Magic implies something unnatural, something beyond the understood world around them. Toph doesn't think it's necessarily completely fictional; Aang and his energy bending removing Fire Lord Ozai's capability to bend at all seems to fit into that definition. She doesn't question that as reality, just identifies it as beyond conventional understanding.

There's nothing mystical about bending. Spiritual, maybe, but nothing unknown. Most people are just too caught up in themselves to really listen.

"I'm listening," she says simply. Something of the true extent of her earthbending mastery comes out in the lack of pretense in her explanation. "I'm not just getting the rock to move, I'm moving it where it's most natural to move it. Anyone can push something around. What I'm doing is making the earth something that's part of me."