Friday, June 25, 2010

No room for retreat on HST - Paul Willcocks on B.C. politics and life.

With a few days left before the HST kicks in, it’s hard to see any way out of the muck-filled hole the Liberals have dug for themselves.
No other MLAs have followed Blair Lekstrom’s lead and resigned. Businesses are getting ready to charge the new tax beginning Thursday. The government’s pro-HST ad campaign is all ready to go.
Which all leaves the Liberals in a bad spot. The tax takes effect as proponents of an anti-HST initiative say they have the signatures of almost 670,000 people who want the tax repealed. About 752,000 people voted Liberal in the last election.
If government doesn’t pledge to repeal the tax, the opponents say they will start recall campaigns against targeted MLAs in November.
The Liberals won’t repeal the tax. They’re convinced they are right and the public is wrong; they don’t want to look erratic; and the process is too far along.
The last point is legitimate. Even two months ago, the Liberals could have - and should have - put the tax on hold for proper analysis, consultation and discussion. (None of those steps were taken before the HST deal was done with the federal government.) Now, retreat isn’t warranted.
The harmonized sales tax will cost most people more money. The Times Colonist asked Statistics Canada to run a forecast based on peoples’ spending, the HST and other tax changes and credits. The HST will cost an average family an extra $521. Everyone will pay more, but the cost will be greatest for those with higher incomes.
Shifting $1.9 billion in taxes off businesses and on to individuals and families is bound to mean higher taxes for most British Columbians. And many of them don’t like the idea of paying more to provide tax breaks for corporations, not to improve health care or public safety.
For some people on tight budgets, the extra cost will pinch. But the higher costs will be manageable for most people.
They will also be highly visible. Eat out, pay a gym membership, buy vitamins, use a cellphone, hire a carpenter to fix something and you’ll pay seven per cent more starting on Thursday.
The Liberals continue to pitch the benefits. The theory is that businesses, now facing $1.9 billion less in taxes, will pass the savings on in cheaper prices.
In some competitive sectors, that will happen. But is the carpenter really likely to cut his hourly rate to reflect his savings from the HST?
And many of the industries that benefit sell their goods outside the province - the forest industry will save $140 million a year - so lower prices won’t mean savings for most British Columbians.
That raises the other claim for the HST. If forest companies can sell more wood, then they will be more likely to expand, which could mean additional jobs. A lower tax burden might also encourage business to locate here - again bringing jobs. And, some economists suggest if there is more demand for employees, wages might rise.
The government, relying on a report by University of Calgary economics prof Jack Mintz, says the HST will bring 113,000 additonal jobs by 2020. That’s good. But there are about 2.9 million people with jobs in B.C. today. Adding 13,000 jobs a year isn’t going to create much upward wage pressure.
So the tax will come in. People will see they’re paying more, though not that much. The benefits will invisible.
Even if the HST brings benefits, it’s not about the tax policy anymore. Polls - and all those names on the petitions - indicate people think the Liberals were dishonest in rejecting the HST during the election campaign and then starting talks with Ottawa about the new tax days after taking power.
They are angry at being ordered to pay more taxes so business can pay less, with no discussion or consultation.
And they’re insulted that Campbell and company say the problem is that voters can’t grasp the obvious benefits - that they are, in short, not as smart as their masters.

Footnote: The government’s pro-HST ad campaign starts once the petition drive ends. The risk is a backlash when the public sees tax dollars spent to promote a tax change the public has rejected.
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I have been a resident of Coldstream since 1976. I have had 15 years of experience on Council, 3 years as Mayor. As a current Councillor I am working to achieve fair water and sewer rates and to ensure that taxpayers get fair treatment. The current direction regarding water supply is unsustainable and I am doing all I can to get the most cost effective water supply possible.