The 2% Solution
What happened to other pieces of the ‘early ideas’ package?

The ‘early ideas’ package presented in the fall focused on 3 things: (1) money for infrastructure, (2) access to growth revenues and (3) tax shifting. The New Deal proposal includes money for infrastructure, access to growth revenues but a much smaller tax shift component.

The New Deal proposal includes many of the core elements in the ‘early ideas’ package including sales tax, income tax sharing and fuel tax. These revenue tools are being proposed as a way to fund the infrastructure deficit and as a way for the City to gain access to growth revenues.

As mentioned, tax shifting was a large part of the ‘early ideas’ package and it remains as a much a smaller component of the New Deal proposal. In tax shifting, revenue is shifted off of property taxes and onto other more appropriate ways of funding City services.

In the ‘early ideas’ package, a City sales tax was key to significant tax shifts. The proposed City sales tax, together with a range of other smaller taxes and fees, made it possible to cut property taxes in half, eliminate the business tax, cut transit fares in half and freeze recreational fees.

A City sales tax is not part of the New Deal proposal. Therefore, large tax cuts are not possible. However, the New Deal proposal does propose a smaller tax shift – property taxes would be reduced by 4% and then frozen for 5 years. In addition, the New Deal proposal provides some access to income and sales taxes, which can facilitate tax shifting in the future.

City sales tax, liquor tax, hotel tax, frontage levies, the natural gas and electricity tax, a garbage user fee, enforcement fines and the 911 phone fee, which were all part of the tax shift, have not been included in the New Deal proposal. These various taxes/fees were not included in the proposal for one or more of the following reasons:

• The ‘new deal’ proposal must be kept simple
• There was limited support for the tax/fee
• There were significant concerns in the industry for the tax
• The tax room is already occupied by the other levels of government
• Without a sales tax, shifts to the tax/fee would mean the overall mix of city taxes/fees would be more regressive than it is currently
• Council has the authority to implement the tax/fee and it can be debated as part of regular Council process (as with the shift to a garbage user fee in the 2005 budget process.)

Please refer to the ‘Report on Public Consultation’ January 2004 for more details on the opinions gathered on each of the elements discussed in the ‘early ideas’ package. The report can be found at Winnipeg.ca/newdeal (under research).