Toronto councillors have passed new taxes to help deal with the city's massive revenue shortfall, after an intense day of debate.

The vote passed 26-19.

The taxes were the subject of heated discussions throughout the summer, but city councillors were expected to pass the tax package that includes a new land transfer tax for homeowners and a new vehicle registration fee.

The municipal land transfer tax doubles the existing provincial land transfer tax on new homes. Drivers will have an added $60 tacked on to their annual renewal bill of $74.

The new taxes are expected to raise around $200 million for the city. Toronto is currently facing a $414-million budget shortfall in 2008.

Mayor David Miller began his morning by addressing a crowd outside city hall, confident his tax plan would get approval. Onlookers wore yellow scarves in support of the proposal.

However, almost as soon as Monday's meeting got underway, critics of the proposal pushed Miller into defending his plan.

"We know what Torontonians have said over the past couple of months," Miller said, speaking to council. "They want a city that has public services in their neighbourhoods to meet their needs and the needs of their families"

Coun. Michael Thompson showed the packed council chambers a tall stack of papers containing more than 1,000 emails from disgruntled constituents.

"Eighteen-hundred emails have been submitted to my office for those who are opposed to the land transfer taxes," he said.

Councillors against the plan had said that if the taxes were approved, the city would continue to impose new levies.

"There will be no end to it and there will be no cost-cutting in here whatsoever," Coun. Doug Holyday said. "What we need is a change in attitude in here."

Coun. Case Ootes said the province needs to do a better job helping municipalities.

"By voting down these taxes, it would force 22 Toronto MPPs to do their job and fight for the people they are supposed to represent," he said.

At one point, security had to remove a man from council chambers after he kept angrily yelling out against the proposal from his seat in the audience.

Mayor agrees to compromise

Many members of council who initially opposed the tax proposal or were undecided were said to be swayed by the support of developers and Toronto's Board of Trade.

Back in July, council voted to defer making a decision on new taxes until after the provincial election, so that they could gauge how much help the city could receive from the province.

Miller had said the city needed to show that it did what it could with the new Toronto Act, bestowed by the Ontario Liberals last year, which gives the city's government taxing powers.

Miller had to compromise a bit from his original proposal. Under the proposal passed Monday night, first-time homeowners get a rebate on the land transfer tax. Also, an independent audit committee has been hired to assess the city's books and suggest areas where fat could be cut.

The compromising and the delays in passing the plan have actually reduced the amount of money the taxes were supposed to raise. Back in July, the mayor estimated more than $300-million would be generated.

Kevin Gaudet, the Ontario director of the Canadian Taxpayers Federation, said even though council promised to examine their own books for savings, it doesn't mean they'll actually make any cuts.

"I'll believe it when I see it," he said in an interview with CTV News. "There's going to be a panel that's going to be looking into the possibility of perhaps reducing spending. In the meantime, they're going to pass $300-million of tax hikes."

Gaudet said Winnipeg's mayor was able to reduce taxes, not raise them, when he consulted an independent panel. The panel recommended outsourcing, privatizing, provincial support as ways to get funds, he explained.

"I'm quite concerned that this city hall has a spending problem, not a revenue problem," he said.

With a report from CTV's Naomi Parness