The hot-button issue at City Hall this week is the proposal to levy a municipal sales tax to provide cash-strapped Toronto with a new source of revenue. Budget chief Shelly Carroll claims that Toronto is devoid of two key elements that other "global" cities possess: "A stable formula for sharing operating costs of public transit with the federal government, and revenue sources that grow with the economy." So, if the proposed municipal sales tax comes into effect, Toronto will at least possess the latter trait of Carroll's "global" city model.
Proponents of this initiative cite other world-class cities who long ago implemented a municipal tax. New York City levies a 4.5% tax on hotel rooms, restaurant bills, and admission charges. Chicago has an all-encompassing 1.25% sales tax as well as a 5-cent bottled water tax and a 9% fountain soft drink tax. These same proponents, one of them being former Winnipeg Mayor and potential Toronto Mayoral candidate for 2010, Glen Murray, claim that tourists should help support key parts of Toronto's infrastructure, like public transportation, through a municipal tax. Murray believes that otherwise, "Canadian cities end up subsidizing tourists’ transit rides without realizing any benefits."
Although I do support this notion to a certain extent, I find the timing of the proposal to be suspicious. Yes, a tax that only really targets tourists would be a wonderful source of revenue and would not affect Toronto residents. An additional 2%-or-so tax on a hotel bill will not dissuade travelers from coming to Toronto, but certainly will help fund municipal projects. Even something along the lines of Chicago's water bottle tax would be a great way to draw revenue from an unnecessary and environmentally damaging purchase. In fact, City Council missed a fine opportunity when it implemented the 5-cent fee for plastic bags this past Spring, as stores can use that extra revenue as they choose, rather than have it go directly to the city.
Ultimately, what draws my suspicion about this proposal is that it comes at the heels of another bold proposal by City Council: To take out a 30-year debenture for $600 million. Hmm. I'll let you make the connection and leave you with this...
