I’ve been working in the public-policy world for well over a decade. I’ve spent much of that time arguing against high taxes and profligate spending. So I don’t say this lightly: Toronto mayor Olivia Chow is right to increase property taxes. We don’t have much choice if we’re going to close a $1.8 billion budget hole while maintaining a relatively functional, growing city.
Let’s get one thing out of the way: the proposed 10.5 per cent property-tax increase isn’t “huge,” and the new rate won’t be “high.” The bark is worse than the bite.
The headlines are gloomy, and the rhetoric is apocalyptic. A 10.5 per cent tax increase sounds big. But, according to city staff, it would cost the average homeowner $321 annually, or $26.75 per month, plus $53 ($4.42 monthly) for the city-building levy. In other words, $31.17 per month. You read that right. This whole kerfuffle is over 32 bucks a month.
Even after the proposed increase, Torontonians will pay among the lowest property taxes in the region. This is hardly a disaster.
The new property-tax rate will remain relatively low by the city’s historical standards. The residential rate is now just under 0.67 per cent — well below where it was in the mid to late 2000s, when it was between 0.83 and 0.91 per cent. And the rate is lower specifically because property values are higher. Unlike, say, income taxes, property-tax rates don’t stay still as the economy grows. If property values increase, property-tax rates go down. The rate doesn’t go down far enough to completely offset the increased assessment value, but it does mean that if property values go up 20 per cent, property taxes do not.
Let’s put a finer point on this. According to the Toronto Regional Real Estate Board, the average purchase price in 2008 was $379,080. By 2023, it had reached $1,126,604. That’s an increase of $747,524. Is an extra $32 a month a gigantic tax increase if you’re sitting on three quarters of a million dollars of untaxed gains? Hardly.
Of course, not everyone owns their home outright. Many people have large mortgage balances that they’re needing to refinance at high rates made necessary by the Bank of Canada’s inflation-fighting efforts. That’s an especially big challenge for anyone who bought within the past few years. For their sake, I really hope interest rates come down quickly (unless it’s because we have a deep recession). But if we can’t raise $32 a month from the average homeowner to keep the lights on in the city, we’ve got much deeper problems.
One might argue that I’m presenting a false choice between development charges and property taxes. After all, the city could simply tighten its belt. We could stop spending money on renaming public squares, building bike lanes, etc. Putting aside the merits of these expenditures, they’re trivial. We’re not going to close a $1.8 billion budget hole by saving a few million dollars here and there. There’s just not a lot of fat to trim.
Cities are the one order of government I’d argue is actually fairly lean. They’re always third at the trough, so they get what’s left over after the feds and provinces feast on income and sales taxes. The runt of the litter doesn’t always get enough to eat.
I’d certainly agree that upper levels of government could do some trimming. The feds could, for instance, stop throwing billions of dollars at electric-vehicle and battery plants. The province could stop subsidizing electricity. With municipal governments, it’s tougher. Toronto has had a hard time finding cash to keep public washrooms open and the streets clean. Any reduction in spending would almost certainly have a tangible impact. There’s no account labelled “waste” that we can eliminate.
The reality is, Toronto is under enormous financial pressure. The TTC isn’t bringing in as much cash as it used to, but we want more service. The police want more money. The city desperately needs more shelters. We want to fix the roads, keep the libraries open, and so on. And, unlike upper levels of governments, the city can’t just run deficits, so it actually needs to make tough choices. That’s exactly what it’s doing by raising property taxes.
I’m not going to pretend that a one-time property-tax increase will fix everything. But let’s be honest: we’re not going to close a $1.8 billion budget hole without raising taxes. Not if we’re going to have a functional city — or something close enough.
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