Clark's HST Plan Could Crumple Her Credibility
Her tax 'fix' would eliminate damage to average family by 2022, three elections from now.
Might Premier Clark pull out a tax hike later down the road?
Has Premier Christy Clark turned the HST referendum into a vote of confidence in her government? She had a choice; she could have remained neutral and said her government would abide by the will of the voters on the HST.
She chose to advocate for the tax, throwing a desperate Hail Mary pass in a last minute attempt to "fix" the tax.
The government newsroom includes a video of Clark making her pitch to vote for the HST. The Clark proposal came so late that the household mailer explaining the referendum cannot be updated, but don't worry, your tax dollars will carry the government's message to you through TV, radio and newspaper ads. Can you trust Clark's promises?
Turning the vote into a confidence question on Clark would be ironic since pro-HST advocates are promoting a YouTube video with the message that voters should vote on the tax, not what they think about Gordon Campbell. Instead of playing it safe, Clark has put it "all in" in an attempt to rescue an unpopular tax.
Critics point to the BC Liberal record on broken HEU contracts, the sale of BC Rail, broken teacher contracts on class size and composition, the HST and corporate tax cuts which followed the 2001, 2005 and 2009 elections with no mention of those cuts during the election. They ask if Clark can suddenly announce an increase in business taxes, what might she do after an election with respect to the HST rate? Would unexpected economic events be used as justification for a change in plans?
That is why the referendum could become a vote on whether she can be trusted rather than on the merits of the tax.
Devil in the details
Clark's proposed "fix" to the HST deserves serious analysis. At first glance a reduction from 12 per cent to 10 per cent plus one-time cheques for some families looks good. As usual, the devil is in the details. Finance Minister Kevin Falcon answered a question on the May 25 Global noon news saying the government will try to get the cheques out before the end of the year if the HST is approved in the referendum. Past attempts to bribe voters with their own money have met with mixed results.
The proposed one-time payment should be ignored as little more than an attempt to sway voters. The lasting change would be a reduction in the provincial portion of the HST rate to six per cent on July 1, 2012, and to five per cent on July 1, 2014. The government describes that as a reduction in the HST rate to 10 per cent by 2014, but they have no control over the federal portion.
Finance Minister Kevin Falcon was quick to portray the choice before voters as a 10 per cent HST or a 12 per cent combined PST and GST, but that is far from true. The tax "base" is the total value of goods and services from which the tax is taken. Like the GST, the HST applies to most services and many previously PST exempt goods. If you can believe what pro-HST advocates and the government say, there are about 20 per cent more things that the HST applies to than the PST, so a seven per cent PST on 0.8 of the HST base is actually a 5.6 per cent tax. That makes the proposed reduction by 2014 and the replacement of the HST with the PST/GST fairly close. It is very unfortunate that no reliable statistics are available to independently verify the relative size of the B.C. HST and PST tax bases. I wrote several columns on this after the tax was announced in 2009 and I submitted freedom of information requests, but the issue remains unresolved.
I have argued that the cost of the HST is closer to $350 per person than $350 per family but if we suspend disbelief and use the government's figures, it claims that its proposed July 1, 2012 HST provincial rate reduction to six per cent would result in the cost to an average family being reduced from $350 per year from July 2010 through June 2012, to $115 per year from July 2012 through June 2014. If the tax were finally reduced to five per cent in July 2014, the government claims the average family would then be $120 per year ahead. It would have paid $940 in increased taxes over the previous four years, so at $120 per year, it would take almost eight years to make that up.
In other words, the Clark "fix" would eliminate the damage to the average family by 2022 -- three elections from now.
Using corporate tax hike to sell HST
If you believe that nothing else will change in that time, I have a bridge to sell you. The government's policy is to increase the MSP premium-tax by six per cent per year. During the NDP leadership race, Adrian Dix proposed rolling corporate taxes back to 2008 levels and using the revenue to eliminate the tax shift paid for by MSP and residential care rate increases. The BC Liberals laughed and accused him of wanting a 20 per cent corporate tax hike; now they do exactly the same thing, but instead of using the money to stop MSP and residential care hikes, they propose to use it to sell the HST. For a family of three or more, the inefficient MSP premium-tax is increasing by more than $80 per year, offsetting the promised 2014 benefits. All of the government's tax changes need to be considered as one complete package.
