Rob Ford’s city budget includes a 2.5 per cent tax increase—but that’s really not a big surprise

Rob Ford’s city budget includes a 2.5 per cent tax increase—but that’s really not a big surprise

(Image: Christopher Drost) 

Yesterday, the city began the lengthy and rather unpleasant process of pushing next year’s budget through the budget committee and city council. Those who stand to be adversely affected: arts patrons, skating lovers, poor children (apparently, they’re eating gravy for breakfast), artists and more. But what’s dominating the headlines is the proposed 2.5 per cent property tax increase—a number that makes for juicy copy, but actually isn’t as incendiary as it seems at first.

The Grid’s Edward Keenan (piggybacking off city politics blogger Matt Elliott) explains:

The headline you’ll see in most places (here and here and here and here and here, for starters) refers to a 2.5 per cent property tax “hike.” It’s actually an increase that will likely just keep place with inflation. Those headlines are misleading and are kind of an unwelcome distraction. As the blogger Matt Elliott spent part of the morning pointing out on Twitter, a property tax increase at the rate of inflation is not really an increase at all—it’s a freeze in real terms. If wages and prices go up across the economy (i.e., inflation) then things like income and sales taxes rise with them automatically, since they are calculated as a percentage of wages and prices.

But property taxes do not move that way. In order to see city revenue rise with inflation—to keep pace with the inflationary rise in the cost of things the city needs to buy—taxes actually need to be raised manually. When taxes are not raised to keep pace with inflation, as was the case last year when Rob Ford announced a surprise tax freeze, the city actually, functionally experiences a drop in revenue.

Of course, the tax increase shouldn’t be particularly surprising—Rob Ford spoke openly about doing something similar during last year’s mayoral campaign (really, he did). Still, we understand the irresistible temptation to juxtapose what’s ostensibly a raise in taxes against Ford’s penny-pinching ideology. Only this time, Ford seems to be recognizing—albeit slowly, and begrudgingly—the reality that governments need money, especially after a year-long spree of cutting taxes, hunting gravy and finding inefficiencies.

• City budget blues: taxes, user fees and cuts, cuts, cuts [The Grid]
Facing $139M surplus, Ford wants to cut $88M in services [Toronto Star]
Ford’s 2012 Toronto budget includes hikes in property tax, transit fares [Globe and Mail]
Toronto budget 2012: Expect a 2.5% tax hike, 2,300 jobs cut [National Post]
Toronto budget includes 2.5 per cent tax increase [CBC]