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One Cent Doesn't Buy Much These Days

David Miller and the City of Toronto have embarked on a campaign to have the federal government commit one cent of the GST to cities. While many have applauded this as a step towards permanent, predictable funding for cities from a tax that reflects grows with the economy, this plan is not the right way to fund cities. This seems somewhat counterintuitive given the above-stated reasons, however, there are three good reasons not to give cities a share of the GST.

First argument: taxation should be based upon representation. Americans have had a lot of wonky political ideas, but this central tenet of the rebellion against the British makes some sense. If you want to spend the money, you should be raising it and accountable for raising it, not someone else.

Second argument: the source of the fiscal imbalance of cities in Ontario is not based on a lack of revenue, it is based on an imbalance of responsibilities. Ontario cities are responsible for funding several provincial responsibilities such as education and social housing through property taxes. This is an inappropriate funding mechanism, and it would be better to campaign to get the province to take back its responsibilities, which in the case of most cities, would free up approximately 1/3 of their budgets for municipal needs. That amounts to roughly $2 billion in Toronto.

Third argument: in the case of Toronto, the city has been given a whole new set of taxation powers by the province, but has not yet used them. Why should the federal government give them money when they are not fully exploiting their own revenue streams> As imperfect as they are, they are tools nonetheless.

Ultimately, what cities need is not another handout from a higher level of government. Handouts are always subject to the whim of the government of the day and can be revoked just as easily as they were given. What cities require are real taxation powers that cover a spectrum of activities, so that they can have a balance between property taxes and taxes that grow with the economy. That is the hallmark of a responsible level of government.