Loss of Transit Tax Credit Kindles Debate on Social Benefit of Climate Action
One of the smaller pieces of the federal budget received outsized attention last week, after Finance Minister Bill Morneau announced that he was eliminating a Harper-era tax credit for middle- and upper-income Canadians who bought public transit passes.
The budget proposes a $3.4-billion investment over three years “to upgrade and improve public transit systems across Canada”, an 11-year, $20.1-billion fund through bilateral agreements with provinces and territories, and specific transit expansions in Ottawa, Calgary, Toronto, Montreal, and Vancouver. But it also eliminates the $150-million Public Transit Tax Credit as of June 30, arguing that “available evidence suggests that this credit has been ineffective in encouraging the use of public transit and reducing greenhouse gas emissions.”
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That decision led much of the early coverage of the budget, with Toronto Transit Commission Chair Josh Colle warning that it could hurt ridership and calling on Ottawa to use every tool at its disposal to encourage transit use. The Globe and Mail placed the value of the tax credit at more than $250 in the Greater Toronto Area and cited TTCriders spokesperson Jessica Bell calling the budget measure a “massive” tax hike.
“Although seemingly ironic that Prime Minister Justin Trudeau is effectively raising the cost of riding transit in Toronto—for some people—by removing a tax credit brought in under predecessor Stephen Harper, the decision is more complicated than it appears,” the Globe noted. A 2016 study from the University of Ottawa “concluded that the tax credit had increased ridership by between 0.25 and 1%,” determining that most riders who benefited “would have taken transit regardless of the availability of the tax credit.”
The Globe added that the Harper-era credit—like many of the previous government’s boutique fiscal measures—mainly supported “comfortably well-heeled” riders who had the cash flow to buy monthly passes. “At the other end of the spectrum, meanwhile, riders without the cash flow to buy a pass, or who earn too little to pay income tax, will not be able to access the credit.”
A Toronto staff report last November reinforced that analysis, noting that “low-income riders use cash fares and tokens more often than medium- and high-income riders, who are likely to buy monthly Metropasses, which are cheaper on a per-ride basis.”
Équiterre Government Relations Director Annie Bérubé suggested squaring the issue by earmarking part of the federal contribution to help transit authorities subsidize passes for riders in greatest need.
“No one disagrees with the policy goal of making transit passes affordable to those who need it most,” but “the public transit tax credit did not achieve this policy goal,” she said. “It is a regressive policy, had little or no impact on transit ridership, and was costly to administer.”
Chris Winter of Climate Action Canada said a long-term commitment to greenhouse gas reduction would mean building social benefit into Canadians’ thinking about climate solutions.
“People need to see tangible benefits from climate funding in terms of cost savings, their quality of life, and investments in their community,” he told The Energy Mix. “With the current budget, we saw a strong investment in climate action combined with a climate lens on other priorities like economic innovation and community development. What was missing was any tangible social benefit,” and “the one existing benefit, the Public Transit Tax Credit, was cancelled.
“I understand the logic behind the decision, but it sends the message that affordable transit isn’t a priority for Canada’s climate plan.”