Toronto Mayor Rob Ford has been talking a fair bit about taxes and taxpayers lately.
Reporters keep asking him about an alleged video of a man who is said to look like Mr. Ford who appears to be smoking crack cocaine. He fends off the questions by mentioning how he's standing up for the taxpayer at city hall.
The federal Conservatives talk taxes a lot, too. Last week, Finance Minister Jim Flaherty criticized the Ontario government for considering tax increases to pay for new subways and rail lines in the Toronto-Hamilton area. "As you all know, I do not believe in tax increases," Mr. Flaherty said in a statement to The Globe and Mail. "Ontarians pay too much tax as it is."
Taxes and taxpayers are two of the most-often-spoken but least-analyzed words in politics. It's time for a reality check. When politicians talk tough on taxes, ask them how they plan to fix overcrowded roads, inadequate public transportation, failing infrastructure and crowded hospitals without any tax increases. Ask whether taxes and the quality of services we use all the time are totally unrelated.
Taxes are the public policy issue that connects most directly to our personal finances. A few years back, Statistics Canada reported that about 20 per cent of the average household budget was spent on federal and provincial income tax plus payroll taxes.
You've no doubt heard a lot of warnings about how higher interest rates might cost you in the years ahead. Now, it's time to consider what higher taxes might mean to your finances. Many people would say they can't afford tax increases in today's challenging economic times. But that view is going to be tested as governments look for new ways to pay for the things we demand.
I'm a Toronto native living in Ottawa and I get back home quite a few times a year. Roads and highways are jammed at all hours, and public transportation is overwhelmed. I recently watched a streetcar on King Street in the city's downtown get stuck at an intersection through three traffic light cycles because a crush of passengers prevented the driver from closing the doors.
To address this congestion problem, an Ontario government agency called Metrolinx proposed the idea of funding an expansion of public transportation through a 1-per-cent increase in the HST, a commercial parking levy, a gas tax of 5 cents a litre and a 15-per-cent increase in development charges. Ontario Premier Kathleen Wynne is studying the proposals and said there will be consultations before the transit plan is finalized. She has already said only residents of the Greater Toronto Area would pay for the transit expansion.
Ontario's deficit is projected to be an astronomical $11.7-billion this year, so it has no money to expand an overburdened public transportation system. But the problem must be dealt with. The reputation of the country's largest city as a place to live and do business depends on it.
The reputation of politicians today has a lot to do with their stand on taxes. Despite his recent difficulties, Toronto's Mr. Ford has a strong following among people who admire his tough talk on taxes. These are the people Mr. Ford played to when he declared during a recent media conference that he was "elected to keep taxes low and to reduce the size and cost of government and that's exactly what I've been doing every single day." A week earlier, he said much the same: "I would like to assure everyone that we are continuing to fight for the taxpayers every day."
Dissing taxes gets you political street cred. Politicians at all levels have created a compelling narrative that taxes are an imposition on individuals – even an expropriation. It's pure spin, though. If taxes are evil, then it follows that we won't be spending as much as we need to on roads, buses, hospitals and such. Are we good with that? Do we accept perpetual gridlock on our roads and endless daily commutes as a tradeoff for not having to pay more in taxes?
For all the talk about taxes and taxpayers, we've never properly debated the importance of keeping taxes low. Sure, we all want to pay less, or at least not pay more in income tax, sales tax, gas tax, land-transfer tax and so on. But we've never talked about under what circumstances we would be willing to pay more, if any.
It may be that our household budgets would be better off if we paid a little more now, as opposed to waiting and letting infrastructure and urban congestion get worse. We might also take the long view and say we're saving our kids from massive tax hikes needed to repair our cities.
No conversation can be had about taxes without mentioning government waste, which rightly drives people crazy. But cutting waste only goes so far. Whether or not we can create a more efficient government, we'll still need to talk taxes. Which government would like to get things rolling?
For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).
Rob Carrick