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Riders wait for an approaching TTC subway at the the Main Street Station on Thursday, May 21, 2009.The Globe and Mail

Few things are as contentious among transit riders as the fare. Politicians get applauded for making promises of major system improvements, but those can seem ever-distant while the cost to ride is a daily irritant.

So when the federal budget cut a boutique tax credit aimed at offsetting the cost of transit passes, arguing it wasn't playing the intended role of inducing people to ride, the complex nuances of fare policy risked being lost in a rush of anger.

The tax credit, brought in a decade ago, allows people to claim 15 per cent of the cost of a transit pass each year. For users of the Toronto Transit Commission – where the cost of the Metropass has jumped 47 per cent over that period and currently sells for $146.25 per month – the benefit now adds up to more than $250 a year.

Jessica Bell, spokeswoman for the advocacy group TTCriders, called the federal budget change a "massive" fare hike.

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The federal government "should do everything it can to encourage ridership, especially since the TTC's latest ridership numbers show ridership is dropping," she said in a statement.

The tax credit meant $200-million a year in foregone federal revenue, and the government will end the break as of June 30 of this year.

Although seemingly ironic that Prime Minister Justin Trudeau is effectively raising the cost of riding transit in Toronto – for some people – by removing a tax credit brought in under predecessor Stephen Harper, the decision is more complicated than it appears.

For one, the government says it would rather spend money on building transit, and points to plans for about $20-billion in national funding over 11 years.

Also, the budget referenced "available evidence" suggesting that the tax credit wasn't convincing people to take up transit. It was not immediately clear what research it had relied on, but a 2016 study out of the University of Ottawa offered support for the change.

Looking at transit nationally, the research concluded that the tax credit had increased ridership by between 0.25 per cent and 1 per cent, depending on various assumptions. However, "the large majority of recipients of the [public transit tax credit] are those who would have taken transit regardless of the availability of the tax credit," the authors wrote.

This points to one of the difficulties in broad-brush fare-policy changes: using financial inducements to bring people onto transit is an expensive tactic if the bulk of the benefit goes to existing riders. And in a system such as the TTC, where many riders are comfortably well-heeled, a substantial part of the benefit will flow to riders who are solidly middle class. At the other end of the spectrum, meanwhile, riders without the cash-flow to buy a pass, or who earn too little to pay income tax, will not be able to access the credit.

"Low-income riders use cash fares and tokens more often than medium- and high-income riders, who are likely to buy monthly Metropasses, which are cheaper on a per-ride basis," Toronto city staff reported in November. "Unable to pay the upfront cost of the monthly Metropass pass, most of working-age, low-income residents pay per ride and end up spending more on transit [than] everyone else."

The TTC carried 538 million riders last year. About half of them used a Metropass, although it's not clear how many of these were taking advantage of the tax credit. The city staff report said that 40 per cent of low-income riders used the TTC often enough to qualify for the credit, but did not specify whether they were doing so.

The transit agency says it does not know how many of their riders were taking advantage of the credit. A spokesman said they were working to figure that out, and to understand the possible impact of it being eliminated.

Politicians, particularly those eager for Ottawa to build transit, were circumspect in their reaction to the federal decision.

On a call with reporters Thursday morning from India, where he is on a trade mission, Toronto Mayor John Tory called the budget move "an unfortunate development" and said he was trying to learn more about the logic behind it.

"This … will have some negative impact on some people, I'm sure," he said.

With a report by Jeff Gray

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