Toronto Mayor David Miller suffered his biggest political defeat Monday as council narrowly voted to delay any decision on bringing in two controversial new taxes until at least October.

In a 23 to 22 vote, council decided that any decision on new taxes on land transfers and vehicle registration should wait until after the provincial election.

Toronto Mayor David Miller, seen here in May, says Toronto's self-sufficiency depends on the proposed new taxes.
(Osamu Honda/Associated Press)

Miller dodged questions after the vote about whether this was a personal defeat, and instead warned massive service cuts and huge property tax increases are now likely.

"It's not been my style to create a crisis," he said. "But we've reached a point where the city's budget is not sustainable."

Coun. Case Ootes said the vote is a stark wake-up call to Miller that citizens want more control on spending at City Hall.

"He lost big today. And he better start listening to the people of this city. They're not happy with the way this place is run," he said.

Miller had argued that the new taxes were essential if the city is to prosper.

As debate got underway Monday on the controversial taxes, Miller told council the city must follow other cities such as New York, Berlin and Shanghai, and break away from dependence on property taxes.

"If we do not invest, this city of Toronto will be left behind," said Miller.

Admitting the taxes are not popular, Miller said if introducing them were easy, that would have been done already.

The measures are an annual vehicle registration fee of $60 for most passenger vehicles and $30 for motorcycles and a tax to match the provincial land transfer tax on house purchases. The taxes are expected to raise more than $365 million per year.

The house purchase tax would add over $4,000 to the cost of a $400,000 home.

Groups such as the Toronto Real Estate Board and the Canadian Federation of Independent Business have condemned the proposed plan, but the mayor and supporters say the taxes are needed to prevent either large service cuts or big property tax increases.

"This has struck a chord, so the members of council are getting lots of calls from the residents, and there's pure anger," Coun. Denzil Minnan-Wong told CBC News before the debate began.

"And on the other side is David Miller doing his arm twisting on the council floor."

The public viewing areas at City Hall were standing room only as the debate got underway Monday.