Toronto should use the City of Toronto Act to its full potential and implement new ways of generating revenue.
Pros: No additional legislation is required, the City has the capacity and authority to raise revenue through additional streams, ability to target revenues from fees and taxes to specific priorities, such as building and maintaining transit or green space, can augment traditional revenue sources and provincial transfers.
Cons: Political resistance to any new taxes or increases in current fees, hesitation at the municipal level to act independently.
The City of Toronto act afforded the city the broad authority to impose direct taxes and fees. However, the land transfer tax and the now defunct, vehicle registration tax are the only examples of the City executing its newfound authority. Instead, property taxes continue to fund close to 40 percent of the city’s budget, while other cities in North America, and especially those that Toronto competes with, have more diversified revenue streams. The property tax rate in the city is also much lower than that of municipalities in the GTHA, despite the greater scale, concentration, and costs of programs in the city. In recent years, property taxes have increased below the inflation rate and have been supplemented by revenues from the land transfer tax. In addition to pegging the property tax rate to inflation to ensure the funding of municipal government, it is time to explore the possibility of implementing new revenue tools such as sales taxes on alcohol, tobacco and entertainment or direct taxes in the form of parking levees, congestion charges, and development charge reform.
Guaranteed financial revenue, from sources such as a transit or congestion tax or the reinstatement of the vehicle registration tax, will provide the City with the capacity to dedicate funding to long-term projects and reduce maintenance backlogs on existing assets. While these taxes would provide dedicated revenue to essential city-building policies and programs, they must also be accompanied by increases in provincial funds for essential social services.
Image credit: Simon Cunningham, Flickr creative commons