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Giving Toronto new taxation powers

Give Miller & McGuinty an Inch and They'll Take a Mile

By Adam Taylor, CTF research director Canadian Taxpayers Association
Tuesday, June 20, 2006

Dalton McGuinty and Toronto Mayor David Miller are two peas in a pod.  Their response to any fiscal challenge is to blame someone else for their problems and to dig deeper into the pockets of taxpayers for more money.  The Toronto Sun reports that the City of Toronto will not pass on the lower GST to its citizens for services such as parking, recycling, and recreation fees — instead they will simply pocket the tax savings.  City officials say passing on the tax relief to consumers is just too costly.  It turns out this tax grab is just the tip of the iceberg.

The "Stronger City of Toronto for a Stronger Ontario Act" (Bill 53), which recently passed into law takes this one step further by giving the City of Toronto what it has long wanted: New taxation powers that allow it to continue its out of control spending. 

Premier McGuinty, who has made so secret of his plan to stake his re-election on appeasing Toronto and the GTA, is no doubt happy with the passage of this piece of legislation.  But what does this mean for regular taxpayers? 

In Toronto, it means that businesses and individuals will have less in their pockets.  It also means Toronto will have even less incentive to reduce costs or spend efficiently.  Further, this could become a precedent-setting case that will see hundreds of other municipalities lining up to demand new taxation powers.  Giving the City of Toronto more taxation powers is like giving a pyromaniac a jerry can and a pack of matches.  As usual, it is taxpayers who get burned.

The passage of Bill 53 opens the door for two new taxes to be imposed by the City of Toronto — a municipal sales tax on alcoholic beverages in bars and restaurants, and a municipal land transfer tax.  Imposing a new sales tax on buying alcohol in bars and restaurants will mean higher costs for customers, and therefore, lower revenues and gratuities for businesses and workers.

The Ontario Restaurant Hotel and Motel Association opposes a new tax on liquor saying it "threatens the sustainability of the hospitality industry’s licensee community."  With an estimated 4000 licensed establishments in Toronto, another tax on beverage alcohol will ensure that consumers stay in their homes to watch the game instead of visiting the local pub.  It will also make tourists reconsider their vacation plans.  With high corporate taxes already driving businesses out of Toronto to lower-tax jurisdictions throughout the GTA, imposing new taxes on liquor will ensure this phenomenon continues.

Another potential new tax is a municipal version of the already-existing provincial land transfer tax.  While some provinces such as Alberta and Saskatchewan have no provincial land transfer tax, Torontonians may soon contend with two.  With property taxes already skyrocketing in Toronto and throughout Ontario, adding a municipal land transfer tax will only speed up the economic decline which has plagued Toronto for years. 

The Toronto Real Estate Board opposes a local land transfer tax saying, "Many people are already choosing to live outside the city because they simply cannot afford to live here.  A Toronto land transfer tax would make this situation even worse, which would in turn mean less growth in Toronto’s taxable assessment base and more urban sprawl resulting in increased commuter gridlock, pollution, and frustration levels."

How does a potential Toronto bar and land transfer tax affect the rest of Ontario you ask?  Well, if the McGuinty Liberals are willing to give the City of Toronto — arguably the most fiscally irresponsible government in Canada — new taxation powers, who’s to say they won’t do the same for Ontario’s other 445 municipalities? 

In usual fashion the premier will blame new taxes on each individual municipality even though it is provincial legislation that opens the door for this to happen.  Hopefully, taxpayers and citizens will recognize the growth limiting nature of these two politicians before they burn down the entire forest. 

- Written by Adam Taylor, Canadian Taxpayers Federation research director,