Many people in British Columbia feel both dismayed and betrayed by the HST. It is a $2-billion shift in hidden sales taxes from business to consumers done by a government which said sales tax harmonization was not on the radar screen during the most recent election. True, government reduced income taxes to soften the blow of the tax shift, but meanwhile, it increased other taxes. If government cuts one tax then raises another, people are no better off. If the government wants to honestly claim families will be better off with the HST, it must get rid of the other taxes and reduce the overall HST burden.
The HST, which kicks in on Thursday (July 1), brings together the seven-percent provincial sales tax (PST) with the five-percent goods and services tax (GST) for one “harmonized” 12-percent sales tax. When the HST was first announced, the Canadian Taxpayers Federation recommended the provincial government protect families from this tax shift by reducing other taxes to offset the impact. The government partially agreed and increased the basic personal income tax exemption from $9,373 to $11,000. However, they are still hitting families with other tax increases.
The carbon tax is also going up on July 1. It will rise from 3.33 cents per litre to 4.45 cents per litre for gasoline, and 3.84 cents per litre to 5.11 cents per litre for diesel. Families will be paying more to drive their kids to soccer practice and businesses will pass their cost increase to families in the form of higher prices for everything from food to clothing.
Following the pattern of great fanfare for a tax cut then slipping a tax increase in on the sly, the government announced a residential energy credit equal to the B.C. portion of the HST, to lower home heating costs for families. What did it do next? It increased a tax on B.C. Hydro bills, the Rate Rider, from one to four percent. As a result, B.C. Hydro customers won’t benefit from the full seven-percent tax break. Just to add insult to injury, families will pay the federal portion of the HST on the Rate Rider.
The Medical Services Premium (MSP), or health tax, also went up in 2010 and will go up again in 2011 and every year after that. On January 1, the health tax went by six percent, from $648 to $684 per year for individuals, and from $1,290 to $1,368 per year for families. On January 1, 2011, the health tax will go up again, to $726 per year for individuals and $1,452 for families. At this rate, the health tax will double in nine years.
The government claims families will be better off with the HST because prices will go down over time—oh, except when government is doing the pricing. One example is the PST on liquor, which will fall from 10 to seven percent under harmonization. Don’t raise your glass in celebration too soon folks, because the government will increase the wholesale mark-up on alcohol to keep its tax grab the same.
The government’s claim that people will be better off with the HST is difficult to square in the face of these other tax hikes. To ensure families are better off, government must reduce the total family tax burden—sly tricks won’t do. The government must eliminate additional taxes like the carbon tax and the health tax, and reduce the burden of the HST by reducing the harmonized rate from 12 to 10 percent. The possibilities for protecting families from the tax shift are endless, unlike people’s patience with government’s tax sleight of hand.
Maureen Bader is the B.C. director of the Canadian Taxpayers Federation.