Cutting gasoline taxes

Item date: 
August 13, 2018
Item context: 

An excellent review of the Gas Tax Forum by delegate Don McLean from CATCH.

By DON McLEAN

Road congestion will worsen, transit funding could be jeopardized, and savings to drivers will almost certainly evaporate if the provincial government follows through on its promise to cut gasoline prices, several experts warned at a forum last month. At least one argued the tax should be increased substantially to fund better roads and other goals.

The new Conservative government has promised it will cut the price of gasoline – partly by eliminating the cap and trade climate program and partly by directly reducing the at-pump provincial tax by 5.7 cents. The resulting nine cents per litre would make Ontario’s gas tax the lowest of any province in the country – four cents below Alberta and a full dime less than Quebec.

Speakers at a Gas Tax Forum at the University of Toronto last month argued the reduction could cut government revenues by a billion and a half dollars and would threaten the provincial funding of municipal transit systems that is paid out of gas taxes. The HSR currently gets over $11 million a year from this source and the previous government had promised to double that by 2021 using 4 cents per litre of the gas tax.

That has been the main source of in new HSR funding Hamilton over the last decade, and has driven transit improvements across the province according to Michael Roschlau, former president and CEO of the Canadian Urban Transit Association.

“Service levels went from 15 to 21 million hours and ridership grew from 636 to 847 million trips over fourteen years,” he explained. “The average age of the province’s transit bus fleet went from twelve years … to six years today.”

Roschlau recalled that the last time Conservatives came to power in Ontario was 1995 and they quickly eliminated provincial support for municipal transit that continued for a dark decade.

“Service was cut, infrastructure wasn’t maintained and the average age of the vehicles went up as municipalities really couldn’t afford to buy new buses. Old ones were pressed into service way beyond their retirement age. In fact, many Ontario municipalities resorted to buying second-hand buses that were imported from the US at twelve years of age [and] brought them up here and ran them for another 5-10 years.”

Municipal expert Harry Kitchen noted the current tax has been frozen for more than a quarter century and should have gone up by to 23 cents a litre just to keep up with inflation. He also provided multiple reasons why such taxes are the fairest, most accountable and transparent way to pay for transit, roads and other transportation infrastructure.

He pointed to real costs imposed on society by the use of motor vehicles including air pollution, climate change, traffic accidents and the “social and economic costs of congestion”. In the greater Toronto and Hamilton area congestion was calculated in 2006 to cost commuters $3.3 billion and to cut economic output by a further $2.7 billion.

He also pointed to the costs of “travel delays and unpredictable travel times” and “higher vehicle operating costs associated with higher traffic volumes.” These impacts have become obvious to anyone using the QEW.

Kitchen argued that higher gasoline taxes would provide “an incentive to switch to more fuel-efficient cars or public transit” and would even reduce urban sprawl. One study of the dozen largest Canadian cities found even a one percent increase in gas prices “caused a 0.32% increase in population living in inner cities and a 1.28% reduction in low-density housing unit.”

Ironically, cancellation of the cap and trade program will likely mean higher gasoline costs because it will mean Ontario will be subject to the national carbon tax. That will happen by 2020 at the latest, explained Alejandro Carillo of ClearBlue Markets (who replaced Michael Berends).

The Gas Tax Forum was organized by Transport Futures and held at the University of Toronto. It heard from eight speakers including Dan McTeague from GasBuddy, Julia Langer from Toronto Atmospheric Fund, two industry consultants and North Vancouver Mayor Richard Walton.