Should a regional sales tax fund GTA transportation improvements? The experts weigh in

Item date: 
April 20, 2012
Item context: 

Paying for transport infrastructure through an extra half -percent retail sales tax has been floated recently in the GTA .   Martin Collier was interviewed for this story and referred the journalist to Lisa Schweitzer who spoke at Transport Futures in February 2011.  Lisa is one of the only scholars to look at the equity impacts of regional sales taxes and road pricing based on actual experience -- not theoretical rhetoric.  (Great to see that Gregory Thomas, who participated at Transport Futures in November 2011, was also interviewed for this article). Since our experience is that journalists often misconstrue what we say, we follow-up with an email so they have our words in writing.  We've inserted what we actually said below the published version.

By MEGAN O'TOOLE

About three-quarters of Greater Toronto residents would support a half-percent regional sales tax increase to fund transportation infrastructure improvements over the next few decades, similar to a scheme enacted in Los Angeles in 2008, according to the results of a new poll by Environics for Spacing magazine. The Post’s Megan O’Toole spoke with a variety of transportation experts and insiders for their views.

TTC chair Karen Stintz
“I think we need to be open to all kinds of ideas, because we have ambitious transit plans that we don’t have a way to pay for,” Ms. Stintz said...

Ontario transportation planner Martin Collier
While a regional sales tax could generate some revenue for transportation infrastructure, it would not address other issues such as traffic congestion and emissions, said Mr. Collier, who founded Transport Futures, a series of events on mobility pricing measures. It is also a “very regressive” policy, he noted. “These sales taxes hit the poor, lower-income folks way more because all of a sudden they have to pay; they’re not the people using the roads and the transit as much as middle-class, upper-income people and in the end, they actually are footing more of the bill to subsidize the people who are using the system,” Mr. Collier said. While a sales tax could be part of the “menu of revenue tools,” he added, it does nothing to shift demand, unlike some other funding options. Road tolls and parking fees, for example, “incent people at all income levels to consider transit, biking and walking over their cars.”

While a regional sales tax will generate some revenue for transport infrastructure, it will do nothing to reduce congestion, crashes, smog and GHGs as the GTHA population grows – and it is actually a very regressive policy for lower income folks who pay a larger share of their income to subsidize the middle class and wealthy who use the transport system more (and vote more, too).  Contact Lisa Schweitzer at University of Southern California for more info on this aspect.

Much of the reason why Toronto’s city building elite are calling for a sales tax is because they entirely believe in a “build transit and they will come approach”.  They also want to make sure that the pain is spread around and largely unseen.  Unfortunately, research and best international best practices show that this rationale doesn’t add up.  Road pricing and parking fees, implemented comprehensively and dynamically, are the only measures that will actually incent people at all income levels to consider transit, biking and walking over their cars – for at least some trips – and allow society to derive the reduced congestion, crashes and emissions benefits mentioned above (see one perspective by Duranton and Turner at http://repec.economics.utoronto.ca/files/tecipa-370.pdf).

The bottom line for Transport Futures is that we incrementally eliminate the subsidies that distort our modal choices.  This will take time but if we phase out the 14.7 cent provincial excise tax (giving something back to drivers for a change!) and bill people for their actual use of transit and roads, we’ll get much closer to a sustainable transport system that is reliable and promotes smart growth as well.  We can use the income tax system to reimburse low income workers who absolutely must drive.

Greater Toronto CivicAction Alliance chair John Tory
Before any decisions are made, Mr. Tory believes there must be a larger public conversation around potential transit funding strategies...

California-based urban planning expert Lisa Schweitzer
Ms. Schweitzer, who has studied the politics of sales taxes in the context of L.A.’s transportation infrastructure, said as with any funding measure, there is a “tradeoff.” Cities such as Los Angeles and Toronto can raise substantial sums through sales taxes, which are more politically palatable than some other revenue generators, she noted. “They’re easy to collect, they’re easy for people to pay; you don’t have to deal with the taxman, you just pay at point of purchase,” Ms. Schweitzer said. A major concern, however, is volatility. “They go up and down based on the business cycle and they run parallel with the business cycle, so when retail sales plummet, the take that you get from retail sales taxes also goes down,” Ms. Schweitzer said. “That can be a problem for transit agencies that are dependent on these sales taxes.”

Gregory Thomas, federal director of the Canadian Taxpayers Federation
“We reject the idea,” Mr. Thomas said, noting Toronto residents already pay some of the highest sales taxes on the continent. “If you want to bump consumption taxes progressively higher, eventually Toronto will cease to be the leading city in Canada.” There is also a risk that such a tax, even if introduced as a temporary measure to fund transit projects, could become permanent. “The temporary wartime income tax of 1917 is your classic example,” Mr. Thomas said. “It’s almost 100 years later and we still have it.” The federation is not opposed to the concept of user fees, he added, but “the easiest way to make sure that you never have a road tolling system that works is to tell motorists that their money is going to be taken from them to pay for transit. The longer transit advocates keep talking about digging their hands into the pockets of drivers, the more remote the chances that we’ll get any kind of reform on roads and parking.”

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