June 23, 2011

Voters will choose to keep or do away with the HST. If only they could figure out the ballot question. You would reasonably think that a No vote would get rid of the HST but that's not how the ballot question is worded.

The confusion is reflected in a recent Angus Reid poll in which one-third thought that a No vote would mean that the HST would remain the same, another third thought it would change, and the remaining third weren't sure. In fact, a No vote both keeps the HST and changes it: lowering the tax rate from 12 to 10 per cent.

Motivations vary. Some want to punish the B.C. Liberals for ambushing them with the HST. They don't necessarily object to the HST but the way that it was forced on them without explanation. Others will vote against the HST to show support for the NDP. Yet others will vote against the HST because they are against all taxes. Tax-revolters imagine that taxes can be lowered while receiving all the benefits of taxation like health care, public education, and roads.

So, who's left? Who will vote on the merits of the HST without the political entanglement? The Canadian Centre for Policy Alternatives offers two perspectives. On one side Iglika Ivanova, a researcher for the CCPA, will vote to keep the HST despite the unfairness of the tax.

Ivanova thinks the unfairness in the HST can be fixed and that it's worth saving because it's more efficient than the old PST/GST. The HST has lower administration costs. Businesses save $150 million in costs and government will save $30 million. And if the HST is not approved, B.C. will have to give back the $1.6 billion that the feds gave us for implementation.

The HST will reduce the cost of consumer goods, she adds. The old tax was cascaded through each step of production: taxes were added to taxes that increase the final cost of goods. In contrast, the HST is a value-added tax. As components move though the manufacturing process, tax is collected only by the value added by that process and not on the entire product.

The problem is not with the HST but in the way the government is adjusting the tax burden. In their haste to implement the HST, the B.C. Liberals did nothing to compensate the tax burden on middle class. The $2 billion saved by businesses was to be collected from ordinary tax-payers. Now, in an attempt at damage control, they propose lowering the HST to 10 per cent.

A fairer solution is to adjust the tax rebate system already in place for low-income families. Simply expand the rebates to compensate the middle-class.

Another researcher for the CCPA, Seth Klein, will reluctantly vote to eliminate the HST; reluctant for two reasons. First, he loathes being part of any perceived tax revolt such as those that have devastated governments in the U.S. And like Ivanova, he is hesitant to vote against a good idea. But unlike her, he is unconvinced that the government will come up with a reasonable repair.

Unlike in Ontario, the B.C. Liberals have failed to explain the HST, hastily concocted its implementation, and neglected to make fair an otherwise good tax. Lowering the HST rate to 10 per cent will only benefit low and high income earners who are already compensated.

Voters have the unenviable choice is between one tax that is more efficient but unfair (though fixable), and one that is inefficient but already fair. And that's only if they can figure out the question.


David Charbonneau is the owner of Trio Technical.
He can be reached at dcharbonneau13@shaw.ca