Yes. Sound fiscal plans benefit Toronto
Mayor John Tory and his main opponent, former city planner Jennifer Keesmaat, agree that property taxes should be kept around the rate of inflation. Clearly, the idea is popular with voters, but is a relatively low tax increase sound policy, or unsustainable pandering to a public that is unwilling to pay more?
While some council candidates and social activists like to point to the wondrous things Toronto could do with more money, there are strong arguments for rate-of-inflation tax increases, arguments that politicians don’t often make because they know a low tax number can sell itself.
First, some context. Both the absolute number and the actual tax increases in Toronto are higher than a quick glance would suggest.
In this year’s budget, the city said the tax bill for an average house, valued at $625,000, would be $2,907. That doesn’t include $1,062 in education property taxes.
As well, residential property tax increases are not quite as low as the city’s 2018 headline number of 2.1 per cent would have you believe.
Add in a fund for capital projects and another fund to help keep business taxes low and the number rises to a stillrespectable 2.9 per cent. Then add higher water and garbage fees on top of that.
It’s true that Toronto’s residential property taxes are low relative to other cities in the GTA, but that’s not an argu- ment for making Toronto taxes higher.
Toronto’s tax situation is far different than that found in Brampton or Mississauga.
Toronto, with its rich commercial tax base, is the envy of other municipalities.
The main reason Toronto can afford to keep its residential taxes low is because of that large commercial base.
It’s an important advantage, but one that will only persist as long as property taxes are competitive with other cities in the GTA.
Higher taxes in Toronto create the risk of corporations migrating outside of the city to save money.
Toronto also has a municipal land transfer tax, something other Ontario cities do not.
This year, that tax is expected to generate about $800 million, roughly 5 per cent of Toronto’s revenues.
Without it, property taxes would be dramatically higher.
Despite modest tax increases, Toronto’s budget has been solid over the last three years. The city has had surpluses of $169.5 million, $212.9 million and $296.7 million, and is projecting another surplus this year.
The city budget is not just a status quo plan. In 2018, its budget provided for more shelter beds and child care subsidies.
Toronto’s operating costs for transit and garbage collection are cheaper than other major Canadian cities. Its roads are in significantly better shape than most cities. Toronto has a capital asset maintenance plan that is reducing its maintenance backlog.
When a city is providing comparatively good services and running surpluses, it’s difficult to argue that a tax increase is required.
That doesn’t mean the future will be smooth sailing. A city staff report this year identified a budget gap that could grow to $1.42 billion in five years, or nearly 10 per cent of the city’s budget by that point.
That’s going to be a challenge for the next city council, but if one accepts that number, it’s not a problem that can be overcome simply by increasing property taxes. Those taxes get all the public attention, but they make up just 32 per cent of the city’s total revenue. A 1 per cent property tax increase raises only $30 million.
If anything, those future spending challenges are an argument for the sort of fiscal discipline that a rate-of-inflation tax increase imposes. Give councillors more tax dollars and they will find new things to spend the money on. That’s a problem when one knows that covering the future cost of existing services could be difficult.
Finally, there is the issue of affordability. Everyone knows housing in Toronto is expensive, but the city’s future economic success depends on people being able to afford to live in the city. Low property taxes help offset the daunting mortgage payments many Torontonians face, and help seniors stay in their homes.
Keeping taxes low is politically popular, but it’s fiscally sound, too.