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Property taxes are going up 10.7 per cent on average in Vancouver and 5.5 per cent in Toronto, where there’s an additional 1.5-per-cent hike in a levy for building transit and housing projects.DARRYL DYCK/The Canadian Press

Take a look at what’s happening in cities if you think governments will avoid serious tax hikes in these financially challenging times.

Property taxes are going up 10.7 per cent on average in Vancouver and 5.5 per cent in Toronto, where there’s an additional 1.5-per-cent hike in a levy for building transit and housing projects. Victoria is looking for ways to raise revenue so it can keep this year’s tax hike to 6.9 per cent, and Montreal’s 2023 budget includes an average tax increase of 4.1 per cent.

Now comes budget season for the federal and provincial governments. Provincial finances are in good or improving shape for the most part, but the federal government has both a deficit and big spending commitments. As unlikely as it seems at this moment of high interest rates and stubborn inflation, tax hikes are on the agenda.

The federal Liberals are expected to announce details in their spring budget of an already announced minimum tax rule to ensure high earners pay at least 15-per-cent tax. But with inflation and interest rates as high as they are, broader income tax increases are politically undoable.

That leaves raising the GST back to 7 per cent from the current 5 per cent as a potential way to help the federal government balance fiscal responsibility with additional spending on programs such as pharmacare. A GST increase was included in a “shadow budget” created by the C.D. Howe Institute, an economic think tank.

Raising the GST is arguably a fair way to raise tax revenue. And yet, the idea was pretty much dismissed by an economist who was once a supporter.

“I would have argued for it a while ago,” said Armine Yalnizyan, currently an Atkinson Fellow on The Future of Workers. “When [then-prime minister Stephen] Harper dropped the GST from 7 per cent to 5 per cent, I thought it was a cheap trick.”

Raising the GST means taxing spending, which financially secure households are doing quite a lot of right now. A recent Personal Finance column looked at how this spending is helping to fuel the inflation that weighs so heavily on people who aren’t financially secure.

Lower-income people also pay GST, but the expense is offset to some extent by the GST tax credit. Ms. Yalnizyan agrees that expanding this quarterly tax credit is a must if the GST is raised. But she doubts a higher GST will ever fly in households coping with higher mortgage payments and food costs.

“It still feels like the poor person’s tax,” she said. “People don’t say, ‘Oh, I’m paying more now, but I’m getting it back.’ They just see it as a higher tax.”

The narrative on taxes over the past few decades suggests that tax cuts are the answer to the financial struggles of Canadians. But it’s hard to square tax cuts with the spending demands on governments right now.

Vancouver Mayor Ken Sim said the sharp increase in property taxes in the city is needed to improve core city services including road repairs and sanitation. Toronto property taxes are rising to invest in areas such as transit and emergency services.

Federally, the government recently offered a $46.1-billion health care deal to the provinces. Can that possibly be enough to get family doctors for all who need one, meaningfully reduce hospital emergency room wait times and shrink the backlog of people waiting for surgery?

Even if it is, the minority Liberals have to be looking at launching a national pharmacare program. NDP support for the Liberals depends on pharmacare legislation being passed in 2023.

Ms. Yalnizyan said opening people’s minds to a higher GST requires a couple of things, the first being a willingness by government to address the sense of unfairness people feel about the economy today. She wonders how people can be asked to pay more tax on their purchases when inflation is high and companies, notably grocery chains, banks and energy companies, are reporting bonus profits.

Governments also need to change the way they talk about taxes. People may be more receptive to a higher GST if there’s a clear plan to spend the money on programs that improve quality of life, Ms. Yalnizyan said.

Talk about getting more houses built, or pharmacare, she suggested. “We need a conversation about what we’re trying to achieve collectively and how we’re going to pay for it.”

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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