Localized Toronto-area tax increase an unlikely sell for transit expansion

I wonder if the people at Ontario’s transit-planning agency has a Plan B, because some people might find Plan A to be a tough sell.

Metrolinx, the province's transit planning outfit, released a report on Monday on how to cover a $34-billion funding shortfall in a massive expansion to the Greater Toronto and Hamilton Area transportation system.

It outlined a package of revenue tools that could pay for the expansion, which includes increasing Ontario’s harmonized sales tax (HST) by one per cent in the Toronto and Hamilton area.

Other measures included charging a five-cents-per-litre gas tax, implementing a 15 per cent development charge on new construction projects, and charge a parking levy for businesses. But the HST bump is the big one.

Various levels of government have already invested $16 billion in completing the multi-year transit plan, leaving some $34 billion to be secured. Metrolinx was left to come up with a strategy to fund the rest of the project to the tune of $2 billion per year. The HST increase is said to cover $1.3 billion of that. Not exactly small potatoes.

[ Related: Ontario transit proposal could cost each household $477 a year ]

This is a big project, tying together 13 transit projects from across the region of southern Ontario that connects Toronto, Mississauga, Hamilton and the Region of York, to name only a few. And considering most of the funding is already coming from provincial coffers, the money has to come from somewhere else.

That’s where this new funding plan enters. Advocacy group CivicAction says the plan will cost the average, one-car household $477 per year. The group supported Metrolinx’s plan and says the governments must now act.

Glen Murray, Ontario's minister of transportation and infrastructure, said in a statement:

That is why the Toronto area needs new transit, but figuring out how to pay for it has been a little more difficult to establish.

For example, as the National Post's Matt Gurney writes:

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The headline strategy in the new plan is certainly the suggestion that Ontario's harmonized sales tax (HST) be increased by one per cent across the region.

Metrolinx notes that the province may find it "administratively necessary" to introduce the percentage point increase across the entire province. It suggests if that is the case, the taxes paid in other areas of the province should be directed toward transit projects in those regions.

The strategy also outlines a $105 million "mobility tax credit" that would be paid out of the new revenue and go toward lower income residents that may be disproportionately burdened by the HST increase.

So we have a localized tax increase that might need to be implemented across the province, which will disproportionately affect low-income residents, but those people will receive some cash back. That doesn’t sound like a politically bulletproof recommendation at all.

Here’s why a one per cent increase to Ontario’s HST might be a tough sell. It is a tax increase, cut and dry. Plain and simple. You can paint levies and development fees as “revenue tools” all day long, but a tax increase is a tax increase.

There is no hiding it, the only thing you can do is sell people on it. And tax increases can politically difficult to introduce.

Manitoba announced last month that their provincial sales tax would increase by one per cent and the public reacted the way you might think they would. It appears Manitoba’s government is willing to campaign on the tax increase being a positive thing. But is Ontario’s?

With the Liberal Ontario government’s shaky history, with political gas plant switcheroos and an opposition Progressive Conservative party already hammering on them for wasting taxpayer money, it will be more difficult to defend a tax increase.

“It’s all about raising taxes. You can call it a revenue tool if you want," Tory transportation critic Frank Klees said, according to the Toronto Star. “We believe Ontarians are taxed to death already. They can’t afford it. If this is what an election is going to be about, bring it on.”

The next step is for the province to consider the recommendations, consult with the public and municipal governments and decide whether to follow the course. Are they ready to ask Ontarian for $477 a household and tell them it’s a good thing?