Rethinking Northern Ontario! Tax policy in Northern Ontario, (Part one).

• Position: NEWS

When the Ontario FairTax Commission handed its report to Floyd Laughren in December of 1993, it reported that "local government finance issues were raised more often in the commission's public consultation process than all other tax issues combined." It went on to say, "The system of local government finance is so complex and arcane that it is incomprehensible to most Ontario residents." It is fair to say that after more than a decade of reforms the situation is only a little better.

Financing local government is a problem everywhere, but it is especially serious in Northern Ontario, where the boom-bust cycle of the resource industries created dozens of sprawling little towns with shrinking populations.

The root of the problem is that the system was designed for the 19th century. Our Fathers of Confederation had no idea what the 21st century Canada would look like.

Trains were the coming thing in 1867. There were no automobiles. Sewer systems were still exciting. Chlorinated water was unheard of. You could drink safely from most streams. Outhouses were standard, hospitals were deadly, schools were minimal and doctors made house calls.

There were no income taxes and no GST. Colonial governments survived by selling off timber and mineral rights, peddling land to immigrants, and collecting tariffs. Is it any surprise they came up with a system that doesn't fit the 21st century?

The problem today is an outdated fiscal system

More than 80 per cent of the services were delivered locally. Local school boards, local hospitals, and local roads were local responsibilities.

Local governments depended on the property tax to pay for the services they provide. Although property tax rates have risen, economists Harry Kitchen and Enid Slack have shown that the cost of municipal services have been growing faster. There is now a massive fiscal imbalance between the province and local governments.

Today, municipal governments pay for transportation (roads and transit), protection (police and fire), environment (water, sewers, and solid waste), and social services. They are involved in public health, social housing, recreation and culture, and planning and development. During the 1990s, the Harris government made a bad situation worse by downloading social services and uploading revenue sources.

No wonder bridges and water systems are crumbling.

Local government has the responsibility, the province has the revenue

Northern communities are having an especially...