In Ontario cities can’t run a deficit. Unlike the provincial and federal governments Toronto simply has to balance our budget every year.
While our costs grow due to inflation, salary increases and service improvements, our revenues struggle to keep up.
To balance the city’s budget we always start by taking a hard look at what we spend. I know it is now clichéd to talk about ‘gravy’, but there remain opportunities to save money simply by doing things smarter.
Looking for savings will help us balance the budget, but we can’t build social housing, expand transit or offer more childcare spaces by cost cutting alone. Toronto has a revenue problem.
The city is extremely limited in its powers to raise money. Again, unlike the provincial or federal governments, councillors can’t just dream up a new tax and watch the money roll in.
To put the city on better financial footing and to provide the investments we need in transit and housing, we have begun to explore revenue tools for the city to consider levying. Here are some of the taxes that city council will consider this fall:
- Potential revenue: $21 to 151 million
Toronto has the authority to levy a tax on alcohol. Implementing it would be a challenge however as the city doesn’t have any infrastructure or experience with a sales-based tax (outside of the municipal land transfer tax). Exactly what percent of tax to charge, how much it would cost to administer, and the impact on businesses would need to be determined.
- Potential Revenue: $5 to 46 million
Like the alcohol tax, taxing the sale of cigarettes would be a so-called ‘sin’ tax on consumers. The threat of residents purchasing their tobacco outside of the city borders could potentially reduce the amount the city could raise from this tax. To administer this tax the city would need to hire dozens of staff to process payments.
Municipal Income Tax
- Potential Revenue: $145 to 926 million
There are two ways that the City of Toronto could charge income tax: to businesses or to individuals. Taxing either business income or personal income would require permission from the province, a significant delay. The down sides of any locally delineated income tax is the potential loss of jobs and people fleeing Toronto to avoiding paying this tax.
- Potential revenue: $171 to 535 million
Charging a daily fee to the owners of parking spots could be implemented relatively quickly and easily. Whether to charge the levy only to surface parking lots and not underground, or only for paid parking spots and not free parking would need to be determined.
One of the benefits of this revenue tool is that it would encourage owners of some large surface lots to redevelop, reducing water runoff and the urban heat island. A similar tax is levied in Montreal, Vancouver, Pittsburgh and Los Angeles.
- Potential Revenue: $21 to 126 million
Many cities across the world charge a tax each night a hotel room is rented. The relatively small number of hotels and motels makes this more easily implemented than some other revenue tools. Another benefit is that citizens of Toronto will not pay the tax. The downsides of this tool is that it could make a city already expensive to visit even pricier, discouraging tourists from contributing to our economy.
Let me know what you think about these revenue tools or anything else happening at City Hall. Call 416-392-1376 or email firstname.lastname@example.org.