Ottawa - Thursday, October 9, 2003 - by: Walter Robinson, Federal Director, Canadian Taxpayers Federation

new deal
for cities

Details are starting to emerge about Paul Martin’s “new deal” for Canadian cities. Speculative media reports point to the following:
  • Some $2.5 billion from federal gas tax revenues will be returned to Canadian cities for infrastructure on a per capita funding basis;

  • Municipalities will be quasi-accountable for the spending of this money through signed agreements;

  • The provinces must agree to federal intervention in municipal affairs.




A focus on municipal finance issues is expected to form a large component of the 2004 federal Liberal campaign platform.



gas tax

As was pointed out last week, Mr. Martin found religion on the cities agenda only in recent years, but better late than never. On the other hand, the Canadian Taxpayers Federation has pushed to plow gas taxes back into infrastructure for over half a decade and has repeatedly blown the whistle on federal gas tax gouging in five annual, successive and successful gas tax honesty campaigns.




Public policy leadership is about adopting the issue, framing the debate and driving the agenda and in this sense the Canadian Taxpayers Federation is very pleased that its leading research on federal tax collections, disbursements to the provinces for roadway spending and comparisons to the U.S. situation is now employed by all participants in the urban agenda debate.




Consider the similarities between the Canadian Taxpayers Federation’s Municipal Roadway Trust and Mr. Martin’s rumoured approach mentioned earlier:
  • Devote half of all gas tax collections ($2.2 billion annually) to cities — large and small — for roadway improvements in a three-year renewable programme based on their contribution to GDP;

  • Empower the federal auditor general to audit the programme annually and recommend successor year penalties for cities that misuse funds for canoe museums, fountains, etc.;

  • Provinces wishing to emulate the MRT model could establish parallel funding arrangements or piggy-back with Ottawa in bi-lateral federal provincial agreements.




The Canadian Taxpayers Federation approach to this issue provides for greater accountability for the expenditure of federal tax dollars with the oversight from officials in the Audito General’s office.

put half
of tax into

As well, gas taxes are a user fee on motorists and as such, should be directed back to roadway construction and/or bridge and underpass maintenance. The establishment of a stable and predictable funding stream equal to 50% of annual gas tax collections ($4.4 billion of Ottawa’s $4.8 billion annual haul comes from the pumps) for roads is long overdue.



tax relief

This new steam will allow big cities and small towns to then reallocate their own source property tax revenues away from road budgets (if they so choose) to other infrastructure or transit priorities or tax relief and municipal debt reduction.



of 1.5¢/L

Where Mr. Martin’s proposals fall short is with the remaining injustice of the extra 1.5 cent/litre surtax applied in 1995 (hiking the federal gas tax from 8.5 cents to 10 cents/litre) to raise revenues to fight the federal deficit. Since balancing the federal books, this extra tax has added $2.8 billion to Ottawa’s coffers. It’s time to not only redirect the gas tax but cut it as well. Let's hope we see both of these ideas appear on the pages of Red Book IV.



Walter Robinson
Federal Director

  Joyce, Greg, Paul Martin reiterates pledge to remit some gas tax money to cities, (pdf) September 25, 2003, CNEWS Canoe


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