For dropping fares to $1 to be profitable (that is, breakeven), you'd need to be able to double passenger loads, which I doubt is realistic, since the TTC is pretty much at capacity during rush hour.
That said, I'm in favour of free transit. It would really cut down the number of staff required by the TTC, cut down on the overhead of selling tokens, collecting tokens, processing money, etc. It would also make longer LRTs practical since you wouldn't need fare collectors at each entrance. It could be paid for out of road tolls. If people complain about subsidizing transit users, they can stop driving and start taking the bus.