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The Impact of Provincial Gas Tax Cuts on Community Transportation

Date: September 12, 2018

A half day Forum on the Gas Tax was hosted by Transport Futures in Toronto on July 25th, 2018. Speakers discussed the economic, social and environmental aspects of gasoline pricing and gas taxes. It included experts from within academia, business, and the non-profit sector. The forum was organized as a result of the current Government of Ontario’s plan to lower provincial gas taxes by as much as 10 cents per litre.

Reducing the provincial gas tax by 10 cents a litre will take an estimated $1.5 billion per year out of revenues at Queen’s Park. Some of these revenues are presently used to fund municipal transit programs across the province. Therefore, this is a subject that certainly deserves more analysis and discussion as far as community transportation initiatives are concerned.

Panelists at the Gas Tax Forum spoke about both the pros and the cons of relying on gas taxes from the perspective of the following: economics, infrastructure, transportation demand management, fiscal policy and politics, environmental and legal implications. Speakers at the Forum argued that a reduction in gas prices, via a cut in provincial taxes paid at the pump, would not only cut government revenues but could also threaten funding for municipal transit systems that are currently paid for out of the provincial gas tax fund.

For instance, gas tax revenues are used at present to fund infrastructure (such as better roads & bridges), the provision of transportation services (such as public transit & community transportation), and also various programs to assist people in actually changing their behaviours (so as to increase use of public transit & CT services). In rural regions, where historically there has been little or no public transit, education & incentive programs like this are particularly important when transit services are initially implemented.

It was noted during the Forum that the last time provincial support for municipal transit was cut, services were either reduced or eliminated, and existing infrastructure wasn’t maintained (e.g., municipalities couldn’t afford to repair or purchase new vehicles). So, in addition to the probability that new services would less likely be created, current ones would also suffer. What then will happen in those regions where presently no alternatives to the private automobile even exist?

Prior to the election of the current Ontario government, it had been announced that the municipal share of the provincial gas tax funds would actually increase by two cents per litre by the year 2022. This would provide municipalities with more dollars available to be invested in local transit and community transportation initiatives. However, it is unclear whether or not this policy will still be put into place.

Panellists also pointed out that, although both federal and provincial gas taxes is currently an important source of funding for transportation infrastructure and the delivery of municipal transit services, they will become less effective over time as both improved fuel efficiency and the introduction of electric vehicles continue to cut into revenues. Some felt that this makes it an ideal time to consider the introduction of other measures to make-up for lost revenues, such as road tolls. Pilot projects in the Greater Toronto Area have apparently worked well, as have those in the United States. These are seen as beneficial for not only generating revenues but also reducing congestion in urban areas. There are actually several strategies for using tolls to increase government returns on investment, as well as reduce traffic, but this will clearly require further discussion and education within the public sphere.

The speakers provided other reasons why gas taxes are a fair, accountable and transparent way to pay for transit, roads and other transportation infrastructure for the time being. They mentioned the economic and social costs of air pollution, traffic congestion, collisions and climate change, as being among larger societal expenditures. For instance, higher traffic volumes mean unpredictable travel times and delays, as well as higher vehicle operating costs associated with congestion (e.g., more gasoline consumed while idling in stop & go traffic). In other words, any dollars that will be saved at the pumps on gas through a reduction in taxes will simply be spent on having to purchase more gas due to increased congestion, unless alternative mobility options like Community Transportation (CT) continue to be invested in.

So while the costs of operating vehicles (including CT vehicles) will theoretically become less expensive when and if gas prices go down, it is still unknown just what will happen to the dollars allocated from within the provincial gas tax coffers that are currently used to fund public and community transportation services. This is something that those presently involved in providing community transportation, and with a reliance on the provincial gas tax, are eager to find out. Let’s hope that the current Government of Ontario will continue to support CT in this province!