Toronto’s fiscal crisis has helped to sharpen attention on both the revenue and spending sides of the city’s multi-billion dollar budget. Some say that the fiscal gap can be cleared by raising taxes, or bringing in new taxes, which would raise more revenues. Others say that the gap should be covered by cutting spending or uploading some costs back to the provincial level (in the 1990s, and more recently, the Ontario government downloaded the costs of critical provincial initiatives – everything from guarding courts to land ambulances to social programs – to municipal taxpayers.
But there’s another important dimension to Toronto’s fiscal crisis, and that’s equity. Right now, just a little over 40% of the city’s revenues come from property taxes – that’s slightly more than $3 billion dollars.
The most important test of fairness for any tax – including property taxes – is “ability to pay”; i.e. – wealthier people pay more taxes than poorer people.
Toronto’s property taxes (and the property taxes of many other Ontario municipalities) fail the equity test. The property tax rate for home owners is 0.5888434%, while the tax rate for renters is 2.0881901%. Owners in Toronto have average incomes that are more than double those of tenants, yet tenants pay a tax rate that is three and one-half times higher.
So, while municipal politicians, government officials, financial experts and the rest of us are debating the city’s fiscal crisis, we can spare a moment to consider the best way to correct the fundamental inequity in Toronto’s property tax rates.