Contentious 'made-in-Toronto sales tax' goes before council

Ontario would still need to OK Toronto's request for the new fee

Cbc.ca
Sept. 6, 2023
Shawn Jeffords

Toronto's grim fiscal outlook takes centre stage at city council today, with a raft of possible new taxes and fees up for consideration to avert the crisis.

All 25 city councillors will get their first chance to debate -- and potentially change -- measures city staff recommended last month to address what they called an "unprecedented financial crisis." Civil servants have laid out possible tax hikes including increases to the municipal land transfer tax, vacant home tax, and the creation of a parking levy to raise hundreds of millions in new revenue.

Councillors will also be faced with a staff recommendation to create a municipal sales tax, which could generate as much as $1 billion per year for the city. That, however, would require provincial approval and an amendment of the City of Toronto Act.

Mayor Olivia Chow's executive committee endorsed the plan late last month, but must now secure the approval of council to move it forward. On Tuesday, she urged councillors to work together to address the financial crisis.

"We know that we are stronger together," she said during a press conference. "And there's no dispute that every councillor understands that the City of Toronto is in a budget deficit situation."

Toronto faces $1.5 billion in budget pressures this year and those are projected to grow to $46.5 billion in operating and capital shortfalls over the next decade.

Council must do 'what we can' to address crisis: Chow

The city needs the help of both the province and federal government to address its financial crunch, Chow said. However, before council makes any formal requests, she said it needs to signal to other levels of government that it's doing its part to address the crisis.

"We need to have good working relationships with other levels of government," she said. "But prior to that, we need to come to the table with what we can do, what's within our power to do, and that's what's laid out in front of councillors."

The staff report details measures which, if approved by council, would take time to investigate and implement. The only tax hike in the report that could be enacted immediately is a proposed graduated municipal land transfer tax which would increase rates for homes worth more than $3 million.

On Tuesday, Chow pointed to that tax as something that will have no impact on people struggling to make ends meet.

 

"If you look at the solutions in front of people tomorrow at council, the one that we are enacting immediately is called a 'mansion tax,'" she said. "It is for people that are buying homes that are luxury homes, that are expensive."
City staff say that measure could raise $26 million per year.

Sales tax won't work: Pasternak

Debate about the municipal sales tax could be one of the most contentious parts of the package proposed by staff.

Some have already spoken out against the measure, including Councillor James Pasternak, who represents York Centre, Ward 6. He said the sales tax will hurt people at a time when many are struggling with the increasing cost of living.

"A made-in-Toronto sales tax, it just won't work," he said. "People will shop elsewhere, they will leave our jurisdiction and shop at retail stores outside of Toronto."
But Pasternak agrees that upper levels of government need to come to the table with more support for the city. The province and federal government should give municipalities, including Toronto, a share of existing harmonized sales tax revenues, he said.

"We're generating billions of dollars of economic activity in taxation for the other two levels of the government," Pasternak said. "To ask for some of that back through a transfer, as a portion of the sales tax, I think that's a reasonable request."

It isn't immediately clear if the province would approve a municipal sales tax for Toronto. Asked recently if the province would allow the city to levy the fee, a spokesperson for the premier's office did not answer directly.

"Our government is focused on keeping costs down for people, especially at a time when the cost of living is going up," Caitlin Clark said in a statement.

Feds have rejected recent calls for financial help

The federal government has been cool to Toronto's recent requests for financial aid.

In 2022, the Liberal government rejected calls for help from former Mayor John Tory. Then, in July, Deputy Prime Minister Chrystia Freeland rejected another request -- this one from Mayor Chow -- for hundreds of millions of dollars in financial support for Canada's biggest city.

In a letter sent to Chow, Freeland said the federal government had contributed over $6 billion to the city since it was first elected in 2015. And if further help is needed, Toronto should either pull money from its reserve accounts or approach Premier Doug Ford's provincial government.

"The ability of the federal government to spend is not infinite -- and the emergency support we provided during the pandemic led directly to the excellent fiscal position that the province of Ontario currently enjoys," Freeland wrote at the time.