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Issues at Glance – The Toronto Car Tax

February 16, 2010

Taxes.  One of those few single words a politician will inevitably utter which is sure to draw attention from voters.  We all pay them, acknowledge that the revenue which they generate will make society better, but, push come to shove, we’d really rather pay less of them.  Everyone has a position on taxes.  Although the taxman will never get his dues from smiling faces, if you convince us the taxes are fair, we will hand they money over with little resistance.  The main issues with taxation arise when the levies are perceived to be either unfair or simply too heavy.  In walks the Personal Vehicle Tax (PVT).

How Much Is This Costing Me?

The Personal Vehicle Tax or the Toronto Car Tax, as some call it, is a municipal vehicle registration fee which was officially launched on September 1st, 2008 by authority of the City Of Toronto Act.  Under the tax, the owner of a vehicle is charged an additional fee upon their annual registration.  The fee is $60 for cars and $30 for motorcycles (commercial and “classic” vehicles are granted an exemption).  The justification for the tax was that Toronto already suffers from a structural budget deficit and that the additional revenue generated would go towards transportation infrastructure.  The tax was initially projected to bring in $56 million, with last year taking in $46 million in additional revenue.

Toronto City Council passed the bill on October 22, 2007 by a 25-20 vote.  Councillors, however, were not the only Torontonains who were divided on the issue.  The tax was lobbied against by the Toronto Automobile Dealers Association as well as several other consumer groups.  A great deal of the public’s opposition derived from sentiments that Toronto car owners were already subject to enough vehicle-related taxes.

Taxes For a New Car Buyer

– For the average $30 000 new car, the purchaser would have to pay an additional $4 309 in taxes.

In addition to these taxes and the tax on mandatory car insurance, federal and provincial taxes account for roughly 1/3 of the cost of gas at the pump.  This means that for an individual purchasing $60 of gas a week translating to $3 120/year, about $1 030 of that cost is paid as a tax.  These figures do not account for “taxes” garnished from parking meters (You only have yourself to blame for those parking tickets so don’t try to pass it on).

What You Get, and What You Don’t

Any rational car owner will recognize all of the freebies they have received when it comes to driving.  The average driver on the road today purchased their heavily taxed vehicles, filled them up with highly taxed gas and pulled out on to a series of roads and highways which cost countless billions of dollars forked over by a collective society long before that driver was born.  No driver truly believes that they are exempt from this “deal” and understand the need to pay it forward.  That is why, for the most part, taxes related to driving are seen as being fair and are handed over, again, with little resistance.

The new Personal Vehicle Tax just doesn’t fit into this equation for two reasons:

  1. The additional tax revenue generated is not specifically earmarked for driving related concerns such as road maintenance and congestion alleviation.
  2. Even if it were directed towards these issues, only vehicle owners residing in Toronto proper are subject to the tax.  A huge percentage of drivers on the streets and motorways within Toronto reside in the 905 suburbs and beyond.  These users, who regularly contribute to traffic congestion and the degradation of transit infrastructure, should in some way contribute to related funds.

A City Facing Some Problems

Regardless of your opinion on the tax in question, traffic related issues remain a huge concern in this city and, as well, the municipality’s structural deficit requires swift attention.  The fact remains that 71% of the region’s population is car-dependent.  Simply put; people need to drive places and the infrastructure that supports that need must be maintained.  At the same time, congestion within the city is not just a matter of annoyance but has economical ramifications as well.  It is estimated that the loss in productivity caused by traffic congestion, costs Torontonians $2 billion per annum.

Another Way?

There are many alternative solutions, albeit with higher degrees of complexity, than a blanket fee.  Several cities around the word have experimented with and have implemented varying forms of congestion control including commercial vehicle taxes and user fees (most notably in London, England).  It is in these places where Toronto City Council should look for more than just a band-aid solution.  Mayor David Miller, who was one of the main proponents of the PVT, has also advocated toll roads as a viable means.

Get Informed

This issue is already a point of contention for the upcoming Toronto Municipal Election.  Rob Davis, candidate for Ward 15, has launched publicity campaigns against the tax.  As far as Mayoral candidates are concerned, George Simtherman has stated that he is against the tax and is open to toll road discussion, however, is neither for nor against the use of tolls.  Both Giorgio Mammoliti and Joe Pantalone voted in favour of the tax.  Rocco Rossi has also yet to take a position and former candidate Adam Giambrone also voted for the tax.

To see how your City Councillor voted click here.  Additionally, here is the actual report presented to City Council.

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