Photo: Municipal vehicle tax could fund transit, benefit all city-dwellers

(Credit: City of Toronto via Flickr)

By Gideon Forman, transportation policy analyst at the David Suzuki Foundation

Now that road tolls are out, at least for the foreseeable future, how can Toronto pay for public transit that is vital to our climate goals and congestion relief?

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One approach is to reinstate the personal vehicle tax that was killed during the reign of Mayor Ford. Few of us have nostalgia for that era, and bringing back a useful revenue tool the city wrongly trashed could help put this unfortunate period behind us.
Owners would pay the PVT when they register personal, but not commercial, vehicles, including cars, motorcycles and mopeds. (Drivers in the latter categories would pay a lower rate.)

The amount charged would be up to city council, but would likely be modest, around $60 to $100 annually. Some car owners might complain, but this is a fraction of the approximately $1,000 per year they would have paid to drive on the city's expressways under a tolling regime.

Levying a vehicle tax would bring Toronto in line with other major municipalities that already collect it and enjoy a dedicated revenue stream for vital services. Montreal car owners, for example, pay an annual $75 fee, which the city uses to support public transit. Drivers in Chicago pay a yearly "wheel tax" of about US$86, which helps to repair and maintain local roads.

These smart communities know that funding essential programs requires a suite of revenue tools beyond property taxes.

A PVT would offer the city many benefits:

1) It could incentivize less-polluting cars. As KPMG explains in its City of Toronto Revenue Options Study, this tax "can be customized to price discriminate across different types, ages, and classes of vehicles to help drive policy objectives such as encouraging the use of fuel efficient vehicles." We know that transportation is now the main source of greenhouse gases in Ontario; getting inefficient cars off the road could help the city meet its climate change targets. Council should consider waiving the PVT for hybrids and electric vehicles.

2) It's quick, easy money. In their paper, "More Tax Sources for Canada's Largest Cities: Why, What, and How?" municipal finance experts Harry Kitchen and Enid Slack argue a vehicle registration levy is "inexpensive to implement and administer." One reason: The city could collect it through an existing system the province uses to handle its own registration fee. Ease of implementation means it could be running in short order. The City of Toronto estimates it could be in place by April 1. Of 12 revenue tools KPMG examined, the vehicle tax would be the fastest to bring in. Because it's permitted under the City of Toronto Act, it would face no legislative hurdles and we could start enjoying its benefits, in terms of improved services, in just a few months.

3) It would generate substantial dollars for vital services. If the annual fee were $60, KPMG estimates the city would net $55.7 million. If the fee were $100, it would net $93.5 million. Even at the lower end, this is a significant revenue source. For example, the Toronto transit system's recent fare increase will bring in an estimated $27 million. That fare hike — which is especially difficult for low-income transit users — could have been entirely avoided had a PVT been in place.

4) It won't be onerous for drivers. KPMG says the cost of owning and operating a vehicle is about $11,000 a year. If the PVT were $100, it would represent less than one per cent of this yearly expense.

Road tolls are an excellent idea but they're not likely to be implemented any time soon. In the interim, the city should bring back a small PVT earmarked for transit.

One unfortunate legacy of the Ford era is the suggestion that fees paid by drivers represent a "war on cars". It's time to discard this nonsense and realize that a tax dedicated to transit improvement — which helps residents leave the automobile at home — is also a boon to motorists. After all, buses, subways and light rail are tremendous allies in the effort to beat congestion.

February 17, 2017

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