Don Cayo
Sun
I’ve been travelling for most of a month, and had a lot to catch up on when I got home. Reading the pronouncements from critics of the harmonized sales tax (and they are legion), I’ve been struck by how much they say against this tax plan and how little they say about how the B.C. government ought to raise revenue instead.
I didn’t need much persuading, but a thoughtful piece by Jonathan Kesselman, a clear-eyed and even-handed tax guru at Simon Fraser University, convinced me that the status quo — the current PST — isn’t worth fighting to retain.
It is well documented that this kind of tax stifles economic growth, and this particular tax is rife with ambiguities and inequities that result from a complicated web of exemptions and exceptions. (For example, my shirt would be PST-exempt if I lied when I bought it and said it was for a teen. Or I could get a provincial tax break on a red raincoat, but not a yellow one. And on and on …)
And even though I’m somewhat persuaded by those who argue we are taxed too much, I can’t ignore that there have been substantial tax cuts both provincially and federally in recent years. My colleague Craig McInnes made an interesting case last week that the real tax burden — as measured by how much discretionary income we have left after paying the unavoidable bills — has gone down, not up, over recent decades.
Bill Vander Zalm, the self-styled knight in shining armour who’s leading the anti-HST charge and a former premier who knows a lot about spending money, acknowledges that the government needs sales tax revenue.
“British Columbia could easily make the provincial sales tax work the same way as a value-added tax,” he wrote in a letter to the editor last week. “It could apply it to all goods and services.”
In other words, B.C. could have its own GST. (This might not be a bad idea, except that it would be dumb to administer and collect the tax independently of the feds. Two bureaucracies to do the work of one, which is what we have now, is not a step forward.)
Still, efficiency aside, Vander Zalm seems to have come around to the mainstream economists’ view that a value-added tax is better than our old PST.
Yet in what follows the snippet I’ve cited, he strays into Fantasy Gardens.
He wrote not only that the B.C. government could apply its own VAT tax to all goods and services, but also “reduce it to three or four per cent and provide input tax credits to business. It would then be essentially revenue-neutral for government and consumers, and business wouldn’t pay — a win-win-win situation.”
If only that were possible, tax policy would be so easy. But if business inputs are exempt — as they would be under both the HST and the Vander Zalm idea — then somebody (you and me and about four million other consumers) must make up the difference. And that won’t happen — indeed, government revenues would take a major hit — if there is, as the former premier proposes, a three-or four-point drop in the province’s VAT rate.
I personally favour the HST not only because it’s more efficient and fair than the clunky system we have now, but also precisely because it reduces business costs. I don’t own a business and I don’t plan to, but I do expect to see more business activity — and hence more jobs and prosperity — as a result of this tax shift.
I also know the extra strain that the HST will put on my personal budget won’t be excessive — about $200 a year, by my calculation — thanks to a simultaneous income tax cut and prospective savings as business costs decline.
I do have concerns about both the terrible hit the HST will add to the cost of many new homes, and the sneaky way the provincial government is using a nose-stretching loophole to gouge people who park in downtown Vancouver. But these are details that can be fixed, not inherent flaws in the tax method.
I don’t expect all readers to agree. But if you write to tell me I’m wrong, I’m interested in hearing just how you think the provincial government should raise the money it now gets from the PST, and why you think your idea is better than the HST.
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