Why are some Toronto homeowners paying less tax?

The average Torontonian pays more than $3,500 in property tax to cover city services. It’s a lot. And, more than anything, local residents want the system to be fair. But just how fair is it? As Toronto digests the latest budget and property tax increases, the issue of tax fairness across the city has come up. At the heart of this debate lies a fundamental question: are all areas of Toronto being taxed equally and should they be?

The recent unveiling of the new city budget revealed staggering financial pressures, driven primarily by growing demand for refugee claimant support and shelter spaces, coupled with decreased transit revenues. 

In response, the city reported undertaking various measures, including finding efficiencies, and securing intergovernmental funding. However, these efforts weren’t enough to stave off an eight per cent residential property tax increase, which translates to an additional $285 annually for the average Toronto homeowner.

Amidst these fiscal challenges, one city councillor’s attention has turned to the issue of property tax disparities, particularly exemplified by the unique situation on Toronto Island.

Although the island’s picturesque landscapes and car-free streets evoke tranquility, there exists a contrast in property tax rates compared to the rest of the city.  

Residents of Toronto Island benefit from a unique structure in which property taxes are based solely on the assessed value of their homes, excluding the land’s worth due to the lease arrangement with the city. This results in significantly lower tax bills for islanders, despite enjoying the same range of municipal services.

The proposed motion by councillors Jon Burnside and James Pasternak, titled Tax Fairness for All: An Equitable Approach to the Residential Property Tax Rate on Toronto Island, seeks to address this imbalance. 

Burnside was first introduced to the issue at a committee meeting years ago, he explained. The focus shifted to the cost of emergency services, particularly for firefighters and EMS on the island. Delving into the numbers, it became evident that the average cost of a call for the island’s fire service is around $3,000 across the city, but $11,000 or $12,000 on the island during peak activity times and ballooning to $30,000 per call during the off-season. 

This raised questions about property taxes, as it was discovered that while the average resident in an area such as Flemingdon Park pays approximately $4,200 annually in property taxes through their rent, islanders typically contribute around $1,500. 

“And, of course, the reason is that they don’t, quote-unquote, own the land. Right?” said Burnside. “Of course, my argument is that an apartment dweller doesn’t own either. So in my mind, there was a real loophole there. And I wanted to close it.”

The motion proposes an “area rating” tool, allowing for a customized tax rate reflective of the unique circumstances of living on Toronto Island.

“They should be paying what the average Torontonians pay, right?” said Burnside. “I think that’s around $3,500.”

One of the comments, via social media, critical of the proposal is that island residents must pay a considerable amount every year for the ferry. It is the only public transportation off the island. 

“Hold on, you pay about $1,000 a year for the ferry, which is heavily subsidized and for something you get right downtown,” Burnside explained. “Someone with a Metro Pass that wants to come down, they pay $1,700 a year. Everywhere you turn it’s advantage, it’s privilege.”

And for a city with an equity lens as a priority, Burnside does not understand the pushback he has received from the proposal, which was referred to the executive committee for a late-February meeting.

Toronto Island Residential Community Trust Corp. (TIRCTC/Trust)  commented that it has issues with the initiative. 

“The Trust is in favour of fair taxation for all Torontonians and we are working with the city councillor to address the inaccuracies in the motion and ensure that decision-makers are supported by accurate facts and a clear understanding of the unique legislation that governs Island properties,” Alison Rogers, chair of TIRCTC,  wrote, in an emailed statement. 

While the focus remains on Toronto Island, broader questions about tax fairness persist.

Should people choosing to live in areas of higher density be taxed at a lower rate based on service costs per household? For instance, in Toronto, residential and multi-residential areas each have different rates. In Halifax, proximity to public transit and the classification of your area as urban, suburban or rural also impact your rate.

“We need integrity in the system,” said Burnside. “People need to feel confident that everyone is treated fairly.”     

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