Friday, June 25, 2010

No room for retreat on HST

With a few days left before the HST kicks in, it’s hard to see any way out of the muck-filled hole the Liberals have dug for themselves.
No other MLAs have followed Blair Lekstrom’s lead and resigned. Businesses are getting ready to charge the new tax beginning Thursday. The government’s pro-HST ad campaign is all ready to go.
Which all leaves the Liberals in a bad spot. The tax takes effect as proponents of an anti-HST initiative say they have the signatures of almost 670,000 people who want the tax repealed. About 752,000 people voted Liberal in the last election.
If government doesn’t pledge to repeal the tax, the opponents say they will start recall campaigns against targeted MLAs in November.
The Liberals won’t repeal the tax. They’re convinced they are right and the public is wrong; they don’t want to look erratic; and the process is too far along.
The last point is legitimate. Even two months ago, the Liberals could have - and should have - put the tax on hold for proper analysis, consultation and discussion. (None of those steps were taken before the HST deal was done with the federal government.) Now, retreat isn’t warranted.
The harmonized sales tax will cost most people more money. The Times Colonist asked Statistics Canada to run a forecast based on peoples’ spending, the HST and other tax changes and credits. The HST will cost an average family an extra $521. Everyone will pay more, but the cost will be greatest for those with higher incomes.
Shifting $1.9 billion in taxes off businesses and on to individuals and families is bound to mean higher taxes for most British Columbians. And many of them don’t like the idea of paying more to provide tax breaks for corporations, not to improve health care or public safety.
For some people on tight budgets, the extra cost will pinch. But the higher costs will be manageable for most people.
They will also be highly visible. Eat out, pay a gym membership, buy vitamins, use a cellphone, hire a carpenter to fix something and you’ll pay seven per cent more starting on Thursday.
The Liberals continue to pitch the benefits. The theory is that businesses, now facing $1.9 billion less in taxes, will pass the savings on in cheaper prices.
In some competitive sectors, that will happen. But is the carpenter really likely to cut his hourly rate to reflect his savings from the HST?
And many of the industries that benefit sell their goods outside the province - the forest industry will save $140 million a year - so lower prices won’t mean savings for most British Columbians.
That raises the other claim for the HST. If forest companies can sell more wood, then they will be more likely to expand, which could mean additional jobs. A lower tax burden might also encourage business to locate here - again bringing jobs. And, some economists suggest if there is more demand for employees, wages might rise.
The government, relying on a report by University of Calgary economics prof Jack Mintz, says the HST will bring 113,000 additonal jobs by 2020. That’s good. But there are about 2.9 million people with jobs in B.C. today. Adding 13,000 jobs a year isn’t going to create much upward wage pressure.
So the tax will come in. People will see they’re paying more, though not that much. The benefits will invisible.
Even if the HST brings benefits, it’s not about the tax policy anymore. Polls - and all those names on the petitions - indicate people think the Liberals were dishonest in rejecting the HST during the election campaign and then starting talks with Ottawa about the new tax days after taking power.
They are angry at being ordered to pay more taxes so business can pay less, with no discussion or consultation.
And they’re insulted that Campbell and company say the problem is that voters can’t grasp the obvious benefits - that they are, in short, not as smart as their masters.
Footnote: The government’s pro-HST ad campaign starts once the petition drive ends. The risk is a backlash when the public sees tax dollars spent to promote a tax change the public has rejected.

6 comments:

Anonymous said...

Let's do some quikie math

$2 BILLION is being transferred from business to individual British Columbians. There are about 4.5 million BCers. Let's divide $2B by 4.5m... the answer is $444.44 per PERSON.

Fortunately I'm not a statistician, nor am I an economist... or I might be thinking my little family of four was about to get dinged more than $1700 a year to support the failed 'trickle down' theory.

-----

"The theory is that businesses, now facing $1.9 billion less in taxes, will pass the savings on in cheaper prices".