If Clark had promised to deliver her entire fix by July 2012, better yet if Campbell had delivered that package when he announced the tax in July 2009, then there would be an argument that the impact on families is not the primary concern in considering the change. By phasing her promise over several years, with the net benefits not appearing (if at all) until 2022, Clark appears to be up to the kind of tricks that has made the public lose trust in the BC Liberals.
Consider for a moment the effect of a 10 per cent HST (apart from the phase-in issue, other tax changes, elections over the period and BC Liberal credibility). Other things being equal, increasing corporate taxes while imposing a five per cent tax (10 per cent HST) on an expanded tax base creates winners and losers. When Campbell announced the HST in July 2009 he identified a short list of major industries that would receive most of the benefits (input tax credits). The losing industries are those that are labour intensive, restaurants and the service sector. The business tax increase makes a bad situation worse for the service sector. Under Clark's proposal, the service sector would still suffer by having a five per cent increase in price and consequent reduction in demand, while paying higher corporate taxes so as to compensate consumers who are hurt by higher taxes structured so as to help mining and other capital intensive industries. No surprise that the restaurant industry wonders what the BC Liberals have against it; the HST was bad enough, the fix is a disaster.
After subtracting point-of-sale rebates, the HST is forecast to raise $5.8 billion in the current fiscal year, rising to $6.2 billion next year (the Dinning panel claimed unexpected HST revenues were much higher than reported by the Ministry of Finance). Using the Ministry of Finance's figures, a one point cut in 2012-2013 would mean a loss of $885 million in revenue.
The Ministry of Finance estimated that corporate income taxes would raise $1.9 billion next year; ironically the identical amount that corporations are expected to save as a result of the introduction of the HST. Raising corporate taxes by two points (20 per cent) would take B.C. back to 2008 levels. If a two point hike raised 20 per cent more, the revenue increase would be $380 million, $505 million short of the lost revenue from a one point reduction in the HST.
The complete "fix" to 2014 leaves a hole of more than $1 billion in the provincial budget, but that wouldn't come to light until after the next election. That's when it would be discovered and be the reason for either increasing tax rates or drastically cutting services. By comparison, a return to the PST/GST would be revenue neutral except for excess HST revenues beyond what the government revealed, i.e. the tax grab portion of the HST.
We can afford to reinstate PST
It is true that reinstating the PST will require the re-establishment of a collection division, but that is trivial relative to the costs consumers are paying.
It is true that in a worse-case scenario, the federal government will demand complete repayment of the one-time $1.6 billion transition fund. That means honestly re-stating the debt as it would have been after the 2009 election. Christy Clark's Hail Mary pass has resulted in the referendum being a question on whether she can be trusted.
She might have been better off to stay neutral and say that she would fully respect whatever decision the voters chose to make with respect to the HST. ![]()




35
Login or register to post comments
pianosaurus rex
38 weeks ago
Too generous
In stating that Clark or the Liberals have any credibility at all. But it is an interesting observation of how Clark as head of the Liberals views the tax.
By having the Liberals make into a credibility issue reveals that all Liberals are aware the HST is a boondoggle for British Columbians and a boon for business.
A desperate move by desperate people. Look at Clark’s low popularity rating; it won’t move upward because of this…rather it may move downward.
jim1966
38 weeks ago
As A Single I am Insulted
Yes I am. This move by the BC Liberals is a bad one and it shows. "Families First?". Last time I looked single people, divorced people,gay and lesbian people and widowed people are part of our society. Ms Clark's plan leaves these folks out and that just stinks.I am voting to axe this tax along with Ms Clark and her government's agenda.
Ramone
38 weeks ago
I wouldn't be surprised...
...if voters fall for the Liberals' smoke and mirrors act and vote to keep the HST.
They did, after all, vote these crooked casino capitalists into public office not once, but THREE times.
(continued...)
notdarkyet
38 weeks ago
It has always been about credibility
I signed the petition because I didn't trust them and I will vote to extinguish the tax for the same reason.
If the tax is defeated, and if the Liberals still think it so good and should be saved, then they can make it a major part of their platform in a fall election.
The referendum has become unnecessarily divisive. Now I am supposed to feel guilty because some people will lose on rebate checks if the tax goes down. I am sorry, but if they can find a way to help families that are struggling then they can find ways to help families who are struggling under whatever tax we have. But they have never been too great on that, have they?
