For a generation of Torontonians, it’s been the question no one wanted to contemplate: How do we pay for transit? Since the 1990s, we’ve been starving the TTC, forcing it to pay 70-80 per cent of its operating expenses from the fare box (with next to no funding from the provincial or federal governments), and playing a cat-and-mouse game with one-time splurges for new construction that are sometimes scaled back or cancelled. It gets to be embarrassing, the way our major metropolitan transit network seems held together with chewed-up gum and broken shoelaces found under the seats. Toronto’s chief planner, Jennifer Keesmaat, recently noted on Twitter that London spends three times as much per capita on transit (from all levels of government) as Toronto does, while New York City twice as much. In his book about international transportation, Straphanger, author Taras Grescoe noted that “the TTC is on its way to becoming a case study in how to quickly squander a hard-won legacy of decent transit.”
Finally, however, the time to talk about funding has arrived. On Monday, Keesmaat previewed her upcoming public discussion on the subject, and on Tuesday, Metrolinx launched its public consultation on revenue sources for building new transit.
Most of the suggestions that local politicians put forward involve either someone else paying the bills (by justifiably shrugging off responsibility onto the federal or provincial governments) or complicated arrangements that attempt to make it look like no one will pay much in new taxes (such as the weird property-tax scheme attached to Karen Stintz’s OneCity proposal last spring).
But if we’re confronting the simple truth that we need to invest in transit, we should accept the most simple and straightforward means to do so. My own suggestion involves the provincial government, but it will proudly fund the region’s system locally: Increase the HST by two percentage points, and send the revenue directly to municipal or regional governments to fund public transit.
As far as taxes go, some economists like “value added” sales taxes such as the HST because they don’t tend to slow down the economy as much as others. Higher income taxes, on the other hand, inspire people to either stop working as much or to avoid paying the taxes through accounting maneuvers. For a whole lot of reasons that Université Laval economist Stephen Gordon often details on his blog Worthwhile Canadian Initiative, value-added taxes don’t do that.
Of course, sales taxes are regressive—poor people spend more of their income than rich people do, so they pay a higher percentage of their income in taxes. Gordon has pointed out that the key is to send some of the money directly back to poorer people.
Former budget chief Shelley Carroll has suggested that a one per cent HST bump would generate about $1 billion across the GTA. By doubling that, we’d be looking at $2 billion in transit revenue for the region. We could return one-third of that directly to poor, working-class, and lower-middle class residents to offset the effects of the added strain on their budgets, and still be left with more than $1.3 billion per year to spend on transit through Metrolinx and the TTC. Spending half of that on new construction and half on operating budgets would be a massive injection of much-needed money that would help the system flourish.
People don’t love paying sales taxes, but in both New York and Chicago, a dedicated transit sales tax levy has been a part of funding much-admired systems. Los Angeles offers even more hope: Residents there have actually voted in favour of such a tax. Sometimes people are more open to taxes than pundits assume, if they can see the potential benefits. Unlike property or income taxes, everyone who visits the city would be chipping in, not just residents. And best of all, we already know that a 15 per cent HST would not be an unbearable weight for residents, because that was exactly the rate we paid until 2006.
It’s an awkward conversation to have. But now that we’ve started talking, let’s embrace the idea that we’re going to have to pay for transit one way or another.