A sales tax could raise $2.5 billion for GTHA: Report

January 24, 2019

TORONTOCities in the Greater Toronto and Hamilton Area facing growing demands for public services and infrastructure, and a provincial government vowing to cut spending, should turn to a regional sales tax to boost their bottom line, says a new report from the Canadian Centre for Policy Alternatives’ Ontario (CCPA-ON) office.

The report, A New Revenue Tool: The case for a Greater Toronto and Hamilton Area sales tax, estimates that the Greater Toronto and Hamilton Area (GTHA) could raise $2.5 billion from a two per cent sales tax or $1.3 billion if it implemented a one per cent sales tax.

“That’s a significant chunk of change at a time when municipal governments are facing growing budget squeezes and pressures to improve services. If the Ford government is unwilling to increase funding to municipalities, it should provide their governments with broader taxing powers,” says CCPA Senior Economist Sheila Block, who co-authored the report with CCPA Senior Economist David Macdonald.

“Municipalities could use that revenue to deal with climate change pressures on local infrastructure, to improve public transit service, to create affordable public child care spaces, and to act on poverty reduction strategies.”

If the City of Toronto was alone in taking up the sales tax, it could raise over a billion dollars a year with a two per cent tax or half a billion dollars with a one per cent tax rate. This could fill the budgetary gap that results from the slowdown in land transfer tax revenues.

“A two per cent sales tax would amount to a six-cent increase in the cost of a coffee or a 30-cent increase in the cost of a movie. At the same time, everyone would benefit from the services that the tax revenue could purchase,” says Block.

The report addresses concerns about low-income residents’ ability to absorb a sales tax: by illustrating how using some of the revenue to increase the existing Ontario sales tax credit will mitigate impact on low-income households. For example, increasing the Ontario sales tax credit by 50 per cent would result in low-income residents paying only three per cent of the revenues collected by a new two per cent municipal sales tax, while the richest 10 per cent would contribute 22 per cent.

“Municipalities are reluctant to increase property taxes, but they need new revenue tools to pay for the things that make cities livable, sustainable, and safe. A municipal sales tax could boost revenue and it could be implemented in a way that protects low-income residents,” Block adds.

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A New Revenue Tool: The case for a Greater Toronto and Hamilton Area sales tax is available for download on the CCPA website. For more information please contact: Alyssa O’Dell, CCPA Media and Public Relations Officer, at 613-563-1341 x 307, cell 343-998-7575 or [email protected].

 

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