Putting the brakes on the car tax

Stick this in your tailpipe you right-wing nut jobs: this pinko is glad the car tax is dead.

Toronto’s Personal Vehicle Tax was one of the most unfair and ridiculous taxes possible, and one of the great blunders of the Miller era. It was a flat tax which everyone in Toronto paid, regardless of income or use, simply because they owned a car and had an address in the city. For the roughly 1.5 million Torontonians who live away from rapid transit and have no choice but to drive a car, many of whom are lower-income families, it was another burden they were forced to bear on already strained budgets. Meanwhile drivers from outside the city limits continued to use our roads for free, clogging the city’s transportation system. Revenue from the tax was never allocated to road maintenance or anything that would benefit drivers. And, like pouring salt in a wound, the tax was due on your birthday.

What a stupid idea. Rather than coming up with some kind of intelligent way of collecting revenue from road users or an incentive tax to entice drivers to switch to other modes of transit or just drive less, the city slapped a flat tax on everyone who lives here, effectively a punitive tax for owning a car. All it did was provide ammunition for the Rob Fords at election time.

However, while the elimination of the tax is a step in the right direction, it leaves an additional $48 million hole in city revenues. Several motions were made in council to address the shortfall, including guarantees that no services would be cut or that the city would look for other revenue generation methods (read: raising property taxes) all of which were soundly defeated. What that means is now the city will be $48 million poorer next year, with no direction so far from council as to how to deal with the loss.

Strangely, even though Rob Ford swore that there would be no service cuts or tax increases, he voted against all of the amendments to guarantee it. Perhaps that means he knows there are only three ways to handle shrinking revenues:

  1. Increase revenues elsewhere. That means raising taxes and fees, or coming up with new ones. Ford has said he won’t.
  2. Cutting expenses. So far council has axed $48 million in revenue, while cutting slightly less than $1 million in expenses with new council spending limits, much of which wasn’t spent anyway. Ford hasn’t announced where the big savings are going to come from yet, but has promised no “major” service cuts.
  3. Go into debt. Ford hasn’t said anything about this, but the very definition of deficit is when expenses are higher than revenues, and that gap is supplemented by borrowing. Under Ford, that gap has grown. And that means lower taxes today, in exchange for much higher taxes later.

When pressured by other councillors to reveal how he plans to deal with the shortfall, Ford had no answers but simply repeated his campaign points: respect for taxpayers, stopping the gravy train and such. For the sake of the city, Ford needs to put away the campaign rhetoric (he already won, remember?) and start talking about just how he plans to accomplish all of his promised goals, and if he doesn’t have a plan then that needs to be his absolute first priority.

As for how to bridge the funding gap left behind by the Personal Vehicle Tax, the knee-jerk reaction is of course road tolls on the city’s freeways. But tolls are still essentially a flat tax on vehicle use, and will be a burden for the very same people who suffered most from the car tax. At least the people paying the tolls will be the people directly using the road, and not limited to Toronto residents. But there are better ways. For example, almost a year ago I posted an article about the New York Metropolitan Commuter Transportation Mobility Tax, a small progressive tax on businesses in and around New York City designed to collect revenue from those that benefit most from the region’s transportation network, one of the finest in the world. Toronto is also home to Skymeter Corp, world-leading designers of electronic congestion pricing solutions which will benefit cities as detailed by founder Bern Grush in his blog, Grush Hour.

Back in the clamshell at City Hall, rookie councillor Josh Colle presented a motion that council submit the original 2007 Hemson Consulting Ltd. report to the Budget Committee for consideration as part of the 2011 budget process. Mayor Ford was one of 24 councillors to vote against submitting the report, which detailed alternative ways for the city to raise revenues to avoid the need for a property tax increase. Colle’s motion was defeated 24-21, and the Budget Committee will not consider that report.

Respect for taxpayers indeed.

About Greg Burrell

Greg is an accountant, cyclist and political observer living in Toronto, Canada with too many cats.
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  • A couple things:
    – First off, I thought the number they were talking about yesterday when I was there was $64M, and the CFO also mentioned that they conservatively estimated an additional $2M in costs (but hoped it would be lower) to dismantle the program so I see at least a $64-66M hole.

    – Ford *was* asked (by whom, I forget) to promise he would not raise user fees. He dodged this question. And of course the amendment to promise not to cut services was also defeated. I suspect we are very likely to see user fees increase and possibly cuts in places that don’t affect his voting base. (i.e. not auto-related) If I had to guess, the biggest cuts will be to arts and culture, possibly libraries…

    • I thought it was more like $64M too, but the live blog I was watching yesterday kept saying $48M. I think it was Cllr Mihevc (among others) who directly asked Ford to promise not to raise fees, but he wouldn’t.

  • A couple things:
    – First off, I thought the number they were talking about yesterday when I was there was $64M, and the CFO also mentioned that they conservatively estimated an additional $2M in costs (but hoped it would be lower) to dismantle the program so I see at least a $64-66M hole.

    – Ford *was* asked (by whom, I forget) to promise he would not raise user fees. He dodged this question. And of course the amendment to promise not to cut services was also defeated. I suspect we are very likely to see user fees increase and possibly cuts in places that don’t affect his voting base. (i.e. not auto-related) If I had to guess, the biggest cuts will be to arts and culture, possibly libraries…

    • I thought it was more like $64M too, but the live blog I was watching yesterday kept saying $48M. I think it was Cllr Mihevc (among others) who directly asked Ford to promise not to raise fees, but he wouldn’t.

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