needs to find efficiencies. Ontario’s deficits are a problem, one that Ford is rightly determined to address. If Toronto (and other governments and entities) end up making good on the province’s cuts by raising taxes on their constituents, that’s a good thing.

It would mean, in effect, that consumption Ontario had been funding with debt would now be funded in real-time by taxes. This is what fiscal conservatives claim they want — use debt, when necessary, for capital investments and use taxes to cover daily operating expenses. Rather than punting the bill for services consumed today off to some future generation, pay for them out of pocket with our tax revenues in the here and now.

If the public feels as if it’s overtaxed, it can then ask itself, through our societal and demographic processes, what it’s willing to forgo in exchange for lower taxes. That would be a healthy thing: to have actual debates about what we value and what we don’t and then assign our finite resources accordingly. It’s a lot harder to do that when governments feel that they can fund everything indefinitely by borrowing the money and making it some future government’s problem. Having Toronto directly pay for the services through its own taxes helps with that and with another small-c conservative ideal: it puts the money and the decisions with the level of government closest to the issue.

I’m a realist, of course. The shouting between Queen’s Park and city hall will continue until morale improves. And the province is absolutely being cute by pushing any possible public anger at higher taxes or fees onto another level of government. But the next time you hear a politician warning that providing services might require higher taxes, we should all ask them a simple question: Why is that a bad thing?

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