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With fuel taxes on the way out, officials will find a new cash grab

PM Justin Trudeau’s commitment of a new cap on greenhouse gas emissions from the country’s oil and gas industry may not pan out as expected, but we are heading down a road that will see a large reduction in fossil fuel use.

Canada has pledged to reach net-zero emissions by 2050, reiterating its stance at this week’s COP26 negotiations in Scotland.

In the short-term, Trudeau can expect more outrage from Alberta and some not-too-happy motorists already paying record-high prices for fuel. The latter are unlikely to find any financial relief in the transition to electric vehicles that’s expected over the next 10 to 15 years, however.

In fact, governments are already plotting to replace gasoline taxes as the internal combustion engine is phased out of production. The federal government collects about $6 billion a year through excise taxes on gasoline and diesel fuel, with provinces and municipalities taking in another $10 billion. That sum doesn’t include the HST and GST applied to such purchases – taxes on taxes being the norm at the pump – nor some $2 billion in other registration and licensing fees.

While governments certainly waste that kind of money with regularity, it makes sense to find replacement revenues to help fund roads and bridges. That process would be fairer still if the taxes motorists paid did in fact go directly to roads and bridges. That’s not the case in Canada, where the money goes into general tax coffers, unlike in the U.S. where 100 per cent of gas tax funds are required to go towards such projects, the rationale for such taxes in the first place.

Right now, electric vehicles don’t pay fuel taxes. Alternatives include an annual registration fee equivalent to the average fuel taxes paid by motorists and a toll system whereby drivers pay per kilometre travelled. The latter gives rise to a host of ethical problems with the proposed use of GPS tracking devices to log kilometres travelled, with some advocates calling the technology to be used for congestion tolls, time-of-day usage charges and extra premiums to fund other programs, from public transit (already a part of the money diverted from fuel taxes) to health care.

Certainly, any tracking-based method must be dismissed outright on ethical grounds. Just as certainly, governments will refuse to do what’s ethical, so we can expect troubling propositions on top of misdirected infrastructure funds.

As it stands today, we have taxes galore. Tax on taxes. Carbon taxes. Road tolls. Ever-increasing registration fees. Never-decreasing insurance rates. And those are just the financial burdens on motorists, cars of course being to blame for environmental woes, urban sprawl, low numbers of pedestrians and cyclists, and the general crappiness of public transit.

Much has been discussed about the social ills of our auto-centric society – the good, the bad and the ugly. It’s a narrative that proves helpful for governments continually going to the well, lifting money from drivers’ wallets without any apparent shame … or real accountability, for that matter.

By now, we’re all familiar with the constant lament of the infrastructure deficit, the money needed to replace ageing roads and bridges and the money needed to fund public transit. For the most part, infrastructure needs mean taking more from everybody rather than eliminating spending elsewhere to pay for the essentials.

Ever-increasing taxes and fees levied against drivers should be enough to cover the related infrastructure, but the money isn’t always used appropriately, let alone wisely.

What Ontario takes in through gas taxes and what it spends on roads is more than just a passing annoyance, which is why groups such as the Canadian Taxpayers Federation call on the province to put in place policies to guarantee 100 per cent of money raised through gas taxes and licensing fees goes back into roads. The same should be true of any new form of taxation imposed to replace fuel taxes.

Motorists in Ontario already pay for most road construction and maintenance costs through registration fees, and fuel and excise taxes. Even still, they’re not reaping the rewards in either infrastructure improvements or reduced congestion.

Policies for dealing with issues such as traffic congestion are often based on the presumption that road users are heavily subsidized by general government revenues. Studies such as those by the Conference Board of Canada show that’s not the case, estimating Ontario drivers account for 70 to 80 per cent of road costs province-wide, rising to perhaps more than the actual costs in urban areas of the GTA and Golden Horseshoe.

Where advocates of alternative transportation argue motorists don’t pay their fair share, we see that’s not the case. Moreover, even those who don’t drive are dependent on the road network for everything from the delivery vehicles that bring inventory to the grocery store to the very same lanes used by buses, ride-shares and bicycles. Those who don’t pay fuel taxes and licensing are getting a freer ride.

Still, a vocal minority advocates for higher fees and more restrictions, with lobbying for the likes of toll roads and metered usage. Given that policy discussions to date have not included numbers and proof of viability, it’s easy to see why Ontarians see increasing fees and talk of toll roads as just another cash grab.

Actual accountability for the money lifted from drivers extends beyond the province. The federal government collects a significant amount of the revenue. It recent years, it has taken to sharing the wealth with municipalities, which are responsible for some 80 per cent of roads. This shows the perils of money being funnelled into general coffers, especially when drivers are seen as an easy target for ever-increasing taxes and fees while receiving no corresponding benefits – of course, giving less while taking a whole lot more money is pretty much standard operating procedure for just about every government. And just as politicians will talk about the cost of road infrastructure without any real numbers, they’ll also trot out tropes about “good value” without any actual evidence.

Removing gas taxes from general coffers would require the government to make an adjustment in its spending habits. Many would argue we’re dramatically overtaxed: there are plenty of places to cut back in order to put the billions of dollars in gasoline taxes, for instance, where they belong.

Politicians, however, have paid little attention to long-term infrastructure needs, preferring program spending to make a re-election splash. Failing roads and bridges – along with sewers and a host of other infrastructure issues – are left for a future administration to tackle.

Chronically overtaxed, we’re getting less and less for our money. That the public is starting to perceive that reality perhaps bodes well for some pressure on our politicians. Infrastructure spending is front and center now as both the federal and provincial governments look to stimulate the sagging economy. Roads and bridges are prime, old-school works programs that have the advantage of being ready to go – most municipalities have a long wish-list of projects – if only governments would aim for credible policy instead of simply grabbing the cash.

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