This regular online series will feature interviews with fascinating and influential urban thinkers, with a focus on discussing how Toronto can become a more engaged, accessible, sustainable city.
Hugh Mackenzie is a research fellow at the Canadian Centre for Policy Alternatives. A seasoned economist, he’s examined Toronto’s budget issues including an in-depth analysis conducted in 2010 on behalf of the Toronto Civic Employees Union. Spacing asked him to probe some controversies surrounding the 2011 city budget.
Spacing: What’s your opinion on Rob Ford’s decision to eliminate the Vehicle Registration tax?
Mackenzie: If you look outside Toronto to other municipalities around the world, what you’ll see is a broad debate about how to deal with congestion and how to encourage people to shift from private to public transportation options. That’s where a vehicle registration tax makes sense. However, Ford was right that the tax discriminated against suburbanites versus those living downtown, as there are probably a lot more people in the centre of the city surviving without a car. If you’re going to use the tax system to discourage car travel, it makes infinitely more sense to base a tax on use rather than ownership. That’s why levying tolls on expressways that funnel people into the city, such as the DVP and Gardiner, would have been the better option. It provides the additional advantage of raising revenue from those living outside the city who consume Toronto services but don’t contribute to Toronto’s tax base. A case could also be made for a peak-hour surcharge on parking in the downtown area. Ultimately, it all has to be done in an integrated way. If you don’t improve public transit but just levy charges, then all you’re doing is angering people. That was the major issue with the vehicle registration tax.
Spacing: Do you think the city’s public discourse has been hurt by too much negative hammering over taxes?
Mackenzie: I would broaden it beyond the city. Public discourse in North America has been fundamentally damaged over the last 25 – 30 years by debates regarding taxes and public services in which the link between the two is ignored. In Ontario, we’ve had a 20-year-long debate about levels of taxation without any reference to what the implications are for public services. When was the last time you heard a government say, “We need to improve a particular service by increasing taxes?” Regarding the municipal election, I believe anyone who says you can take $50 million or $2 billion out of the Toronto budget without cutting public services is lying to you. They either know that their promise is not true and they’re just saying it or maybe they don’t understand, in which case they shouldn’t be permitted to make such statements.
Spacing: Is the suggestion that Toronto “live within its means” realistic?
Mackenzie: I’m not exactly sure what that means because the government’s means consist of what citizens are prepared to pay for the services they’re provided. A city’s means aren’t fixed. A government’s means are determined politically, just as government expenses are determined politically. To say that the City should “live within its means” is to say nothing whatsoever. It only masks an argument for less services. When people make that suggestion, it’s undisclosed code for, “We know the cost of what we’re currently doing is going up and we’re not prepared to see taxes go up every year to pay for it. Therefore, every year we’re going to have to reduce the amount of services being provided.”
Spacing: Is the Ford’s decision to freeze property taxes for 2011 a wise move?
Mackenzie: I think it’s crazy. I bet that if you walked out on the street in Scarborough or wherever Ford got support, and asked people if it’s possible to cut property taxes without cutting services they would tell you that you’re crazy and it doesn’t work. People don’t expect to get something for nothing. Ford didn’t need to freeze property taxes. He was probably unaware during the campaign that the City’s finances were strong heading into 2011. Then he got his budget briefing from the City treasurer which showed a surplus of $200-250 million. Ford and his advisors knew exactly what they wanted to do with it. Ford is cut from the same ideological cloth as Jim Flaherty and Mike Harris. What they’re about is reducing the fiscal capacity of government. Anytime you freeze property taxes, that’s revenue that is lost to the City forever.
Spacing: Is eliminating extraneous expenses the best solution to Toronto’s chronic budgetary problems, as Ford suggests?
Mackenzie: No. Toronto has budgetary problems because the system of local finance in Ontario is designed to turn municipalities into supplicants to the Provincial government for money. The three major problems inherited from the Province are: one, the enormous deferred maintenance backlog in housing stock inherited after the housing system was downloaded in the late 90‘s; two, sharing the cost of welfare; and three, the elimination of capital and operating subsidies for public transit. Since 1996, the City has been struggling to achieve a balance between the fare box and property taxes as a source of revenue for the TTC. The City’s budget problems are not about council meals or whether the expense allowance is $50,000 or $30,000. This is about big-picture political decisions made at Queen’s Park. It doesn’t matter what Rob Ford does with incidental expenditures because it won’t alter the fact that every spring there will be a jousting match over the City’s budget.
Photo by Steve Hoang