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As any politician knows, talking out loud about taxes, especially the possibility of new ones, is sure to set people’s teeth on edge.

That’s what happened this week when Toronto councillor Shelley Carroll, the city’s budget chief and a possible mayoral contender in 2010, called for a public debate on revenues that grow with the economy (read taxes).

The predictable media firestorm -- akin to the response to then-mayoral candidate David Miller’s musings about road tolls in 2003 -- created some confusion over what Ms. Carroll actually said.

Here’s our attempt to sort out fact from fancy:

What did she say:

At an event on Wednesday at the National Club, organized by Global Public Affairs, Ms. Carroll spoke about Toronto's fiscal challenges. She called for a “systemic change” in city finances, to diversify sources of revenue beyond slow-growing property taxes to pay for local services.

“There is no solution to be found simply by cutting services or raising property taxes,” she said. “Every global city of Toronto’s size has things that we do not...A partnership with the state or federal government to fund the operating costs of public transit and revenues that grow with the economy.

“Others can muse about road tolls, liquor taxes, or other sources of revenue,” she added, “but all of them are a poor substitute for the thing that will make Toronto a sustainable world-class city: dedicated revenues that grow with the economy.”

What did she mean:

As with a campaign led by Mayor David Miller during his two terms in office, the budget chief believes that a city of Toronto’s size cannot achieve its potential without new revenue sources, like a share of the federal GST or the provincial sales tax.

Is she calling for a new Toronto sales tax?

“No, that is not what I am proposing today,” she said, further clarifying remarks made to media scrum today at city hall where reporters had the distinct impression she was recommending such a tax. “What I am saying is there are a range of options that sustain cities around the world...and we need to have a discussion about what are all of those options and which ones would work in Toronto.”

So does she rule a Toronto-imposed sales tax?

“I’m not ruling it out. Torontonians should be part of the discussion.”

Can the city impose its own sales tax?

No. Under the 2006 City of Toronto Act, the province gave the city new taxing powers (land transfer on the sale of a house and motor vehicle registration) but specifically refused to add a municipal sales tax (permitted in some American cities).

So why stir up a hornet’s nest on taxes?

With several (male) contenders in the wings to succeed Mr. Miller when he leaves office after next fall’s municipal election, Ms. Carroll is daring his would-be successors to put up or shut up.

“If you want the top job for the next 10 years you have to tell them right now that discussion [about new revenues to get the city out of its fiscal strait-jacket] is going to be had. Let’s have it now,” she said.

What of Ms. Carroll’s own mayoral ambitions?

She does not “rule out” a run, but says she will make no decisions until early next year, once she has put forward a balanced operating budget for council’s approval.

This entry has been corrected. An earlier version said the event was hosted by the National Club. It was in fact held at the National Club, but hosted by Global Public Affairs.