Ramone
38 weeks ago
I wouldn't be surprised (..continued)
Modern politics is all about spin, corporate media sycophancy, fluff talking PR coached photo/telegenic candidates...and, most importantly, manipulating a naive, gullible electorate to vote against their interests.
Any working-class, or even middle-class, person voting for the BC Liberals or their policies is like a turkey voting for Christmas.
The BC Liberal agenda is making the already wealthy even wealthier and doing it by continually eroding the wealth of already struggling low and middle income earners.
Van Isle
38 weeks ago
I don't want to burst your
I don't want to burst your bubble David but there are a lot of people who think that Ms. Clark doesn't have any "credibility" to begin with.
editingfool
38 weeks ago
another page...
didn't i already read this page? oh yea, it was a page from harper's campaign book. it was titled, 'just don't show up.'
after all the bluster, bs, phoney smiles and even phonier platitudes, christy does not show up to debate the hst at the legs.
didn't we all hear her say that she was just raring to go, could not wait to take on dix in the legislature, eager to debate the hst in question period?? well, yesterday...she pulled another 'harper.' like the by-election debates in point grey, she decided she was just too gosh-darn busy running the province to debate dix on the hst.
i did read this page before....political deja vu. just don't show up, cause you don't have to.
Jeffrey J.
38 weeks ago
Can't Wait for the Referendum
The majority of we, the citizens of BC, were lied to by the Liberals about the HST. And people took to the streets, organized, organized, organized, and the referendum was set in motion. Now, Clark and the Liberals are worried. And so they should be. As the pre-eminent anti-democratic party in BC, they have done more to thumb their noses at the majority than any party before them.
Maybe Liberal politicians will rethink their contempt for democracy.
Let the referendum go forward. I can't wait to cast my vote and send a direct, democratic message to the Liberals repudiating the HST which was brought in by deceit.
Just as the Liberals make decisions with long term consequences for us, we too will make decisions that they may not like. But because WE elected THEM, they will just have to cope and reinstate the taxation system they foolishly tried to dismantle. After all, this is supposed to be their JOB.
freebear
38 weeks ago
Beware any "Family' rhetoric
Another facade, illusion, misdirection from Crusty!
OhCanada
38 weeks ago
jim1966 - I agree
I agree with you - as a single I feel insulted too. More - I feel being forced to pay for everyone else's $167 rebate.
Can't wait to mark NO on the ballot.
pwlg
38 weeks ago
the 10% solution
It's unfortunate Dix did not use some of Schreck's figures yesterday.
Basically, until the 2014 10% solution kicks in we will finance the corporate savings.
Vote YES on your ballot.
If the Socred Liberal coalition was serious about making equitable changes to the HST they would do it today and not wait until 2014.
I agree with Schreck, had bullheaded Campbell and his cabinet cronies set the HST at 10% from the beginning it would not have created such a mess. One good thing about it though is it got rid of Campbell. Now one more to go, bye bye Christy.
slowthinker
38 weeks ago
Mark "YES" to vote no on the HST
OhCanada, others...the referendum question is such that an indication of "YES" is actual saying no to the HST...make sure to read the ballot before marking.
Ronald Pagan
38 weeks ago
Vote yes to cut off our
Vote yes to cut off our noses to spite our faces
Skywalker
38 weeks ago
Not so.
Vote yes to cut off the BC Lieberals
For a better world
38 weeks ago
The Old Adage
The old adage, as to who's ox is being gored, is clearly evident here. The ox being gored is the general populace, and the beneficiaries are those who are already financially better off.
This pattern of shifting the tax burden from those who have more resources to those that have less has being accelerating for more than 3 decades. These are regressive actions initiated by the wealthy, and a one time payoff to those who are less fortunate is miniscule. Every time taxes, based on income are lowered and flat rate fees are introduced instead, the tax burden is shifted to those who have less from those that already have more.
The elite, who are pulling the government levers, want to return to Margaret Thatcher's poll tax methodology. A more progressive tax strategy for society is to return the multi-tiered tax regime that Mulroney and company reduced. Income taxes should be re-established with more and rising rates on higher income earners. If those who are better off do not like this approach, maybe estate taxes should be re-introduced.
