Is it a wise decision that will end an ineffective boutique tax policy, or a slap in the face to commuters that could discourage public transit ridership?

No matter the answer, the federal government’s declaration last week that it plans to axe the tax credit for transit passes came as surprise to many riders.

Metropass user Loretta Ryan said the news, which, which was announced as part of the Liberals’ 2017 budget, is “hard to take.”

“It really does make a difference whether I’m going to get a pass or not,” said Ryan, an urban planner who shares a Metropass with her husband and estimates the family gets about $200 a year back through the policy.

She said that if she’s not able to get the credit, she’ll have to reconsider whether to spend $146.25 a month on a pass. Her level of transit use barely justifies the expense, and it might be cheaper to buy tokens.

“It’s also not very respectful of transit users to take this away,” she added.

The credit was introduced by the Conservative government in 2006, and allowed residents to claim 15 per cent of the value of monthly and weekly transit passes. Users of Presto and other electronic fare cards were also eligible if they took at least 32 trips a month. The Liberals plan to phase it out on July 1.

For adult TTC Metropass holders, the credit could be worth more than $260 a year. The impact for Presto users on GO Transit, where fares vary, is harder to quantify.

Neither the TTC nor Metrolinx, which operates GO Transit, could say this week how many riders used the credit or what the impact of removing it will be. Both agencies plan to study the issue.

Defending the decision to get rid of the policy, Finance Minister Bill Morneau told CBC’s Metro Morning Friday that it simply wasn’t working. “It was intended to increase public transit ridership, that was the goal. It’s actually not having that impact,” he said.

The credit cost the government at least $170 million a year, and Morneau said a more effective use of money would be to invest in expanding public transit. The Liberal budget includes more than $25 billion for transit infrastructure across the country over the next decade.

Morneau also noted that the tax credit is non-refundable, which means that only people who are net payers of federal income tax could benefit. About a third of Canadians don’t pay federal income taxes, and many are people who are supposed to benefit most from public transit: low-income earners, students, and seniors.

The government says it has evidence to back up its case. One study that the minister’s office cited determined that the tax credit did contribute to a growth in public transit use, but only marginally. It found that the credit increased the share of commuters who used transit by between 0.25 and 1 percentage points nationwide, from 11.5 per cent to up to 12.5 per cent.

The authors concluded that given its cost, it was an “expensive approach” to boosting transit use.

Study co-author Nicholas Rivers, who holds the Canada Research Chair in Climate and Energy Policy at the University of Ottawa, said in an interview that compared to other factors that people consider when making transportation choices, such as frequency and quality of service and the cost of driving a car, a 15-per-cent reduction in transit costs isn’t a powerful driver.

“It was a pretty small intervention, and as a result it had a small effect,” he said.

Although its impact nationally was low, the credit had a more prominent effect in cities with robust transit systems. In Toronto the credit boosted transit use by 2.3 percentage points, well above the national average.

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If eliminating the credit depressed transit use by a similar amount, it could spell trouble for Toronto’s transit system, which can be sensitive to relatively small unanticipated fluctuations in ridership. Last year, when transit trips fell 2.7 per cent below the agency’s target, it cost the TTC $46 million in lost revenue. Adult Metropass users account for nearly half of all trips on the system.

Mayor John Tory expressed concern this week about killing the policy, and said he’s hoping to get more information about what the change will mean for the TTC.

“It’s unfortunate that this tax credit is going away because a lot of people will have gotten used to it,” he told reporters.

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