The Federation of Canadian Municipalities pulled its head out the sand this week and announced "Canadians pay enough tax." The concession was found in the opening line of a media release issued to news editors about their report examining the so-called fiscal imbalance. As welcome as it is, the idea taxes are sky high will hardly come as a surprise to a majority of taxpayers. Tax Freedom Day landed on June 19th this year, meaning total taxes paid to federal, provincial and municipal governments consume 46% of household income.

The real purpose of the federation's release, however, is not to shield over-taxed Canadians. Instead, it is the latest attempt by city leaders to muscle in on the federal-provincial dispute over equalization and transfer payments to provinces. Cities want a larger chunk of the tax bite and more of Ottawa's riches. Federal budget surpluses are the result of one thing: Canadians sending too much money to Ottawa. These excess dollars should be returned to taxpayers since the real imbalance is between them and governments.

If provinces and municipalities want more money the option of increasing taxes and user fees is always available. So too is cutting out waste by reigning in bloated labour costs, scrapping union-only policies, and contracting out the delivery of municipal services. Until these are tackled voters are not likely to favour paying more tax to governments that refuse to fill potholes, build roads, and clear snow when money is instead being allocated to trendy social projects with little do to with providing primary municipal services.

It is for good reason Canadians are loath to grant their municipality greater taxation powers - many cities will take a mile even before given an inch of tax room. On July 1st, the GST will be cut by one-point yet Toronto Mayor David Miller's initial response was to keep city fees at existing levels after the GST is lowered and pocket the tax benefit meant for consumers. Calgary Mayor Dave Bronconnier also favours dinging taxpayers and keeping the difference for his city.

They say it is a costly administrative headache to change billing systems, websites and publications to reflect new - and lower - fees. So why bother. For taxpayers, it is infuriating these tax-and-spend politicians are none too concerned about the costs to government, businesses or individuals when they raise their fees and taxes.

Like increasing any tax, this GST swindle is unpopular, which explains why Toronto officials - including the mayor - reversed course this week and announced the tax savings will instead be passed on to citizens wherever possible. When the cost of administering the GST cut is greater than the savings the city will keep the money. City officials in Toronto, Calgary and elsewhere should think again - it isn't so simple says the Canada Revenue Agency (CRA).

According to the tax authority, the Excise Tax Act requires whatever amount of GST is collected be sent to Ottawa. The CRA's webpage gives a helpful explanation, "If you collect or charge GST at the rate of 7%, when, in fact, GST at the rate of 6% should have been collected or charged, you must remit the 7% GST you collected or charged to the [federal government]." This means City officials will violate Canada's tax statute by keeping the one-point reduction in their coffers.

Toronto or Calgary therefore has 3 options. Pass the entire tax savings to consumers; send the revenue to Ottawa; or keep it after making the necessary changes to reflect a 6% GST and higher municipal fees. Whatever happens will require making a clerical change. Taxpayers hope city councilors do the right thing and recognize who is meant to benefit from any GST cut. Here's a hint: It isn't government.