The business elite have always found ways to write-off personal expenses. If they can't do it legally, they will do it illegally. Just ask Conrad.
DPL
38 weeks ago
I can't see any of us
I can't see any of us changing our position on the vote. My only concern is the folks who want to get rid of the HST so might vote no, when to get rid of it they correct word is yes.
John Greg
38 weeks ago
Yes indeed DPL
"My only concern is the folks who want to get rid of the HST so might vote no, when to get rid of it they correct word is yes."
This is a serious concern. I am quite sure this apparent was carefully thought out and prepared by the Liberals. They, and their coroprate bosses are deceitful, manipulative, mendacious freaks.
Camero409
38 weeks ago
Clark and Credibility?
In the same sentence? What an oxymoron! She has no credibility and never will. Oh, and I believe she can see Russia from her living room window!
John Greg
38 weeks ago
Camero409 said ...
"I believe she can see Russia from her living room window!"
Yes, but she thinks it's Bilderberg Palace.
frank2
38 weeks ago
I'm NDP. And I'm FOR the
I'm NDP. And I'm FOR the HST. And for higher corporate income tax. And for higher personal income tax brackets (which, btw, I pay), and removal of the favoured treatment of capital gains. ANd removing the subsidies to oil and gas and mining (roads in north).
ALL of those.
Why?
Because I'm FOR important public services whose deterioration is eroding everyone's quality of life on a daily basis, starting with
-education
-health (including mental health)
-low income supports & housing
-restoring capacity to manage our resources (forests) and parks
-infrastructure deficits
........ for starters.
It is disheartening that "left wingers" have been seduced into debates which focus on the right wing mantra of too many taxes and which to get rid of. Meanwhile, we ignore what's needed to support a better quality of life for all.
CoCs, Christy, the Zam and even Gordo must be delighted at how we focus on their vision of the issues -- not ours.
Ramone
38 weeks ago
Does nobody find this worrying?
DPL writes:
"My only concern is the folks who want to get rid of the HST so might vote no, when to get rid of it they correct word is yes."
Have we become so illiterate (politically and literally) that voters are so easily manipulated and confused by unscrupulous politicos?
A bit of research and preparation, and a careful reading of the ballot should make this a non-issue...but sadly a lot of people really do have trouble with simple English comprehension and as a result are easily manipulated by government and corporations.
Years of anti-intellectual (how dare people learn to think for themselves!) propaganda, and people shunning the written word in favour of television have taken its toll.
The capitalists couldn't be happier.
G West
38 weeks ago
frank2
If that were the choice then I might agree with you - but it's not.
Canada had a chance to institute a rational progressive and thorough program of tax reform after the report of the Carter Commission was tabled.
It recommended exactly what you've listed - a recognition that income is income no matter how you make it; that a dollar earned from interest, capital gains or dividends is no different from a dollar made digging ditches, taking temperatures or teaching kids in school.
Had the recommendations of the report become law we would live in a more equitable and fairer society today and 5% of the population wouldn't be in charge of 66% of the assets.
Increasing the level of sales taxes on goods and services - paid by the end consumer when that tax is the HST - isn't going to help the situation.
It will only make it worse and drive more and more of an increasingly services oriented workforce into the underground black market.
We DO NEED FUNDAMENTAL TAX REFORM - hanging on to the HST isn't going to make things better.
By the end of 2009, 3.8% of Canadian households controlled $1.78 trillion dollars of financial wealth, or 67% of the total for the whole country.
Hanging on to the HST is simply going to make that story more of a nightmare.
Progressives need to vote YES - but not just because this is a bad tax - they need to vote YES because this is the FIRST TIME IN THIS COUNTRY THAT INDIVIDUAL CITIZENS HAVE BEATEN BACK THE TIDE OF GREED AND SELFISHNESS WHICH HAS BEEN WASHING OVER THIS COUNTRY FOR THE PAST 30 YEARS.
G West
38 weeks ago
Oh, and for the interested
That statistic about wealthy households came from the annual report by the financial research institute Investor Economics.
It identified 544,000 “high-net-worth” households in Canada as of December 31, 2009, and said they represented 3.8% of all households. The report calculated that this group controlled $1.78 trillion dollars of financial wealth, which they said was 67% of the total financial wealth of Canadian households....
