Wynne rejects hike in sales, gas taxes for transit

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Ontario Premier Kathleen Wynne is now rejecting the idea of hiking the harmonized sales tax or gas taxes to raise the funds for new transit lines, a sharp turn away from her previous contention the province was ready for an adult "conversation" on the subject.

The move takes two controversial proposals off the table ahead of a provincial budget and possible election, making it harder for the New Democrats – who opposed raising the taxes – to topple the government, and robbing the NDP and the Progressive Conservatives of an easy campaign issue if they do.

But while Ms. Wynne said on Thursday that she will increase neither of the taxes, she said her budget will still contain an "aggressive" plan to build infrastructure. Ruling out two lucrative sources of cash will make it much harder to pay for the new subways, commuter trains and light rail lines she wants to build in the Greater Toronto and Hamilton Area.

"Make no mistake: We will establish in the upcoming budget the dedicated, ongoing, guaranteed funding that those projects need," the Premier said on Thursday morning at the home of a family in Toronto. "But we're going to do that while continuing to keep in mind peoples' everyday costs and the pressures on them in their lives."

The Liberals are mulling several other possible sources of transit cash.

The government is also considering borrowing against future revenues to raise money as quickly as possible.

Ms. Wynne's move was in the works for months. Liberal insiders have been saying since July that the Premier and her advisers did not want to raise the HST. In recent weeks, the government appeared increasingly cool to the option of hiking the gas tax as well. While the Grits do not think either idea is bad policy, they believe both are too unpopular and difficult to sell to the electorate.

The trouble was that government-commissioned studies were solidly behind the measures. A report by provincial transit agency Metrolinx last spring recommended both the HST and gas tax hikes; an expert panel led by former non-profit executive Anne Golden supported an increase to the gas tax in December. One Liberal source said the government did not do a good enough job "managing" the two expert groups to steer them away from politically unpopular recommendations.

Another acknowledged that implementing such measures would "bring down" the government.

Ms. Golden said on Thursday that many of her ideas – including a corporate income tax hike and borrowing – are still on the table. With lesser revenue measures, she said, Ms. Wynne still has options to get at least some cash for her plans.

"It won't be the whole loaf, but even if it's half a loaf, we'll get moving and we'll get started and I think she's committed to that," Ms. Golden said. "I've seen the polls and I know that we're in a minority government situation. I think it would be very different if this were a non-partisan issue, but it's not. I think she had a tricky balance."

Metrolinx was circumspect about Ms. Wynne's decision to throw the agency's best advice out the window.

"The government clearly supports building transit and that's still encouraging for us," spokeswoman Anne Marie Aikins said.

The New Democrats are now in a tight spot. If they vote against the budget, the Liberals can accuse them of opposing new transit for no good reason. The NDP claimed victory on Thursday, but would not say whether that increases the chance of a budget deal.

"We made it clear middle-class families can't take any more burden. We're proud that we set that agenda," NDP MPP Jagmeet Singh said at Queen's Park.

With the PCs hungry for an election, Ms. Wynne's minority Liberals must win the support of the NDP to pass the budget and avoid a trip to the polls.