Ontario gas tax cut extension to cost $500 million over 6 months

The Ford government is set to spend half a billion dollars to extend the provincial gas tax cut for another six months, according to the Ministry of Finance, putting the total cost of the affordability measure at $3.2 billion.

The gas tax cut was first implemented in 2022 as a way to counter the effects of the federal price on carbon, commonly known as the carbon tax, which pushes up the price at the pumps every year.

While the measure was initially sold as temporary relief, the Ford government has extended it four times, capping the provincial portion of the tax at nine cents per litre which, the government said, has saved Ontario households $320 on average.

The meagre savings — less than $130 per year for households on average — have raised questions about whether the gas tax cut is worth the costly price tag.

“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 said the “real savings” are in electric vehicles which, he suggests, the government should work to make more cost-effective.

“If this government really wanted to make life more affordable for drivers, they would make electric vehicles more affordable for drivers,” Schreiner said.

“It costs one-tenth to fill up an electric vehicle versus a gas engine.”

Ontario Premier Doug Ford again tried to link the gas tax reduction to federal carbon pricing when he announced the widely-anticipated extension on Monday.

“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,” Ford said.

Finance Minister Peter Bethlenfalvy said the move made sense as “high inflation and interest rates are hurting Ontario workers.” The Bank of Canada is projecting inflation will stay around three per cent through the first half of the year.

The continued cut amounts to a 5.7-cent-per-litre drop in the provincial tax on gas, and a 5.3-per cent drop in the tax on diesel. It means that, since mid-2022, Ontario has only collected nine cents for every litre of either gas or diesel.

The latest extension will keep the cut in place until at least the end of the year.

The premier and his finance minister have bundled the gas tax cut with a series of other saving measures that have also weighed heavily on the province’s coffers.

Ahead of the 2022 election, the Ford government announced it would scrap the annual fee to renew licence plates in the province, a policy that came with an annual hit to its revenues of $1.1 billion per year.

It introduced fare integration for Toronto-area transit at an annual cost of more than $60 million and froze the cost of renewing driver’s licences. The government has also ruled out new tolls to offset the cost of road construction or maintenance.

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