Social Policy in Ontario

I come to you today bearing a mathematical truth about residential property taxes in Toronto: they are low.

This is an important thing to know, especially now that Mayor John Tory has announced plans to extend a special property tax levy that will amount to an additional eight per cent increase by 2025. That kind of tax hike may sound to some like cause for outrage. Those socialist fat cats at city hall are at it again!

Except that kind of reaction ignores the mathematical truth I am bringing to you. Because, again, Toronto’s residential property taxes are low.

The numbers prove it. In a comparison of municipal tax rates for 2018 (the last full year of data) across the GTA, Hamilton and Ottawa put together by city hall finance staff, Toronto’s residential tax rate ranked lowest. Name a comparable nearby municipality, and Toronto’s tax rate of 0.64 per cent on the value of a home beat it. The average was 0.93 per cent.

Ah, but you’re smart enough to know tax rates aren’t a perfect measure, right? Toronto real estate is the most expensive in the GTA, so for a fair comparison we should ditch percentages and compare real dollars.

But the number crunchers have done that comparison too, and even by that measure Toronto property taxes remain low. The average annual residential tax bill across the GTHA and Ottawa for 2018 came in at $4,773 per household. In Toronto, it was $3,906.

The average Toronto homeowner paid $228 less than Burlington and $403 less than Oshawa. The City of Vaughan lived up to its one-time slogan of being “the city above Toronto” by paying $1,451 more per household on average. Only Milton residents forked over less than Toronto in the analysis and I am pretty sure they don’t have a subway system to maintain.

When I tell people about all this mathematical truth, I get different reactions depending on the audience. Those from the 905 are often surprised, and then kind of annoyed to find out their well-heeled Toronto friends are probably paying less than they are.

Toronto residents, on the other hand, offer potential excuses, like the fact they pay fees the average 905er does not, like the annual cost for garbage pickup or the special Toronto land transfer tax. But even when those costs are factored into the property tax comparison, Toronto still ranks below the GTA average on the tax scale.

Then there’s an argument that Toronto can have low taxes because the city has been booming, with the assessed values of homes have gone through the roof which should mean more tax revenue for city hall. But property taxes don’t work that way.

Unlike income taxes or sales taxes, where a rising economy leads to more government revenue, local governments do not get more property tax revenue when assessed values go up. Instead, the assessment process is revenue neutral — if your property tax bill goes up because your home was reassessed, it means someone else in the city got a tax decrease offsetting that amount.

The best argument against hiking Toronto taxes is that every single day Toronto residents subsidize the cost of people who cross the municipal border. During the day, Toronto’s downtown population more than triples, from an estimated 250,000 to more than 830,000. The people coming in for the day contribute little in the way of tax revenue to the municipal services they use.

But all attempts to address that imbalance have failed. Queen’s Park blocked tolling on city-owned highways. A municipal sales tax — a feature of many cities with populations comparable to Toronto — is not currently permitted by provincial legislation.

And so Toronto, faced with multibillion-dollar funding shortfalls for transit and housing, has few alternatives. The mathematical truth says Toronto’s residential property taxes are low. The mathematical truth says there is room to raise them to pay for the things the city desperately needs.