Extension of Ontario Gas Tax Cut Set to Incur Half-a-Billion Dollar Expense Over Six Months.
According to the Ministry of Finance, the Ford government plans to allocate half a billion dollars to prolong the provincial gas tax reduction for an additional six months, bringing the total expenditure on this affordability initiative to $3.2 billion.
Originally introduced in 2022 to offset the impact of the federal carbon tax, which incrementally elevates pump prices annually, the gas tax reduction was presented as a temporary measure. However, it has been extended by the Ford government four times since its inception, limiting the provincial component of the tax to nine cents per litre. This adjustment, purportedly saving Ontario households an average of $320, has sparked debates due to its modest savings—averaging less than $130 per year for households—and its substantial cost.
“Whenever you reduce revenue, whether that be in the gas tax or something else, you’re giving up something else,” said Liberal MPP John Fraser. “The government isn’t being open and transparent about what people are having to give up.”
Green Party Leader Mike Schreiner emphasized that the significant savings lie in transitioning to electric vehicles, suggesting that the government should prioritize measures to make them more financially accessible.
“If this government really wanted to make life more affordable for drivers, they would make electric vehicles more affordable for drivers,” Schreiner said.
Ontario Premier Doug Ford once again linked the extension of the gas tax reduction to federal carbon pricing during Monday’s announcement, stating, “With the federal government about to increase its costly carbon tax, it’s never been more important to provide relief at the pumps and put hundreds of dollars back into peoples’ pockets.”
Finance Minister Peter Bethlenfalvy rationalized the decision, citing the challenges posed by high inflation and interest rates on Ontario workers. The Bank of Canada’s projection of approximately three percent inflation through the first half of the year further supported this stance.
The prolonged reduction equates to a 5.7-cent decrease in the provincial gas tax and a 5.3 percent reduction in the diesel tax. Consequently, since mid-2022, Ontario has only levied nine cents for every litre of either gas or diesel.
The latest extension will ensure that the reduction remains in effect until at least the conclusion of the year.
The premier and his finance minister have coupled the gas tax reduction with a series of other cost-saving measures, all of which have placed a significant strain on the province’s finances.
Prior to the 2022 election, the Ford government announced the elimination of the annual license plate renewal fee in the province, resulting in an annual revenue loss of $1.1 billion.
Additionally, fare integration for Toronto-area transit was introduced, incurring an annual cost exceeding $60 million, and the renewal fees for driver’s licenses were frozen. Furthermore, the government has dismissed the idea of implementing new tolls to offset the expenses associated with road construction or maintenance.
