TORONTO -- Ontario should hike the gas tax by up to 10 cents a litre, along with other levies, and borrow more money to help raise the billions of dollars needed for public transit expansion in the Greater Toronto and Hamilton area, a government-appointed panel said Thursday.
One option is to increase the gas tax by three cents a litre in 2015, climbing to 10 cents after eight years, the panel said. The government could also redirect the Harmonized Sales Tax that it already collects on the gas tax to transit and raise corporate taxes by half a per cent.
The province could also cap the gas tax increase at five cents a litre after three years if it hikes the HST by half a per cent after that.
Ontario currently imposes a 14.7-cent-per-litre levy on unleaded gasoline, which hasn't changed in more than 20 years.
The gas tax increase would cost the average household in the GTHA about $80 in the first year and $260 after eight years, the report said.
But sitting in traffic for an additional 32 minutes a day could cost a driver more than $700 a year, it said.
"People will get the math," said Anne Golden, chairwoman of the panel.
Even though both the HST and gas tax are collected across the province, residents outside the GTHA won't be subsidizing transit in the metropolitan area because they would receive their share of both the HST and gas tax to fund their own transit projects, she said.
The plan does not ask too much from any one group, she said.
"Riders will pay through their fares ... drivers are going to be asked to give through a very carefully graduated increase in gas and fuel taxes," Golden said.
"Business is going to be asked to contribute through a very modest increase to the corporate income tax and government is being asked to contribute by redeploying the HST funds that it already earns on the gas and fuel taxes."
Doing nothing to fund transit will have dire consequences in Ontario, Golden warned.
"If we don't do something to change the pattern of how people move and get to work, we're going to be in an even worse situation than people now already agree we've reached, a kind of tipping point when it comes to congestion and crowding on our transit system," she said.
Premier Kathleen Wynne echoed Golden's comments.
"If we abdicate this responsiblity now, and we do not make investments in transit, then future generations will look back and say: 'What were you thinking?"'
The whole proposal, when fully implemented, will provide between $1.7 billion and $1.8 billion annually for the GTHA, the report said.
The governing Liberals say they haven't decided if they will rase the gas tax and borrow more money as the panel is recommending.
There are several options it will consider, said Finance Minister Charles Sousa, noting that gridlock in the Toronto region is already costing the economy $6 billion a year.
But hiking the tax on gasoline will drive up the cost of everything and won't create any jobs, said Progressive Conservative Leader Tim Hudak.
He compared it to a sin tax on alcohol and tobacco, saying the Liberals apparently are trying to convince people to stop driving.
The report also recommends a dedicated trust fund so drivers know the extra tax they are paying can be used only for public transit improvements -- something the Liberals have already said they plan to do.
Wynne appointed the panel earlier this year, at a cost of $90,000, to examine proposals from the transit planning agency Metrolinx, which made many of the same recommendations.
Metrolinx proposed a five-cent-a-litre regional gas tax, a $350-million-a-year business parking levy, $100 million a year in development charges and an increase in the HST.
Metrolinx said a one per cent jump in the HST would generate $1.3 billion a year for the transit projects, but the federal government has told Ontario any changes in the sales tax must be done province-wide, not on a regional basis.
Wynne has already ruled out the idea of increasing property taxes.
The panel also recommends greater use of debt to finance transit improvements, borrowing up to $2.50 for every $1 the province raises in taxes.
Wynne has already said they'll issue so-called "green bonds" next year to generate the billions of dollars needed to expand public transit.
History has shown that raising the gas tax isn't always a politically wise move. Former prime minister Joe Clark saw a quick defeat of his brief Progressive Conservative government after proposing to raise the gas tax by four cents per litre in the 1979 election campaign.
