Looking beyond PST to raise infrastructure cash

DEAR EDITOR,

Kudos to Jim Carr for raising once again the pressing need to allocate funds to address the huge infrastructure deficit facing this province (Find courage and bite the bullet, April 14).

He proposes a one per cent increase in the provincial sales tax dedicated to infrastructure or the passage of provincial legislation that will free up municipalities to introduce an infrastructure levy that will raise the same amount ($250 million per year). However, he indicates there might be better ideas and wants to hear them.

Reliance on increases in the PST to fund infrastructure renewal does nothing to discourage the behaviours that have created the infrastructure deficit, which principally include low-density development and urban sprawl in the capital region and heavy reliance on single occupancy use of the automobile. Thus, as either a complement to or as a substitute for an increase in the PST, four sources of revenue should be considered -- increases in the provincial excise tax on gas and diesel fuel, congestion pricing, an open-space amenity tax and impact fees.

A gas tax dedicated to building an efficient, comprehensive public transit system in Winnipeg would be a good start, because it would provide both a carrot and stick to the use of the car for commuting purposes. A 2006 review of policies aimed at correcting the negative externalities generated by the automobile concluded that a progressive increase in the gasoline tax makes sense because it is administratively simple to implement, favourably affects all the externalities and raises revenue.

My own calculations, based on a Statistics Canada model, show that increasing the current excise tax on gas from 11.5 to 20.2 cents per litre would raise just over $100 million per year and would be a slightly less regressive form of taxation than an equal-cost increase in the PST. Were this revenue then dedicated to improving roads and building a comprehensive rapid transit system in Winnipeg, it would provide both an incentive to drive less and an opportunity to use public transit.

Regarding measures to discourage urban sprawl, Brueckner and Helsley (2011) in the Journal of Urban Economics show that the congestion pricing of traffic into the urban core, an open-space amenity tax and an impact tax which prices the cost of providing infrastructure at its marginal value all promote the objectives of raising reinvestment in the urban core and shifting population toward the centre.

While it is doubtful that congestion pricing could be implemented for Winnipeg, pricing the cost of infrastructure at its marginal value and putting a premium on open spaces would raise additional civic revenues which then could be used to address the infrastructure deficit.

Rather than putting all of the revenue-generating onus on an increase in the PST, there may be merit in using a variety of funding sources, including those which discourage the behaviours which have led to the infrastructure deficit. Doing so would provide a more effective long-term solution.

HARVEY STEVENS

Winnipeg

Republished from the Winnipeg Free Press print edition April 17, 2012 A11