Just so you don't think it was produced by some looney left wing think tank.
realisticman
38 weeks ago
Poor Guy
EDITED FOR INSULTING AND BAITING ANOTHER COMMENTER -- MODERATOR over a government report from nearly 50 years ago, The Carter Report.
G West:
"Canada had a chance to institute a rational progressive and thorough program of tax reform after the report of the Carter Commission was tabled."
Did you bounce it off John Cummings?
Now. Nearly a half a century later:
Kevin Milligan is Associate Professor of Economics at the University of British Columbia;
'In the 1960s, Kenneth Carter’s Royal Commission on Taxation studied the question of the tax unit and determined that the family is the best basis for the income tax.
A very prickly problem arises in applying the family principle, however. What’s a family? Carter’s definition clearly referenced the social environment of the era -- maybe in 2011 our society has changed. Among Canadians from Asian backgrounds, for example, elders are considered a core part of the family unit. Moreover, social acceptance of same-sex couples has certainly increased over the decades. Neither of these family types were embraced in the Carter Commission definition, but a great many Canadians would be quite offended to be told their family is not a ‘family’ by the Canada Revenue Agency. "
Ahhr, the good old days. When a loaf of bread was 35 cents and a cup of coffe was 15. When a man was a man and woman was a woman and the family was home. Pierre Trudeau was Prime Minister and Jimi Hendrix played at the Pacific Coliseum. Take us back! Who are these old nostalgic people?
G West
38 weeks ago
EDITED FOR INSULTS - MODERATOR good old days in Canada
Good ideas don't have 'best-before' dates.
Why not take a couple of hours and learn something:
http://epe.lac-bac.gc.ca/100/200/301/pco-bcp/commissions-ef/carter1966-eng/carter1966-eng.htm
As for Kevin Milligan, wasn't he the guy who stated unequivically that the initiative petition to reverse the HST hadn't got a snowball's chance in hell of succeeding?
Yeh, that was the guy!
Like most economists he doesn't know his ass from a hole in the ground. You can ask Ed Deak about the value of academic economics.
BTW, I think you're the only oldie here - still dreaming of Fillmore West and Dead?
G West
38 weeks ago
Whoops!
As for Kevin Milligan, wasn't he the guy who stated unequivocally that the initiative petition to reverse the HST hadn't got a snowball's chance in hell of succeeding?
Yeh, that was the guy!
G West
38 weeks ago
The fundamental point about the Carter Commission
The fundamental point about the Carter Commission, which Milligan seems happy to ignore, is that (and here I'll let the Commission speak for me)...
As we have frequently stated in this Report equity requires that taxes be allocated in accordance with ability to pay.
We believe this can only be achieved when those with larger incomes bear relatively
heavier taxes . Unless income is taken into account in the sales tax system, either by exempting "necessities" or by allowing credit and refunds against personal income tax liabilities for sales taxes paid, general sales taxes are, by our definition, inequitable.
This follows because it is reasonable to assume that most general sales taxes, regardless of their level or form, are ultimately borne by consumers of goods and services.
Consumption expenditures are not a constant proportion of income. The proportion is lower the greater the income of the individual or family.
A general sales tax on all consumer goods and services, without exemptions or, alternatively, without credits against personal income tax liabilities,
would therefore be regressive.
It would impose relatively heavier tax burdens on those with low incomes. This is the antithesis of taxation according to
ability to pay.
Taken from the Report of the Royal Commission on Taxation, Mr . Kenneth LeM. Carter, Chairman at Volume 5, Part A....
(emphasis added)
crankypants
38 weeks ago
Fair taxation
G West is correct in stating that all income should be treated equally when assessing earnings with respect income tax levies. No one likes taxes, no matter the type, but of all the forms of taxation we have imposed upon us, income tax is the best assessment simply because it is the only progressive type of taxation. Income tax levies are based on the ability to pay by virtue of the fact that they are assessed on the income earned by each individual.
Sales taxes such as the GST, HST and PST are all regressive because they assess a form of taxation based only on the cost of a product or service at a defined rate which impacts disproportionately depending on income.
