It’s not hard to get angry at the Toronto city council’s budget proposal to raise property taxes four per cent this year. 

When the economy is in the tank, why raise taxes? Neither the province nor that federal government is proposing a tax increase.

Well, the reality is that when the only tax available to it is the property tax, the city doesn’t have much choice if it is to meet its budget.

The city must have a balanced budget as it does not have the luxury of incurring a deficit.

But a lot of the problem lies in the rigidity of the property tax.

It is not flexible like income tax, responding automatically to change.

Every time your income goes up, more income tax flows to those governments without them doing a thing.

Here’s the example. Police officers in Toronto will see their pay increase by more than three per cent this year. A first-class officer who has been on the police force for five years is currently paid $76,000 a year, so the increase will be about $2,200.

The income tax payable on that extra amount is about $600, and that’s extra revenue for those other governments.

Then you look at the city. How will it pay this extra cost for those police officers? Applying last year’s property tax rate produces the same total revenue this year as last. It’s not flexible.

To pay the wage increases city council must either increase the property tax or cut expenditures by reducing services. City council can’t renegotiate wage increases set by an arbitrator.

So until council has the ability to levy flexible taxes such as an income tax or a goods and services tax — and that day may never come — it must increase the property tax rate to pay its bills. That’s the trap.

– John Sewell is a former mayor of Toronto; torontoletters@metronews.ca.