Metrolinx and Unintended Consequences

Metrolinx has released a short list of investment tools to expand transit in the GTA.  The "strategies and investment tools to fund transit" are methods of generating revenue.  Taxes and added fees that will be used specifically for funding the expansion of transit.  It's fantastic that this list is out and that people are talking about how to fund transit; it's got to have money to expand and that money has got to come from somewhere.  Unfortunately, it looks like Metrolinx hasn't thought very hard about the effects of many of these investment tools.

Some of the investment tools, namely increasing transit fares, will have a negative effect.  It will discourage ridership, especially when Toronto is already famous for having one of the highest fares.  It will punish those people that rely solely on transit to get around the city.  We should be rewarding riders and trying to reduce the fare to make transit a much more attractive system.

Many of the options on the list are related to vehicle use.  Highway tolls, fuel tax, vehicle kilometres travelled fee.  This makes a lot of sense: increase the cost of driving yourself around and people are less likely to do it.  This, of course, means that these taxes aren't so much for revenue generation as they are for discouraging vehicle use.  That's fantastic, for its own reason and that reason isn't to generate revenue for transit.  Sure, some money will be generated but if, and when, people switch away from driving themselves the level of revenue generated will decrease.  This should be expected but if it's the way transit is getting funded those fees will have to be increased over and over.  It's a hassle and hard to do, politically.  These fees should be put in place but as added incentive to use transit and as an added variable source of funding, not as the primary revenue generation.

One other proposal related to private vehicle use: high occupancy vehicle toll.  The same as any other tax, this will encourage a reduction in the taxed behaviour.  If we charge people to carpool, people will have less incentive to carpool.  It would be great if people chose not to drive but, when they choose to drive, it would be better if they chose to carpool.

The best option for funding transit is to put in place an actual revenue generating tax: the sales tax.  The sales tax would have to apply to a sufficiently large enough area that people could not just easily leave the area to shop but not so large as to affect a great number of people that will not be getting the benefit.  The GTA is probably a large enough area, the increase in sales tax does not need to be huge so the incentive to shop elsewhere will be small.  People on the edges of the GTA may take advantage but if saving a small amount of money comes at the cost of a couple hours more driving, most people are not likely to shift their shopping habits.  People aren't going to stop spending their money so it's guaranteed to raise revenues.

Couple the sales tax with some, or all, of the vehicle use fees to encourage more ridership on transit.  This way transit has a stable source of funding, an added variable source of funding, and increased ridership to show that it's effective.  With the right mix funding transit can be mostly painless.  With the wrong mix the fees will only add to the transit headache the GTA is already suffering.

Taxes and Death

There's two things that are certain in a person's life: Death and Taxes. Having not experienced the former for myself I will talk about the latter. Taxes are paid by everyone on nearly everything, it's just the way it is and the way it's got to be. In Alberta we happen to pay the lowest overall tax rate; it's part of our province's shortsighted addiction to resource revenue. Why have a stable source of revenue when we can rely on the business cycle?

Alberta forgoes between $10 and 20 Billion by having such a ridiculously low tax rate. This rate is defended as helping out the little guy. The 2009 budget claims that this benefits those with lower incomes. Unfortunately this isn't true. A recent study by the Parkland Institute shows that only two provinces have a higher tax rate for the lowest income bracket and all of them have a higher rate for the highest tax bracket. Who is it that we're helping here?

Alberta's tax system is not competitive, it's not even playing the same game. If it was the best system in Canada, wouldn't all the businesses and skilled workers that they are trying to attract to the province be here by now? Alberta could remain attractive and institute a progressive tax rate; it doesn't have to be ridiculous start off at about five percent for the lowest income bracket and end at fifteen percent for the highest tax bracket. Nobody is really hurt by this and it would earn Alberta at least another $10 Billion.

Moving away from income tax for a moment let's look at sales tax. Alberta does not have a provincial sales tax, the only province not to. This is all to be more competitive but it still doesn't attract all the new skilled workers that we want in this province. Let's charge a sales tax and let's make it progressive as well. For example, one needs to buy a car. They have a choice between a small cheaper car like a Honda Civic or for three times the cost a Cadillac Escalade. let's charge five percent for the cheaper purchase and fifteen percent for the more expensive purchase. Obviously, only those that are able to afford the bigger purchase will even think about buying expensive objects like yachts (maybe not in Alberta), sports cars, huge houses and we know they can afford the extra tax.

With a graduated sales tax and a progressive income tax Alberta would be able to have a hefty tax base to work with and they could afford to do all the basics that need to be done: health care, education (grade school and post secondary), infrastructure and maintenance. Even hitting a recession the government could afford to weather it with almost no problems at all because they aren't relying on the booms and the busts of the business cycle.

Part of being able to afford doing the basics is knowing what can be afforded and when. The extras that people want and things that are good to have: museums, art galleries, funds for all sorts of extras. These things would need to be funded on a basis of when the money is available. Mostly the money would be available through the royalty rates that the government collects primarily on the oil industry. With an effective and fair royalty structure Alberta would be able to collect a bunch of extra cash and use this for the extras that people want. They could even save a bunch and then when times are lean they could pull out the savings and spend their way through the recession and maybe no one would even notice that it happened.

This would take foresight and intestinal fortitude. Most people hate hearing the word taxes but they gonna happen whether you like it or not. Let's at least make it fair and tax the people who can afford to be taxed and who actually create some revenue from their taxes. Let's stop relying on oil and gas revenue and then cutting back on all the crazy spending we institute when the economy goes bust every ten years. Let's institute a plan that will benefit the most people most of the time. Let's raise taxes.