Friday, June 17, 2011

De-spinning the HST numbers

It’s not easy to sort the HST facts from the spinning by both sides in the tax debate.
Start with Finance Minister Kevin Falcon’s claim that going back to the PST would blow a $3 billion hole in B.C.’s fiscal plan over this year and the next three.
That’s a stretch. The analysis by the independent panel that reviewed the HST’s impact suggests a much smaller hit.
This column will be a heavy on numbers. But numbers matter.
The referendum will result in one of two options: A return to the old PST/GST taxes; or staying with the HST, with promised future rate reductions, some new rebates, corporate tax increases and cancellation of the plan to eliminate the small business tax.
Going back to the PST would bring some costs. The federal government took over sales tax administration when the HST was introduced; the province would have to spend $20 million to re-establish the PST collection office and about $35 million a year to keep it operating, the panel found.
Axing the tax could result in reduced economic growth, reducing provincial revenues by $80 million a year, it estimated.
And the panel noted the province would have to pay back $1.6 billion the federal government put up to encourage adoption of the new tax.
The panel — including former Alberta finance minister Jim DInning and ex-B.C. auditor general George Morfitt — judged the impact of that would be an extra $85 million a year in interest costs because of the increased provincial debt.
And, based on the panel’s analysis, the PST would deliver about $610 million a year less in tax revenue for government than the HST, even if reduced from 12 per cent to 10 per cent. (That, of course, means a saving for families.)
But the panel also noted that the government would save about $441 million a year because it could cancel the rebates and tax reductions brought into cushion the HST’s impact.
All in, based on the panel’s analysis, going back to the PST would cost the government about $362 million a year, mainly because families would pay less tax.
Falcon’s estimate is much higher. The main reason is that he concludes, based on preliminary advice from the province’s comptroller general, that the $1.6 billion would have to be repaid immediately and counted as an expense.
Accounting debates aside, the panel offers a more realistic view. Provincial taxpayers wouldn’t suddenly pony up $1.6 billion; they would pay the long-term interest costs.
The claims about impacts on families are just as muddled.
Christy Clark says the revised HST would see taxpayers pay less than under the PST.
That would eventually be true. But not until 2014. In the meantime, individuals and families would be paying more in sales taxes than under the PST.
Based on the panel’s analysis, individuals and families are paying an extra $1.3 billion in sales taxes this year because of the HST’s wider reach. (The portion of a typical families’ spending subject to provincial sales tax jumped by almost 60 per cent under the HST, the panel found.)
Even with the first rate reduction, from 12 to 11 per cent on July 1, 2012, families would still pay $690 million more in sales taxes in the next fiscal year under the HST. The following year, they would pay $430 million more than under the PST.
It’s not until the following fiscal year — 2014/15 — and another one-point cut in the rate, that families would pay less than they would have under the HST - about $330 million less. That amount would increase in future years.
So families would have spent an extra $2.5 billion in sales taxes over three years before they started seeing lower taxes than under the HST. (Rebates to low-income seniors and all families with children would reduce that by about $200 million.)
There are other reasons for voting to keep or kill the HST. But understanding the numbers is a a good starting point.
Footnote: A problem with any look at the numbers is that the government did not ask the independent panel to report on its estimates after announcing the HST rate cut and corporate tax increases. Given the government’s dismal record in providing accurate HST information, that raises serious doubts. Check hstinbc.ca for more on these numbers.

5 comments:

  1. "...All in, based on the panel’s analysis, going back to the PST would cost the government about $362 million a year, mainly because families would pay less tax..."

    Now that is a statement, phrased as a question, as in "Did you know that....." that I, for one, would like to see all sides include in their phone "polling".

    .

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  2. I have found great ideas for your blog. It's really a source of inspiration. I congratulate you and send my greatest congratulations. It's a real pleasure to read you

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  3. Crankypants4:48 PM

    The numbers you quote on the HST's impact on consumers after the proposed 1% in 2012 make no sense. With the HST at 11% for 2012-2013 and 2013-2014 versus a PST+GST of 12% for those two years, their impacts on consumers should be identical. The same items taxed at the same rates for a 2-year span should yield the same revenue to government for each year, thus the impact should be identical.

    It seems to me the pro-HST side just keeps on pulling imaginary numbers out of the air in the hope that something will sway a vote or two their way. The only truthful argument they have brought forward is that businesses only have to deal with one sales tax, which does nothing to help the consumer.

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  4. Let's cut right to the chase. The people bringing in the HST did it after saying they wouldn't, and when the backlash happened they got real serious about lying.Gordo left the stage, up pops Mz.Clark who changed her position on the HST a number of times, and of course even now they mislead about it being lowered to 10 percent. Best solution , go back to where we were before Gordo had a vision. The PST had and should have a number of exemptions, and the GST seems to work in other places.A vote of YES removes any of the BS and we can get ready to boot the lying bunch in power right now, as soon as possible

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  5. Anonymous10:34 AM

    It doesn't seem to matter, the BC Liberals have lied, deceived, thieved, are corrupt, use dirty tactics, and cheat to win.

    Campbell thieved an entire railroad, after his election lie, the BCR wasn't for sale.

    Campbell and Hansen's other election lie, the HST wasn't on their radar. Also, throw in the lie, our very low provincial deficit.

    Campbell refused to allow, a full Legislature debate. Campbell works for Harper, and Harper was drooling at the mouth for the HST. So, Campbell, Hansen and Harper, FORCED the HST onto the BC people.

    We have caught Craig James of Elections BC, in corruption before. Craig James is a friend of Campbell's. King Gordo, got rid of the two honest EBC members, and installed James to do the dirty work for him. No-one believes Christy won on the up and up. We don't believe she won Point Grey either...I must say, Christy looking cute, standing under her umbrella, campaigning the voters on their way in. Craig James applauded Christy, even though that was a cheat. I don't trust Craig James on the referendum either.

    I don't give a damn, about the hole in the budget. Christy and her gang of lying @!#$$, have the gall to blame the people, for the budget with a hole. Harper, Campbell and the BC Liberals, are responsible for that. The BC people are not. We very clearly said, no to the HST. So Chrisy and Falcon, put the blame, where it damned well rightfully belongs, on the BC Liberals.

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