Maureen Bader: Disharmony in Lotusland over the HST
Among the many broken promises of the B.C. Liberal government was the surprise sales tax harmonization announcement. While harmonization may bring greater investment and more high paying jobs to the province in the long run, the short run reality is that hard-pressed families will be paying more for many goods and services, and the timing couldn’t be worse. Harmonization should only proceed if families pay less in total tax.
The harmonized sales tax (HST), set to kick-in on July 1, 2010, brings together the seven percent provincial sales tax (PST) with the five percent goods and services tax (GST) for one 12 percent tax paid by consumers. Harmonization removes the PST on business inputs, things like hammers and nails, and gets rid of the web of PST exemptions that create special benefits for some businesses. It lowers costs to business, gets government out of the business of picking winners, and broadens the tax base. However, because of the elimination of PST exemptions, families will pay an additional seven percent tax on food in restaurants, new homes costing over $400,000, newspapers, accountant’s fees, and home renovations—just to name a few.
Citizens are outraged about harmonization, and rightly so. Harmonizing the sales tax is a significant change from previous government policy and came as a complete surprise. During the recent provincial election, the B.C. Liberals said they would not harmonize the sales tax. This seems to be yet another snap decision made, like the carbon tax, with no consultation by a paternalistic government. This sudden and unexpected turnaround is a slap in the face to all British Columbians.
Many are asking, why now? The $1.6 billion in transitional funding from the federal government will probably go a long way in helping the provincial government overcome its pre-election, spending-spree-created budget deficit. But it’s still money being borrowed by the federal government to bribe the province to harmonize, adding to the federal debt and creating a bigger tax burden for future generations.
The official reason, however, was to create an investment climate competitive with that of Ontario, which is also implementing an HST on July 1, 2010. But why do we want to be competitive with a “have-not” province? Why not be competitive with the province right next door—Alberta? It has no PST at all and a higher basic personal income tax exemption. Lowering the PST would be one way to help families bear the burden of higher prices. The Atlantic provinces did just that when they introduced the HST in 1997.
A much better tax-cut option, and one included by the Ontario government when it announced the HST, is an income tax cut. Reducing the burden of income taxes for all British Columbians would be best achieved by increasing the basic personal income tax exemption. Right now, the basic personal exemption in B.C. is $9,373, but it is $16,775 in Alberta and even $12,945 in Saskatchewan. There is plenty of room for the government to leave more money in the pockets of taxpaying families, increase the incentive to work, save, and invest, and lower the impact of the HST.
Although the HST may have some positives in the long run, the arrogance of the tax change coupled with higher taxes for consumers make it mandatory for the government cut other taxes. This will get government out of our pockets and allow hard working families to spend their own income in a way that best serves their needs. Moreover, it should be the only way British Columbians should accept the HST.
Maureen Bader is the B.C. director of the Canadian Taxpayers Federation.
Comments
8 Comments
Jak King
Aug 27, 2009 at 1:06pm
Sales taxes are ALWAYS better than income taxes because they are, in a greater sense, voluntary. You only pay if you choose to buy. Income taxes are mandatory whether you want to pay or not. Best idea: scrap all income taxes and move to sales taxes ONLY with exemptions for basic food, shelter, health. That way, ALL taxes become essentially voluntary.
Evil Eye
Aug 27, 2009 at 1:19pm
The 'Eye' and his good friend 'Grumpy' have discovered the delights of Point Roberts, where we filled our cars with gas and saved $20.00 and Ms. 'Eye' & Ms. Grumpy saved about $40.00 apiece at the local store.
It was nice to have a beer at 'Reef' (but make sure the Ms. drives you home because the Gestapo at the border are truly nasty) and the 'Eye' is going to go there on a weekly basis.
Piss on the HST, just shop in the Excited States of America.
Ken Marsden
Aug 27, 2009 at 1:42pm
How are seniors on fixed incomes going to afford this.
seth
Aug 27, 2009 at 3:57pm
While it is ironic that Bader and her gang were the biggest cheerleaders for El Gordo during the election, I love her no sales tax idea compete with Alberta idea. I've got a better one replace all sales tax with income tax on the rich.
When Mulroney's fascists introduced GST there was a lot of analysis that showed an increase in income tax by 2% would have eliminated the need for a GST. In fact there are numerous studies to show that income tax is a far fairer tax structure than sales tax.
Of course, just like with our fascist governments today big business told Mulroney what to do and here we are.
If we want efficiency, lets eliminate all sales tax and a la Obama put a 10% tax increase on incomes over 250K to pay for it. After all the rich are the ones that want US to pay for tax efficiency. Let them put THEIR money where their mouth is!!!
seth
Jak King
Aug 27, 2009 at 6:23pm
If you want to "punish" the rich, put in sales taxes, which hits them where it hurts -- when they spend conspicuously. Income tax can ALWAYS be avoided or evaded or reduced; sales taxes are direct and unavoidable.
HST and New Housing in July 2010
Aug 28, 2009 at 12:16am
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, Buyers will flock to buying used homes. That will put upwards pressure on the price of used homes especially in the Vancouver, Victoria and Kelowna areas where most of the population is located.
Here is something to ponder on regarding the Property Transfer Tax
Here is Another interesting Comparison Between Ontario and B.C.
From what I understand (and I checked this out thoroughly):
Based on a $500,000 house sale in Ontario, the Ontario Land Transfer Tax will be an additional $6,475.
Based on a $500,000 house sale in B.C., the B.C. Land Transfer Tax will be an additional $8,000.
If this is true, that is an extra $1,525 for the B.C. government on this one sale alone.
Now keep in mind that B.C. has the highest house prices in all of Canada.
seth
Aug 28, 2009 at 10:07am
sales tax
99.9% of sales taxes are collected from the great unwashed who can't escape sales tax as they basically spend their entire income in town surviving.
The + 250K income business and personal income earners are around 1% of taxfilers and spend most of their discretionary income out of province. The proportion of all sales tax collected from them is much smaller than their proportion of income tax. Most have already maxed out their tax rebates and shelters.
Extra tax on them would be just gravy. They want UnoWho to pay. Let's stick it to them instead.
seth
The Good Tax?
Aug 28, 2009 at 5:08pm
Now come on King, a good tax on goods. Its all voluntary Kings says. Like how? Staying alive cost in the big city and if you find yourself short changed or unable to meet your monthyly expences don't cry to foul. Its all voluntary, you know like breathing.