When he was president of the Federation of Canadian Municipalities, Jack Layton called for cities to be recognized constitutionally so as to be independent of the provinces and to be able to create their own forms of taxation. The Federation backed his argument that cities could not continue to finance themselves through property taxes alone. The media and federal governments chose to ignore the issue until Winnipeg’s then-mayor, Glen Murray, picked up on the idea and made it a national issue to the point that a cities agenda has become a declared top priority of Paul Martin’s new Liberal government.
What was it about Murray’s original “New Deal” that created such excitement, stirred up such debate in Winnipeg and gained national attention?
Glen Murray is very persuasive. He was able to demonstrate that cities are desperately underfunded with huge infustructure deficits and badly in need of improved public transit. But Murray went well beyond what the Federation of Canadian Municipalities was talking about and is still talking about. He argued that not only did cities need more revenue from the provincial and federal governments, but that there ought to be a significant reduction of property taxes, which would be shifted to user and consumption taxes – tax shifting.
Despite all the hoopla, in the end Murray failed to garner sufficient support to deliver this New Deal. What he did manage to get through Winnipeg’s City Council was the basic proposition that the city needs a bigger share of provincial and federal revenues, no more than what the Federation of Canadian Municipalities has been calling for over the last seven years. Today, that is all that is left of Glen Murray’s “New Deal.”
Nobody in Winnipeg’s city hall, including Murray’s successor as mayor, Sam Katz, is inclined to bring back the original “New Deal.” Nor, evidently, is anybody else in the municipal scene around the country. (Katz, a local businessman in the entertainment industry, seems most concerned to eliminate Winnipeg’s business tax and is questioning Winnipeg’s need for an improved public transit system.)
What was the Glen Murray “New Deal”?
Murray centred much attention on tax shifting. Donna Morton, head of the Centre for Integral Economics think tank, who helped shape this aspect of the New Deal, argues that taxes need to be focused differently – less on income, property improvements, investment, labour – which she calls “good things” that need to be encouraged; and more on the “bads”: pollution, traffic congestion and urban sprawl, which need to be discouraged. The idea is to use taxes to change behaviour and get different results – tax the bad to encourage the good.
Winnipeg’s property taxes are high compared to other cities, which rely more heavily on a variety of user fees and higher charges on water and sewage. The original “New Deal” was to cut property taxes by half, eliminate the business tax, cut bus fares by half and eliminate the amusement tax. Taxes would be shifted from property/business taxes to user taxes and fees. The shift was to include, but was not limited to, a city sales tax, a gasoline and diesel tax, income-tax sharing with the province, increased property frontage levies, a natural gas and electricity tax, garbage collection fees, a liquor tax, a 911 telephone fee, a hotel tax and, finally, increases in water and sewer rates.
No question, Murray’s New Deal taxes would bring a lot more money into the city coffers. But then again, Winnipeg faces a $100 million infrastructure deficit.
The other godparents of Glen Murray’s “New Deal” – besides Donna Morton – are Richard Florida and Jane Jacobs. In his book, The Rise of the Creative Class, Richard Florida argues that talent goes to communities that are tolerant, multi-cultural and creative – values much emphasized by Murray and embodied in his “New Deal.” For years Jane Jacobs, a well known urban activist, has argued that cities are generators – not merely recipients – of economic activity, and that we need to move towards the concept of a “city state.” To survive and prosper in this world, Canada should see its major city regions as competitors on a global scale. Attempting to diversify revenues for the City is the first step towards a city state.
Who Supported Murray’s “New Deal”?
Murray’s “New Deal” attracted support from Florida’s “creative class,” the wealthy and business class, environmentalists and the arts community. Since taking the mayor’s chair, Murray had proved to be very adept at building a coalition that included the developers and the unions, along with the “creative class.” Promises to initiate an urban Aboriginal strategy garnered support from Winnipeg’s growing Aboriginal population.
What attracted business and the rich to the “New Deal” was the significant decrease or elimination of property and business taxes in favour of user fees. From the environmental perspective, the lure was the greater emphasis on “consumption” taxes. Environmentalists argue that to create a sustainable environment, we ought to create “sin” taxes – that is, penalize those with SUVs (for example), who consume too much gasoline. Taxes must be radically overhauled to reflect the real social and environmental impact of economic behaviour. For example, heavy industry pays nowhere near its share of the infrastructure it uses or the pollution it produces, while “greener” industries like “high tech,” arts and tourism subsidize industrial corporations. The same goes for socially responsible citizens who walk and bike downtown every day, subsidizing those who own SUVs and live in suburbia. The original version of the “New Deal” had some of the Morton tax-shift feature although hardly enough to cause a major shift in economic behaviour.
Why Did the Original “New Deal” Fail?
Several factors ensured that Murray”s original vision of a “New Deal” would fail. While a significant number of businesses, including the Chamber of Commerce and right-wing think tanks, supported the original version, they were concerned that the “New Deal” be “revenue neutral” – that is, that the amount of revenue raised from user fees was equivalent to the amount lost from cutting property and business taxes. There was also considerable skepticism that any extra revenue would actually be dedicated to infrastructure renewal.
The media played a significant role in undermining the original “New Deal.” While, on the one hand, the Winnipeg Free Press supported the original “New Deal,” the Winnipeg Sun and Winnipeg’s most-listened-to talk-radio host, CJOB’s Charles Adler, opposed it from the get-go by calling it nothing more than “tax grab,” not a “New Deal.”
Another reason the “New Deal” failed was opposition of low-income and working-class people who correctly saw it as shifting taxes from the middle and business class onto the backs of the “working poor.” This opposition was clearly revealed in a series of public forums sponsored by the mayor. The biggest beneficiaries of property-tax reductions, by far, would be apartment-block owners and owners of large suburban homes, whereas the consumer taxes and user fees would fall disproportionately on lower-income residents. Residents in inner-city neighbourhoods were particularly unhappy about the possibility of a fee per bag of garbage.
Last but not least, the provincial NDP government first ignored the plan, and then, without much fanfare, killed it when Premier Doer announced there was no way he was going to allow an increase in taxes and that the City would not get a portion of the provincial sales tax.
The Second Coming of the “New Deal”
Murray himself conceded defeat, giving up on tax shift. A second version of the “New Deal” simply called for a share of federal and provincial gasoline taxes. The move seems to have silenced most of the opposition to the original plan, while at the same time subduing most of the excitement garnered by it. In the process, the most progressive feature of the New Deal, which had nothing to do with taxes, but with quite an exciting Aboriginal urban strategy, got lost in the shuffle.
Meanwhile, at the national level, it remains to be seen if Paul Martin can be forced to deliver on his promised cities agenda, modest as it may be. With Glen Murray’s defeat in the federal election, Martin has lost the services of a powerful cities advocate.
Nick Ternette is a Winnipeg-based community and political activist, freelance writer and broadcaster.