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Public Works: Taxing For Transit

Other cities use sales tax to fight gridlock. Why can't Toronto?

Public Works looks at public space, urban design, and city-building innovations from around the world, and considers what Toronto might learn from them.

Photo by {a href=""}Lavandeer{/a} from the {a href=""}Torontoist Flickr Pool{/a}.

Last week, voters in Atlanta, Georgia shot down a proposal that would have implemented a one cent sales tax to fund transportation projects. The plan was defeated by an improbable coalition of the Sierra Club, the NAACP, and the Tea Party, bonded together by a general distrust of politicians and by the populist paranoia that dominates American politics in the 21st century.

However, even though Atlanta voters weren’t inclined to pony up tax dollars to unclog their streets, sales tax as a funding mechanism for transportation infrastructure has been a winner elsewhere.

In 2008 Los Angeles county residents approved Measure R, a half cent sales tax increase to fund transit expansion, highway upgrades, and other transportation improvements over thirty years. The new money has had a galvanizing effect on public transportation, with fourteen new transit projects now in planning or under construction. In November, voters will be asked to decide whether to extend the sales tax until 2069, making it effectively permanent.

While LA is the most well-known example, sales taxes are probably the most common local funding mechanism for transit systems across North America, with municipalities from Denver to New York City using some form of the levy to keep the buses and trains running.

So why not Toronto? The idea has been discussed ad nauseum since at least the middle of David Miller’s last term as mayor. It might even be popular: a poll in April of this year found that 74 per cent of GTA residents would favour a small sales tax increase if the money were funnelled directly to transit.

One problem, of course, is that Toronto is largely subject to provincial whim when it comes to paying for the TTC, with Queen’s Park approval needed for most taxes. The City’s perpetual fiscal crunch was to have been mitigated with the 2006 City of Toronto Act, which gave our municipal government access to new “revenue tools.” It enabled City Hall to create the land transfer tax and the (since rescinded) vehicle registration tax, which bumped up our operating revenues and helped address systematic imbalances in the annual budget cycle, but doesn’t generate the kind of money we need for subways.

Back in 2009, then-Municipal Affairs Minister Jim Watson slapped down a municipal sales tax proposal from uppity budget chief Shelley Carroll, advising that the province had no intention of giving up its monopoly on point-of-purchase shakedowns, and possibly inspiring some under-the-breath “you’re the revenue tool!” muttering from Carroll.

With council smacked down, the idea was largely dropped until a couple of months ago when 91-year-old Mississauga mayor Hazel McCallion, emboldened by her popularity and apparent immortality, called for a regional transit tax with a sales tax as one of the options. Premier Dalton McGuinty offered a polite and vague minority government-style response, suggesting that gridlock issues needed to be debated further before new levies could be contemplated.

Even the ambitious and ultimately doomed OneCity transit plan floated by TTC Chair Karen Stintz (Ward 16, Eglinton-Lawrence) and Vice Chair Glenn De Baeremaeker (Ward 38, Scarborough Centre) back in June relied on property tax adjustments rather than a sales tax for funding. Property tax is a sensitive issue in Mayor Ford’s Toronto, many councillors (including Carroll, and colleagues on both the left and right of the spectrum) expressed concerns about using it to fund transit, and OneCity never even made it to council floor, with the tax proposal the first piece to be shelved.

If a special property tax hike is off the table, we need money from somewhere else. Actually, we need it from a variety of somewhere elses, and given the dollars required, that will have to include a new sales tax. Just because it hasn’t been done, doesn’t mean it can’t be done, and with the GTA expected to add 2.8 million people in the next 25 years, something will have to be done.

Regional transit agency Metrolinx is due to release its study of revenue tools that could fund transit expansion in Toronto and other municipalities next year. Last month, city council decided to try to form a working group with Metrolinx and those municipalities, so that cities could provide input into that suite of funding options. When they hold their meetings, we hope that the idea of a sales tax is finally given the consideration it warrants. It’s time for somebody to pick up this idea and run with it.


  • Anonymous

    It’s worth pointing out that just as the TTC gets no funding from the province of Ontario, Atlanta’s transit system gets ZERO from the state of Georgia and it has always been thus. Aside from small existing portions of sales tax in two counties and a modicum of federal funding, MARTA depends on fare recovery to a similar degree that the TTC does. By defeating this proposal, Atlantans are promoting congestion and basically shooting themselves in the (gas-pedal) foot. We should be very wary of making the same mistake.

  • Anonymous

    It just sucks how we took 2% off the GST and nobody really noticed… that’s 12 BILLION that could be going directly into transit EVERY YEAR if the stupid Conservatives didn’t set the money on fire.

  • Anonymous

    This city has no planning in terms of transportation, I’m sorry to say. The GTA needs to start collecting taxes – not only to improve existing public transportation, but to save reserves for future ones. Sure – expansion projects can be debated, etc, but lets start saving for these projects! Why rely on debt the whole time? If the Gardiner was to collapse tomorrow, there would be no money in the coffers to build a replacement.

  • Mark

    We should also have the Province look at something like New York’s Metropolitan Commuter
    Transportation Mobility Tax.

  • Anonymous

    1 % Non Solution that Leaves a Transit Funding Shortfall of 99 %.

    A 1% sales tax increase
    would barley accomplish enough to pay for the administration of such a new tax
    and would be a tax that would most likely come with an annual increase until
    this new sales tax was 5% or 8% on
    top of the existing harmonized GST of 13%.

    The possibility
    realistically exists that Torontonians and all Ontario residents, tourists and
    business could in a few short years have a sales tax and combined GST existing
    tax that exceeds 20%!

    We do not need new taxes,
    rather better management of existing revenues and expenditures by our
    politician and unelected technocrats and bureaucrats.

    What is required is a commitment from
    both the federal and provincial governments to annually transfer 25
    cents from existing provincial and federal fuel taxes on gas, diesels gas, fuel
    and oil.

  • Bill

    What’s funny about this is that the 1% tax is aimed at improving public transit which is aimed at curbing gridlock (what the Toronto Transit Alliance is keen on doing). However, an increase in public transit will have little to no effect on gridlock, as shown by numerous studies. Something else is needed — and that is to punish drivers and make driving more expensive. What is proven to work is a congestion fee for cars entering the city core. This is what we need to be talking about….. not some 1% tax that will need to be paid by people who don’t even own cars. You drive, you pay.

  • Anonymous

    I’m not sure why no one ever mentions this, but we used to have an extra 2% sales tax that funded federal projects. It was called the GST, you might remember it. Sure, Harper was nice enough to roll it back to 5% but clearly life did not end when the sales tax in Ontario was 15% instead of 13%. This alone makes it very easy to argue for a dedicated GTA sales tax. Make it a 2% hit — 1% for regional transit projects, and 1% for other capital needs for the local municipality (be it Toronto, Ajax, Brampton, etc.)

    We did it before. We can do it again.

  • Peter Clarke

    Career Politicians, Political Parties, Civic Action Group’s and the Media All Support New Taxes for Transit on Individuals and NOT on Corporations andUnions!