Let the cuts begin

[observor 69]

The thought occurs:

Ever since the downloading of services onto municipalities under the Harris regime the provincial treasury appears to run a surplus with ease while most Ontario communities struggle to provide services and balance their budgets.

 

[observor 69]

http://www.thestar.com/printArticle/237880

Tax cuts at root of budget crisis
TheStar.com - comment - Tax cuts at root of budget crisis

July 20, 2007
Carol Goar

The first alarm bells went off 12 years ago. But they were faint and distant.

In New Jersey, one of the richest states in the U.S., municipal property taxes were rising rapidly. Mayors were complaining bitterly.

Governor Christine Todd Whitman was a year into her aggressive tax-slashing program. Her aim was to cut state income taxes by 30 per cent in her first term of office.

But as the state's taxes went down, local levies went up and municipal politicians faced outrage from hard-pressed ratepayers.

That was the year Mike Harris, the newly elected premier of Ontario, launched his Common Sense Revolution, pledging to chop personal income taxes by 30 per cent.

It took longer for pain to filter down to the municipal level in this country, partly because of differences in the structure of government and partly because Harris and his colleagues undertook a massive reorganization of local services that threw everybody's books into disarray.

When the confusion subsided, city officials realized their costs were galloping ahead of their revenues. They accused Harris of shortchanging them, dipped into their contingency reserves, delayed sewer, water and road maintenance, hiked user fees and cancelled discretionary programs.

Some municipalities boosted property taxes while others, such as Toronto, tried to shield ratepayers while they sought relief from the province.

Harris was unsympathetic. He told them to tighten their belts, as he was doing at Queen's Park.

Dalton McGuinty, who became premier in 2003, acknowledged there was a problem, but said he couldn't afford to fix it. That's still his position. And he's right, as long as he refuses to roll back any of Harris's tax cuts.

That leaves cities to find their own solutions.

Toronto Mayor David Miller, hoping to avert a sharp increase in property taxes, proposed two new levies – a land transfer tax and a vehicle registration tax – this week. But city council put the idea on hold until October.

Even if Miller's plan is approved in the fall, the city's financial woes won't be over. They'll just be lessened. Property taxes will still climb. Municipal services will still be at risk.

Economists are reluctant to draw a link between Harris's income tax cuts and the property tax increases that loom – or have already been implemented – at the local level. They can't pinpoint direct evidence of a cause-and-effect relationship.

But there is plenty of circumstantial evidence.

To pay for his tax cut, Harris slashed welfare rates by 22 per cent and downloaded 20 per cent of the cost (plus 50 per cent of the administrative expenses) onto the municipalities. He also forced them to pay 20 per cent of the cost of the province's drug benefit program and 50 per cent of the cost of ambulances.

He cancelled new social housing projects and handed the municipalities responsibility for the existing stock, much of which was badly in need of repair.

He refused to invest in new child-care facilities and saddled municipalities with 20 per cent of the cost of existing ones. And he pulled out of public transit entirely.

Was it a coincidence that road congestion worsened, the homeless population swelled and more police were needed to deal with youth violence? Was it an epidemic of local mismanagement that drove up municipal costs?

An economist might say so. Most residents wouldn't.

Miller could have done a better job of explaining the city's fiscal predicament. Council could have done a better job of finding savings at city hall.

But the root cause of the municipal budget crunch is the tax relief Harris doled out a decade ago. "We are giving back to Ontarians more of their hard-earned money," he reminded voters regularly.

For most Ontarians, the benefits of those tax cuts are a receding memory.

The costs will go on and on.



--------------------------------------------------------------------------------
Carol Goar's column appears Monday, Wednesday and Friday.

 

[Edward Campbell]

Mike Harris asked the right question: who does what to whom?

Unfortunately the answer to that question, and there is one, matters only if one also asks: who has the money?

Until municipalities have tax powers which can pay for the responsibilities they ought to bear the system will remain broken.  And they must have a secure tax base.  Relying upon provincial charity is not a useful plan.

Toronto will close a subway line, degrading service and raise transit rates, asking consumers to pay more for less.  I never took a marketing course but I suspect they don't tell would be managers that's a really good idea.  Meanwhile the provincial government will run for re-election based on running a budget surplus.  Torontonians will probably vote for them, too.

 

[The_Falcon]

Things might get interesting as the media smells blood, tonight on CityNews at 6 (CityTV for those in the area), they are doing a "special" story looking into the waste that goes on in Toronto City Hall.  I am betting on the artsy fartsy/harm reduction stuff being highlighted.

 

[observor 69]

Things might get interesting as the media smells blood, tonight on CityNews at 6 (CityTV for those in the area), they are doing a "special" story looking into the waste that goes on in Toronto City Hall.  I am betting on the artsy fartsy/harm reduction stuff being highlighted.

Will the program also deal with the statement made by E.R.Campbell
"Until municipalities have tax powers which can pay for the responsibilities they ought to bear the system will remain broken.  And they must have a secure tax base.  Relying upon provincial charity is not a useful plan."

I think not.

 

[Brad Sallows]

It's a national issue in the sense it could happen in any number of cities, so it's worth examining.

>Most of the national income comes from the major cities because that's where all the wealth is - save for that in the pockets of some seniors in places like Orangeville and Kelowna.

The people generating most of the national income have the same right as anyone to b!tch.  If they want anyone to pay attention, however, there are a few things that should happen:

1) Stop supporting wealth redistribution.  Be consistent.  I have no sympathy for pleas for money coming from people who are content to redistribute it in other ways because it suits their vision of what a country or province should be.  They've created their own problem.  The cities have all the voting muscle they need to force higher jurisdictions to cut taxes so that cities can increase taxes.

2) Cut all of the trivial non-functions of government; otherwise, demands for money for infrastructure are just indirect appeals to subsidize all the other baggage the locals have chosen to pay for at public expense.

3) Withdraw influence over other political jurisdictions.  Agitate for and support constitutional change if necessary.  Stop making every social initiative a straitjacket for all of Canada.  Even if urban Canada wishes to be charitable to rural Canada it is an insufficient excuse to impose the will of urban Canada on rural Canada.  Torontonians should make Toronto whatever they want it to be and not concern themselves with how people elsewhere tax themselves and conduct their lives.

4) Politicians would rather pose for pictures during announcements of new infrastructure than spend unheralded office hours managing and sustaining what they already have. Toronto: force those in your city halls to stop adding new sh!t until you can afford to keep what is there.