Tax cuts at root of budget crisis

CAROL GOAR
The Toronto Star

The first alarm bells went off 12 years ago. But they were faint and distant.

In New Jersey, one of the richest states in the U.S., municipal property taxes were rising rapidly. Mayors were complaining bitterly.

Governor Christine Todd Whitman was a year into her aggressive tax-slashing program. Her aim was to cut state income taxes by 30 per cent in her first term of office.

But as the state's taxes went down, local levies went up and municipal politicians faced outrage from hard-pressed ratepayers.

That was the year Mike Harris, the newly elected premier of Ontario, launched his Common Sense Revolution, pledging to chop personal income taxes by 30 per cent.

It took longer for pain to filter down to the municipal level in this country, partly because of differences in the structure of government and partly because Harris and his colleagues undertook a massive reorganization of local services that threw everybody's books into disarray.

When the confusion subsided, city officials realized their costs were galloping ahead of their revenues. They accused Harris of shortchanging them, dipped into their contingency reserves, delayed sewer, water and road maintenance, hiked user fees and cancelled discretionary programs.

Some municipalities boosted property taxes while others, such as Toronto, tried to shield ratepayers while they sought relief from the province.

Harris was unsympathetic. He told them to tighten their belts, as he was doing at Queen's Park.

Dalton McGuinty, who became premier in 2003, acknowledged there was a problem, but said he couldn't afford to fix it.  That's still his position.  And he's right, as long as he refuses to roll back any of Harris's tax cuts.

That leaves cities to find their own solutions.

Toronto Mayor David Miller, hoping to avert a sharp increase in property taxes, proposed two new levies – a land transfer tax and a vehicle registration tax – this week. But city council put the idea on hold until October.