In my estimation, government should be able to fund most of their financial requirements through the collection of one tax, that being one based on income.
rantnic
38 weeks ago
Financial Transaction Tax
The FTT is probably one of fairest of taxes as it is not based so much on consumption, as on the exchange of wealth. A simple .005% Financial Transaction Tax would replace the PST, GST, HST, Land Transfer Tax, Inheritance Tax and if changed to .01% would also replace Income Tax. This short video on the Robin Hood Tax will give you a clear idea of the power of the FTT. http://www.youtube.com/watch?v=qYtNwmXKIvM
Frank
38 weeks ago
frank2
"It is disheartening that "left wingers" have been seduced into debates which focus on the right wing mantra of too many taxes and which to get rid of. Meanwhile, we ignore what's needed to support a better quality of life for all."
What I find disheartening is to hear an NDPer supporting a tax that shifts taxation from corporations and high income earners onto middle and low income earners.
You say you support higher corporate taxes yet you don't let that belief guide your decision on the HST.
Lots of people support higher taxes but only because those higher taxes support things we consider to be in the realm of the public good.
If we could have great health and education without paying for it there would be no reason for supporting higher taxes at all.
But we certainly don't support higher taxes when the money goes only to lessen the load on business and the rich. Why would we?
brg61
38 weeks ago
Trust???
Mr Schreck raises a good point when he asks if the BClibs will use "unexpected" circumstances as an excuse to cancel or alter these "fixes".
This party has a decade long record of lies and deceit and despite a change of leader the same dubious people remain in power.
It's even harder to trust this gov't when they appear so desparate to win the hst referendum; will they accept defeat or demand a re-vote?
Amor de Cosmos
38 weeks ago
Thank you Frank2
Thanks for the great comment Frank2.
We can all agree that the way the HST was brought in was reprehensible. Campbell had to resign because of that.
We can also agree that the HST, like the GST and PST, is regressive.
The challenge with this referendum is that it should, at this point, be about tax policy. While it is correct that the HST may be criticised for being regressive, this is not an analytically sound reason to replace it with the just as regressive PST and GST.
Moreover, everybody is criticising Clark for her little goody exemptions (as they should), but are ignoring the fact that the chief argument by supporters for returning to the PST is that it has far more of these goody exemptions (be they for rich or poor).
Shreck's 'analysis' throws in a bunch of figures without explaining that these cost figures (how much it affects families) really CAN be remedied (by an NDP government for example) by lowering the HST even more in the future, perhaps until it withers away. But these figures and arguments are not reliable ones on which to arrive at a conclusion that we should revert to the GST/PST.
While I clearly do not support regressive taxes in general, I believe at this time it would make more sense to keep it than to go back to the even more irrational and just as regressive PST and GST.
Given that Campbell had to step down, I will vote at this point based on reason and not rhetoric.
Speaking of rhetoric, my big question as a long time NDP supporter is when will we finally get activists/leaders that will cater to the public's intelligence and not its ignorance.
In all their articles about the HST, my impression is that Tieleman and Schreck rarely actually address the tax policy issues in an instructive manner. My impression is that they engage in the same obsfucation tactics as those they criticise.
I believe I recall that these same pundits were at the forefront of fighting against electoral reform as well as formenting significant confusion about putting a price on carbon pollution.
I would prefer if The Tyee would request information from these well-known commentators about who is paying them for their lobbying efforts if they are going to continue to provide articles to this site.
In the end, my experience has been that the criticisms of the NDP when it comes to economic matters are partially justified, and I am worried that it won't get better until things change.
It's kind of like the policy of the NDP to essentially just scream "Campbell doesn't care" and "Campbell is bad" no matter what what the policy issue was. Any government who gets into power with those types of discursive tactics, doesn't deserve much better. There's no credibility in it.
Skywalker
38 weeks ago
It is a good reason to vote "yes".
This provides the opportunity to start over with enough direction about what to avoid.
Frank
38 weeks ago
Amor de Cosmos
Why not get rid of the PST completely then by increasing the corporate tax?
If they can lower the HST by 2% by increasing corporate tax by 2% then can they not get rid of the provincial portion of the HST altogether by increasing corporate taxes by another 5%? It would still leave corporate taxes pretty low in relation to other countries.
Do that and everyone's happy. Even business should be happy if getting rid of the PST is as wonderful for them as they say it is.
cw
38 weeks ago
Kinda like "First cut your whale into 1" cubes
The whole lie is based on the Lieberals being in power in 2014. 'nuf said.