TORONTO – Ontario should significantly raise the gas tax and borrow more money to help raise the tens of billions of dollars needed for public transit expansion in the Greater Toronto and Hamilton area, a government-appointed panel said Thursday.
One option is to hike the gas tax by three cents a litre in 2015, climbing to 10 cents after eight years, the panel said. The province could cap the increase at five cents a litre after three years if it hikes the Harmonized Sales Tax by half a percentage point after that.
At the same time, the government should redirect the HST that it collects on the gas tax — about $80 million a year in the GTHA — to transit and raise corporate taxes by half a percentage point to 12 per cent.
Ontario currently imposes a levy of 14.7 cents per litre on unleaded gasoline and 14.3 cents per litre for diesel, which hasn’t changed in more than 20 years.
The gas tax increase would cost the average household in the GTHA about $80 in the first year and $260 after eight years, the report said.
But sitting in traffic for an additional 32 minutes a day could cost a driver more than $700 a year, it said.
“People will get the math,” said panel chairwoman Anne Golden, who said she drove to the news conference, but does use public transit.
Even though both the HST and gas tax are collected across the province, residents outside the GTHA won’t be subsidizing transit in the metropolitan area, she said. They would receive their share of both the HST and gas tax to fund their own projects.
The plan does not ask too much from any one group, she said.
“Riders will pay through their fares … drivers are going to be asked to give through a very carefully graduated increase in gas and fuel taxes,” Golden said.
“Business is going to be asked to contribute through a very modest increase to the corporate income tax and government is being asked to contribute by redeploying the HST funds that it already earns on the gas and fuel taxes.”
Doing nothing to fund transit will have dire consequences in Ontario, Golden warned.
“If we don’t do something to change the pattern of how people move and get to work, we’re going to be in an even worse situation than people now already agree we’ve reached, a kind of tipping point when it comes to congestion and crowding on our transit system,” she said.
Premier Kathleen Wynne echoed Golden’s comments.
“If we abdicate this responsibility now and we do not make investments in transit, then future generations will look back and say: ‘What were you thinking?’”
When fully implemented, the whole proposal will provide between $1.7 billion and $1.8 billion annually for the GTHA, the report said.
But the governing Liberals say they haven’t decided if they will raise the gas tax and borrow up to $2.50 for every $1 the province raises in new revenue, as the report suggested.
The report also proposes a dedicated trust fund so drivers know the extra tax they are paying can be used only for public transit improvements — something the Liberals have already said they plan to do.
Wynne has also said she’ll issue so-called “green bonds” next year to fund public transit.
The government has said the gridlock in the Toronto region is already costing the economy $6 billion a year.
But hiking the tax on gasoline will drive up the cost of everything and won’t create any jobs, said the Progressive Conservatives.
“I think the people will revolt,” said Tory critic Doug Holyday, a former Toronto city councillor.
“That’s no more than a sin tax, just like increasing the cost of alcohol and cigarettes because you want people to quit smoking and drinking, so they want people to quit driving and they want the drivers to pay for the transportation of the whole area.”
Both opposition parties say new levies aren’t needed to build public transit.
The Tories say they can find the money within existing budget to pay for transit, while the New Democrats haven’t said how they’d fund it.
NDP Leader Andrea Horwath said she doesn’t want to give the Liberals another “blank cheque” to waste people’s money with tax hikes.
“There’s no way that we’re going to be supporting new taxes, whether it’s gasoline tax of five or 10 cents, whether it’s a half a per cent increase in the HST,” she said.
Golden, who’s urging an end to partisan warring over transit, said they’re both wrong.
“There’s absolutely no evidence to support the idea that this can be funded from efficiencies or savings,” Golden said.
A spokeswoman for the Canadian Federation of Independent Business said the panel’s gas tax hike proposal is “troubling.”
“Especially after consulting with the public and hearing loud and clear that it doesn’t trust the government with more hard-earned tax dollars,” Plamen Petkov said in a statement.
Wynne appointed the panel in September — at a cost of about $90,000 — to examine proposals from the transit planning agency Metrolinx, which made many of the same recommendations.
Metrolinx proposed a five-cent-a-litre regional gas tax hike, a business parking levy, development charges and an increase in the HST.
Wynne has ruled out the idea of increasing property taxes, but has promised to bring in tolls for drivers who want to use high-occupancy lanes but don’t have enough passengers.
The panel rejected tolls, saying it’s too costly and takes too long to implement.
History has shown that raising the gas tax isn’t always a politically wise move. Former prime minister Joe Clark saw a quick defeat of his brief Progressive Conservative government after proposing to raise the gas tax by four cents per litre in the 1979 election campaign.
But the Liberals in British Columbia were re-elected in 2009 despite introducing a carbon tax that added seven cents to a litre of gas.
Wynne said her government will continue to invest in public transit because that’s what the province needs.
“You can pick one piece of the plan and say ‘Well that’s really hard to campaign on,’ but I know that people need transit, they want investment in transit, they want GO to be increased.”