The BC Liberals are not 'eating their own dogfood' on this one. The price of booze should come down under the HST, but the BC Liberals are RAISING the wholesale price to maintain the shelf price... insane.

-----

The report by University of Calgary economics professor Jack Mintz has been thoroughly discredited by all those who have read it. And it would be absolutely insane to try to to do a retrospective study in 2020 to examine if 1000 jobs a month have been added to our economy over the past decade that were directly attributable the HST... INSANE.

-----

The British Columbians who have signed the anti-HST petition across this great province are even more wedded to this cause than all those who anonymously ticked a box in the last election were to theirs. This issue has united the people of this province like no other issue - even the Olympics didn't garner this level of support across the land.

-----

No, folks won't be happy to see the BC Liberals spend a huge undisclosed* amount of money to convince them that their signatures are worthless.

* = The BC Liberals are notorious for mounting publicity campaigns without the embarrassment of disclosing the costs.

-----

The facts are that the BC Liberals - before and again during the election - absolutely denied that the HST was an issue. Three days after the election the BC Liberals were talking their federal Conservative cronies to bring in the HST. Those are the undeniable FACTS. We will leave aside the issue (for now) of how the BC Liberals lost $1.5 BILLION in one (1) month while they were out campaigning in the general election last year.

Leah said...

In a previous study for the Province of Ontario, Jack Mintz said the HST would slow job growth:

“These more positive results would come at the cost of a longer and deeper period of short-term loss, including, for example, an estimated reduction of just under 38,000 jobs in the second year.” (CD Howe Institute, Sep. 2008, p. 20)

And Jack Mintz said the HST would drive down real wages:

“After several years of somewhat higher unemployment, however, workers come to accept the real wage losses…” (CD Howe Institute, Sep. 2008, p. 9)

Of course, Dalton McGuinty said the HST was a bad idea too:

“Cutting corporate taxes will create more financial trouble by starving the provincial treasury of much-needed revenue, and harmonizing the sales taxes will only end up hurting consumers.” (Nov. 25, 2008)

And also said the corporate tax cuts he now supports were a bad idea:

“…what the Conservatives are asking us to do is to cut corporate income taxes – those are taxes on profitable corporations – by $2.3 billion…That definitely means closing hospitals, firing nurses, cutting education.” (Mar. 20, 2008)

...that had "nothing to do" with jobs:

“Since the last budget, Ontario has lost 30,000 jobs. We've had the slowest rate of growth in the country. Your predilection for this corporate tax cut has nothing to do with economic policy and everything to do with ideology.” (Nov. 27, 2001)

So, why the difference for BC?

Ian said...

Here's an easy test of the BC Liberal's veracity. Ask your publisher how much the cost of a subscription will decline July 1st as a result of the pass-through effect. I'm betting zero despite the fact that the cost of newsprint, ink and pencils will fall 7% for the paper.

DPL said...

I sure go along with Ian about the Times Colonist. We pay for seven days delivery but only get the paper six days a week. Asking why the monthly rate didn't go down when the extra day was cut was a total waste of time. Seems we either suck it up or drop the paper. To access other CANWEST papers on line, one needs a seven day subscription. The people running the news media sure won't lower the price but will pocket the extra dollars.

The TC did a series on costs of HST to individuals and I'm quite sure will happily accept our money to advertise the "Great things" the HST will bring to us suckers. Companies pay reduced tax and we of course end up paying more. Great to live in BC where we spend a lot of time getting shafted

Anonymous said...

All of the whining and complaining will not change that as of July 1st the HST is here, and it is here to stay. It’s time to suck it up and accept it like adults and move on. Even you NDPaul.

Norman Farrell said...

What goes around, comes around.

BC Liberals will regret doing what a substantial majority of voters want not done.

Campbell's legacy will be that of a man who disrespected democratic values and felt no shame for being untrustworthy.

Campbell should heed the words of Cassio in Othello:

"I have lost the immortal part of myself, and what remains is bestial. My reputation, Iago, my reputation!"