When Is A New Tax Not A New Tax?

The Ontario Tories have decided that they want to fund transit and roads through gas taxes!

Cue the cheering peasants dancing in the streets … well, er, um, ah … maybe not yet.

John Tory has discovered that about a third of the tax collected on fuel does not actually go to funding roads and transit.  His solution to transit’s funding problems?  Just redirect that missing third to transportation (a little over $1-billion per year).  However …

We will have to wait up to five years for this to actually happen (beyond the 2011 election) as the provincial budget digests that level of hit on programs that use the “missing” billion.  I wonder how John Tory plans to pay for this while delivering on the usual Tory promises to cut taxes and reduce overall government spending?  This is almost as bad as waiting forever for Greg Sorbara to figure out that the province had money to spend on transit beyond his pet subway scheme.

So what do we have?  “New” funding for transit based on gas taxes, but no new gas taxes.  Efficiencies will be found elsewhere in government.  A billion a year is a lot of efficiency, and over five years, the Tories would no doubt find their own boondoggles to spend on.  With that kind of money, you could bury an “adscam”-sized project in the paperclip budget.  Maybe something like changing the provincial colours to Tory Blue to match their Ottawa cousins.

8 thoughts on “When Is A New Tax Not A New Tax?

  1. What great news! That means that with a Tory Tory Governments, the Tory-Tories will find a way of clawing back what the Fiberals gave to the transit agencies.

    Just when Ottawa was FINALLY able to retire buses over 20 years of age (the TTC has some catching up to do–but, alas, there are no more GM New Looks in Ottawa. Sob. OK, nostalgia moment passed), I guess we can all expect 1) a subway to the new-blue North of Toronto and 2) we’ll all be buying second-hand buses again.

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  2. …and how’s this for a long transit commute? On my OC Transpo bus this Monday morning (a rush-hour 67 HURDMAN/DOWNTOWN/CENTRE-VILLE), I looked on the floor and found a transfer, issued on Friday, July 6 at 10:40 AM. The route?: … a 21 BRIMLEY/TO KENNEDY STN. VIA SCARBOROUGH CENTRE!
    A little too far apart for interlining, no? But then, if the Tory Tories are elected…..

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  3. Hi Steve.

    This gas tax thing seems to keep coming back like Elvis sightings.

    Before Tory opened his mouth he should have considered several things. Does the gas tax actually cover the total cost of running both roads and transit? What happens to the services that receive the diverted revenues? How do they get funded if you divert gas taxes to roads and transit? And, is building more roads an effective solution to our mobility?

    I remember reading a book called “Boom, Bust and Echo”. It talked about the Baby Boomers and their effect on the economy. One interesting point tucked deep in the book was a report that claimed that the average driver was receiving a subsidy of between two and three thousand dollars per year. This report was done for the Calgary City Council. I have never seen it referred to anywhere else. If true, and these guys certainly are not a bunch of tree huggers, this blows the gas argument out of the water. The report said that a lot of the major costs, such as lighting, police patrols, and health care costs resulting from accidents, were being met from other budgets. I cannot recall if the cost of road delays and the economy and the cost of global warming were also considered, but those costs are very real. The cynic in me says that all costs would be considered if LRT were being built, so why not for the roads.

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  4. Ireland has cut personal and corporate taxes while massively increasing infrastructure spend – including LRT, metro, interurban and roads. I would argue for a different spend but the money is there – principally from consumption taxes. It is possible to manage taxation so that it grows with the economy using progressive taxes.

    Steve – all the matters is what Tory or McGuinty commits to spending and what on. It’s their job to make the numbers work and if we start debating where those taxes come from this thread will get closed.

    Clearly there are credibility gaps: Tory has his Harris-Eves cross to bear, and McGuinty has the regressive Health Tax and the commitment to close coal generation by 2007. However, McGuinty has offered MoveOntario and Tory knows he can’t be premier without transit dependent urban ridings. Our job is to ensure that any candidate who comes knocking knows that transit can attract votes.

    Steve: One source of funds available in Europe is the EU which has massively invested in infrastructure in some countries. Our equivalent, Ottawa, is not exactly in a rush to do the same, especially for transit.

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  5. @Mark Dowling: I think that Ireland’s massive and unprecedented economic expansion is the principal reason why they have been able to finance infrastructure investment from consumption taxes while cutting income taxes.

    The “whole pie” grew like crazy there over the last decade. If the same were true of Canada, maybe that strategy might fly here… but not now.

    Futhermore, I don’t think it is sufficenient to take a funding promise at face value without analyzing the source of those funds and how any (re)allocations of funds will cascade through the system and affect other government programs and spending.

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  6. One problem that’s not widely acknowledged is the fact that, at least in the US, gas tax revenues have not kept pace with the increase in kilometers driven. The federal and most state gas taxes have not increased in a number of years, even as the fact that cars today get much better mileage than before means that each driver pays less in gas tax per mile than ever before. Due to this development, some people estimate that the US Highway Trust Fund will go bankrupt in just a few years without a tax increase.

    While raising the gas tax would obviously be politically unpopular, it (in my opinion) remains the best way to fund transit (and roads). I hate to see people view consumption taxes as “progressive” taxes, considering that the poor always pay a much greater percentage of their income in sales taxes versus the rich, regardless of tax credits. No wonder the rich love that kind of tax the most! Why should the poor pay taxes to fund transit when it is the car drivers that should be doing so?

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  7. Chris,
    Don’t forget the poor get to use an enormous amount of taxpayers’ dollars via the health care system. This can be considered a redistributive tax because the rich pay more in income tax and the poor use far more health care resources. The problem with health care isn’t that we don’t spend enough, it’s that the money and resources aren’t used efficiently.

    Consumption taxes do work in certain circumstances because they influence behavior. The introduction of congestion charges in London, England are one successful example.

    Most municipal taxes come from property taxes and in my experience most poor people don’t own property (one of the reasons why so many elderly are poor in Toronto.) I know many of them pay property taxes via rent, but only a small amount of that goes to transit.

    I am going to assume the transit funding problems (public and private) are similar to the health care situation. Bad service, bad management, and the money and resources aren’t being used efficiently.

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  8. No you’re wrong about health care. Health care costs increase substantially more than real GDP. I suspect transit is in a similar boat. I also suspect that transit, like health care, tends to help the middle class more than the poor. It is the middle class who can lobby for increased service first. The Transit City plan, if anything, is one of the few “redistributive” transit plans, in that it is, in part, specifically aimed at improving access to inner tier, low-income suburbs. In contrast the only transit that has _committed_ funding is for the 905, an area that does not live or die on public transit-unlike the poor most suburbanites can afford to drive to work.

    Finally, while property taxes certainly hurt some elderly in cities, any look at poverty stats would show that the young and children, together, make up the majority of the poor. Canada’s social support for the old is probably not enough, but Canada’s social support for the rest of poor is utterly insufficient.

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