Guy Dauncey: HST should have been an ecologically harmonized sales tax

By Guy Dauncey

The harmonized sales tax—it sounds like something Confucius might have supported during China’s Zhou Dynasty. Here in B.C., however, the government’s surprise announcement that we will be adopting the HST next July 1 has brought nothing but disharmony.

By August 17, 93,000 people had joined Bill Tieleman’s NO BC HST Facebook group, and on August 6, a Global TV-Ipsos Reid poll found that 85 percent of British Columbians surveyed opposed the new tax. Not much harmony here.

And why should there be? Nobody likes what seems to be a tax grab, even if businesses do reduce their prices because they will now be able to get their PST payments repaid as well as their GST, and no longer be subject to a cascading PST on every stage of manufacture or installation. When Saskatchewan’s Conservative government adopted the HST in 1991, the move was so unpopular that it is thought to have caused the fall of the government in the election that same year.

It looks really bad. Over the last few years, PST exemptions have been created for a wide range of purchases that were deemed to be in the public interest, including books and magazines, used clothing, smoke alarms, health-related items bought by people with disabilities and handicaps, work-related safety equipment, and general safety equipment, such as seat belts, life jackets, and fire extinguishers. All will now increase in price by seven percent.

The government wants us to become healthier and more active, but gone are the exemptions on bicycles, membership fees in health clubs, non-prescription medications, vitamins, and dietary supplements.

It wants to improve our schools, but gone is the exemption on school supplies. It wants to reduce air pollution, but gone are the exemptions on emission-control devices for diesel vehicles and anti-idling devices on trucks.

It wants us to play our part in the worldwide effort to tackle global warming, but gone are the exemptions on fuel-saving aerodynamic devices on tractor-trailers, electric motorcycles and scooters, and new fuel-efficient vehicles. Gone too are the exemptions on home insulation, energy-efficient windows, doors, skylights, furnaces, boilers and heat pumps, Energy Star fridges, freezers and clothes washers, wind turbines, solar photovoltaic panels, solar hot water systems, and micro-hydro turbines.

The government wants to help B.C.’s farmers, but gone is the huge list of PST exemptions that applied to almost everything a farmer might need, from agricultural feeds to wood shavings for livestock bedding.

So what is the government retaining PST exemptions for? The federal government allows a number of exemptions up to a certain value, and the B.C. government is using this to continue the exemptions (now known as a “point of sale rebate”) on books, children’s clothing and footwear, diapers, children’s car seats and car booster seats, and feminine hygiene products, as well as a partial exemption for new home-buyers, all of which seem defensible.

But it is also exempting gasoline, diesel, and aviation fuel. If ever there was a chance to create a stronger price-signal to encourage us to reduce our carbon footprints, this was it. To tax people buying solar panels, but make gasoline tax-free? To send the confusing message that the green stuff doesn’t really matter, especially when funding for the government’s wildly popular LiveSmart B.C. efficiency-incentive program has run out, is surely not what the government wants.

Here’s what would have made more sense. Charge the PST on all fossil fuels, in addition to the carbon tax, and suck up the complaining. Apply the new PST “point of sale rebates” to all things healthy, educational, and green, and use the extra income from the PST on gasoline and diesel to phase out the government’s budget dependency on $2 billion a year in revenues from oil and gas. This would become an ecologically harmonized sales tax, creating harmony where we need it most, and allowing us to use the tax system to steer our budgetary way to a healthy, sustainable world, instead of back into the fossil-fueled mess of more pollution and global warming.

Guy Dauncey is the president of the B.C. Sustainable Energy Association, and the author of the forthcoming book The Climate Challenge: 101 Solutions to Global Warming.

Comments

6 Comments

George King

Aug 17, 2009 at 8:32pm

Sucker list--BC liberal
Junker List--Gordon Campbell!
I just got junked and jailed so I have no time for public opinions!

Panda

Aug 18, 2009 at 10:12am

Let’s look ahead to July 1, 2010

In British Columbia where the cost of housing is literally the highest in all of Canada, you are out with your wife and children looking for a house to buy.

You have 2 choices. Both houses are the same size and are on the same size lot.

A. The first house is brand spanking new and has a sale price of $550,000.

If you buy it, in addition, you will pay $9,000 in Provincial Property Transfer Taxes.

As well, with the HST now in effect, you now will also have to pay an additional
$66,000 less, as I understand it, a rebate of $20,000.

Therefore your total cost for this new house will be $605,000.

B. The second house is a used 5 year old house and has a sale price of $550,000.

If you buy it, in addition, you will pay $9,000 in Provincial Property Transfer Taxes.

Therefore, your total cost for this used house will be $559,000.

What affect do you think the HST will have on a house buyer’s decision making given these 2 choices?

To me, a typical Buyer will focus on buying used housing leaving new housing to sit on the market.

Bruce Elkin

Aug 18, 2009 at 10:45am

Great article, Guy. So obvious to so many, but not to Campbell and his Council of Business and C0C cronies. As you point out it is not only short-sighted, it missed a great opportunity for this government to actually move toward the "greenest province in Canada". HOpefully, we can keep the pressure up on them, and they'll make some changes or recind it. At the very least, I suspect Campbell will be gone before the next election. And good riddance.

Great article!

asp

Aug 19, 2009 at 8:06am

kiss. We have a ecological tax, the carbon tax, the only problem is that it is too low. It needs to go up faster, every year, and adjusted for changes in the GDP, so that it doesn't get made ineffective by inflation.

And remember people, the point of the carbon tax is to get you to eliminate your fossil fuel habits. You are supposed to making lifestyle changes that get you ahead of the game. That way you don't have to pay the tax. Cool, eh?

Chili

Aug 22, 2009 at 11:41am

You're absolutely right, but I suspect that the 'average' voter cares a heck of a lot more about paying an extra 7% on their hundreds/thousands of dollars of gas purchases a year than on paying an extra 7% on a bicycle. Sad, but true. Raising gas prices 7% would be a much faster form of political suicide.

RodSmelser

Sep 24, 2009 at 10:32am

I think Guy Dauncey does a good job of listing a number of things that are going to go up in price under the HST.

However, I find it hard to accept that an article, even a short one, on tax policy can refuse to mention equity considerations. This is where I part company with the environmentalists like David Suzuki and Guy Dauncey and their associated economists, such as Mark Jaccard and David Green.

I can well understand that exemptions from a general sales tax for worthwhile goods and services, from bicyles to energy saving gadgets, is a worthwhile idea. But turning that argument on its head, and significantly raising taxes on other household necessities such as fuel and lighting causes me problems.

Unless there are significant credits in the income tax system there's a major equity problem, one that doesn't seem to much disturb BC's environmentalists, who view the average consumer, especially those living in suburban municipalities, as the number one enemy of the environment.

Not one BC environmental leader has called for putting a real carbon tax on primary fossil fuel production, because they don't want to offend BC's mining and oil/gas interests. Instead, they favour a selective sales tax paid for by the average wage earner.

If people are paying more to drive their kids to school and daycare, ... tough beans according to Suzuki and Dauncey! If they were decent people, genuinely good citizens, they wouldn't have moved "out there" in the first place, and they would have thought twice about bringing more people into an "overpopulated" world. Harrumpf.

Rod Smelser