Commission on the Reform of Ontario's Public Services

Tax Revenue
Chapter 18: Revenue Integrity
The <strong>Commission</strong>’s mandate does not allow us to recommend tax increases. However, we
have noted throughout the report that certain aspects of the tax system work to ensure that
revenues do not tend to grow in sync with the overall economy, defined as nominal GDP.
As such, the Status Quo Scenario features a decline in the tax burden, defined broadly as the
ratio of revenues to nominal GDP.
This, of course, compounds the difficulty of returning to a balanced budget. Allowing the
overall tax burden to decline magnifies the severity of program spending restraint required.
This severity could be alleviated if taxes begin to keep pace with economic activity.
Consistent with our mandate, we have not incorporated any increases in revenues from such
reform into our Preferred Scenario. We simply note for consideration the relatively
straightforward reforms that could be implemented to prevent the overall tax burden from
declining over time.
The main sources of this downward bias in the tax burden are education property taxes,
business education taxes and a number of excise taxes that are levied on the volume of
products sold rather than the value at which they are sold.
Education Taxes
Provincial-Municipal Relationship and Property Tax
A key feature of the provincial-municipal fiscal relationship is the fact that the property tax base
is used to support municipal services and to fund a portion of Ontario’s elementary and
secondary education costs. In 2010, property taxes raised over $23 billion in Ontario, including
over $6.6 billion 4 in provincial education property tax revenues. The municipal portion of the
tax raises $16.4 billion, and is the largest single source of revenue for municipalities.
4 All education tax revenue numbers included in this paper exclude the property tax component of the Ontario Energy and Property Tax
Credit, which is netted against education property tax in provincial Budget documents.
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