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Index for my Toronto Budget 2004 project
The Implications of John Sewell's New Deal
23/01/2004

Former mayor of little Toronto, John Sewell, writes a good weekly column for Eye called Citystate. This week, he writes about the New Deal for Cities.

Federal politicians have generally been able to slough off these urban demands, although after he resigned as finance minister last May, Martin talked about the gas-tax option. But at the end of the day, the amounts of money that would get to the cities are relatively small. And the way the argument is pitched makes it look as though the mayors are whining, and that leaders of different levels of government are just fighting among themselves.

It's time for a new strategy, one that offers something tangible and concrete that the public wants. In that way, it won't be a matter of political in-fighting, it will be a matter of mayors and city councils asking for things of real substance and value to their constituents.

Sewell then goes on to describe areas of service where the federal government has cut back leaving the cities carrying more of the burden. He argues "That's fine. But now that [Martin] has vacated that field, he should give cities the power to enter it, and he should give cities the tax tools to raise the money to... [(fill in the policy)]".

In other words, Sewell comes pretty close to suggesting cities be allowed to charge income tax. The federal government and provinces can cut their income taxes, and cities can collect them. Instead of a higher-level government raising the money and handing it downwards, why not just let those lower-level governments charge the tax themselves? It seems more reliable that way -- you don't have to worry if you'll really get your cash. It also is arguably more democratic, since a lot more decisions about policy and taxation will be made locally.

This isn't entirely a new idea to me -- I had it in the back of my mind when I wrote this post comparing the city vs. province debate to the province vs. feds debate. The implications are interesting, and not entirely positive. We are talking about transferring tax points to lower tiers of government, and how this affects you will depend on where you are.

If you live in a city like Toronto -- wealthy, but also with social spending needs -- this plan wins for you. A low income tax will give the city all the money it needs. In fact, it will give the city so much that it will start to wonder why it is sending money to Ottawa and Queen's Park. Sooner or later the higher levels of government would be forced to lower their taxes.

On the other hand, if you live in a city that has social needs without the high tax base, or if you live in a rural area, this plan can really hurt in the long run. Once wealthy-city taxpayers elect tax-cutting parties to power in Ottawa and the provincial capitals, it will be the poorer areas that really suffer. They won't have the transfers they used to get, nor the taxation potential they need.

Sewell's suggestion is really the reversal of the situation we face now -- wealthy cities paying a lot of tax and getting too little back for their own needs. If his solution comes to pass, it's a new twist on a familiar story: "The Goose Who Laid the Golden Egg, and Finally Went into Business for Himself".

As an advocate for Toronto, I could really get behind this. But as an Ontarian and a Canadian, I wouldn't be as happy.

An easier and happier situation is a compromise... the federal and (especially, in Ontario's case) provincial governments need to give a little, so that cities are able to pay thier own bills and adapt with the times.


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