Earlier today, Elections BC announced the much anticipated HST referendum results. British Columbians have voted to scrap the HST.
The best part about having the results is that now we can move on from the narrow issue of what type of sales tax is better and focus our energies on some of the bigger issues affecting British Columbia.
Since the HST was first announced in the summer of 2009, it has dominated the policy debates in BC despite the fact that either way, the tax was going to have only marginal effects on the economy.
Yes, the HST is slightly more economically efficient than the PST. But the difference has been vastly exaggerated by HST proponents, who also refused to acknowledge that the tax is unfair to modest and middle-income families.
This is hardly surprising to readers of this blog who may recall me making this point before:
The HST is certainly an improvement on the PST from an economic efficiency point, but it’s a relatively small improvement. I am convinced that the economic benefits touted by the BC government and over exaggerated and the significant job growth, in particular, will not materialize.
The reason why HST only has a marginal impact is that taxes play only a marginal role in investment decisions. The main determinant of investment is expectations for future sales, driven in part by the general economic environment. Proximity to markets, the availability of appropriate infrastructure, access to cheap energy, access to a skilled labour force, and political stability are all much more important considerations when a firm is choosing where to set up shop.
The independent panel report, commissioned by the BC government, estimated that the actual economic impact we can expect from HST falls far short of the “giant leap” touted by U of Calgary’s Prof. Jack Mintz. For example, while Prof Mintz estimated 113,000 new jobs and 8% increase in capital investment by 2020, the independent panel found that we could realistically expect about 24,400 more jobs and 4% increase in business investment over the same period.
While I personally would have preferred to keep a reformed version of the HST, I think it’s counterproductive to fret over marginal efficiency differences after the people have spoken.
I’m also glad to see a return to somewhat improved tax fairness. We have witnessed a very large increase in income inequality in BC over the past 20 years, and we need to be very careful not to pursue policies that will make this problem worse — like the HST.
Recent research we’ve done at the CCPA shows that the HST is only one piece of an inequitable provincial tax system, a system in which the richest 20% of British Columbians pay a lower overall/total effective tax rate than the rest of us. Much more needs to be done to make sure everyone contributes a fair share to fund the the services and infrastructure BC needs in.
Now that the HST debate is over, it would be great to see some of the energy and focus many academics, business and community leaders dedicated to debating the HST be redirected to designing and debating solution to the real challenges facing BC.
Our unemployment rate remains high and slightly above the Canadian average at 7.3%. The economic outlook has worsened considerably over the last 6 months, with or without HST. There’s a serious risk of our main trade partner, the US, going into a second recession, which may push us back into a recession as well. Canadian corporations are not investing, even in the HST provinces. That’s because it’s not about taxes!
In the meantime, BC hasn’t had a budget and significant policy changes since Feb 2010. The Feb 2011 budget, tabled in the midst of a party leadership race, was prepared as a “placeholder” budget, padded with unusually large contingencies and forecast allowances to leave the new Premier room to implement their own policy priorities. Premier Clark has not tabled a budget yet, deferring the decision until after the HST referendum.
Now we know what we’re dealing with, I look forward to debating Premier Clark’s policy priorities for moving forward.
British Columbia families will remain vulnerable, burdened with unprecedented levels of household debt — 160% of income — the highest in Canada. More and more people are retiring with debt. Our housing market is weakening and bank economists are expecting a “correction” (aka, decline). Unemployment rate remains high, and is projected to stay over 7% for the next few years. Wages for those who are employed are barely keeping up with inflation.
The reality is that without a robust labour market recovery and real increases in household incomes, consumer spending will no longer be able to drive the type of strong economic growth BC experienced in the mid-2000s.
We’re still struggling with low business investment after years of corporate tax cuts that were supposed to stimulate investment and productivity. It’s not for lack of money: private non-financial corporations held $471 billion of cash in the first quarter of 2011. It’s also not for lack of competitiveness, or these corporations would have invested abroad instead of keeping the cash.
The problems that climate change poses continue to grow. We need an economic strategy what would invest in people and take bold steps to support a greener economy for our province.
On top of these, persistent poverty and rising income inequality threaten our economic wellbeing. We spend too much paying for the consequences of poverty instead of addressing the root causes of the problem. We are not fully using the skills and productive potential of those in poverty or those whose lower incomes limit the kind of opportunities available to them. Even the Conference Board of Canada has acknowledged that not just poverty but income inequality “can diminish economic growth and undermines social cohesion.
These are the types of issues that should be at the center of the economic debate in BC, not the best type of sales tax.
kate dyson // Aug 31, 2011 at 10:31 pm
Great stuff…all…I am enjoying the read…but am too tired from shovelling close to a ton of gravel in my daughter’s back yard to comment further…in a day or two…once I have recovered from the exertion…
David Huntley // Aug 31, 2011 at 5:53 pm
The HST is part of an overall plan to have Canada run by corporations, or, if you like, the model of Milton Friedman and the Chicago School of Economics. People used to be, and some still are, ruled by Emperors, Kings, Queens, dictators or the church; it was, and is, a long struggle to get out from under these yokes. We are now undergoing a transition to being run by giant transnational corporations. I do not understand why people put up with it. Do they not see it?
Do not blame the corporations. They are doing what they are required to do – to maximize profits for their shareholders, and if this means controlling politicians that is what they do. The politicians are slowly transferring power to corporations. NAFTA is a good example of the handing of power from the people to corporations.
We are in desperate need of new rules for corporations. These rules were originally created as corporations were seen as beneficial to society, and that has proven to be so. But, they have got out of hand, and the rules need to be changed so that they are subservient to the people and not vice versa. The charters that govern Canadian corporations need changing (1) .
We need a discussion on the allocation of taxing. There are
– personal income tax
- corporation tax
– sales tax
to which I would add other possibilities such as (this is not a complete list)
- wealth tax
- inheritance tax
- land tax
- tax on financial transactions
- elimination of certain tax breaks
- elimination of tax havens
One of the goals in choosing the mixture should be to reduce the inequalities that is an inevitable consequence of our capitalist system. Some options are:
- income tax rate increases with income, more so than at present.
- income that is not earned by working, such as interest and capital gains in excess of inflation, should be taxed at a higher rate than real working income.
- inheritance tax. Britain does this. So does the USA. I have never understood why someone who has not earned it should get a fortune from an inheritance.
- wealth tax: the town of Nördlingen in Germany taxed its citizens 0.5% of their net wealth each year in the 17th century; anyone caught cheating suffered a severe penalty, sometimes when the will was probated. This seemed to have worked well (2).
- a land tax. This would be a fixed percentage of the assessed value of all land. There would need to be some provision for those for whom it would be a hardship. This should be workable. The mechanism for collecting it already exists. This would likely have the added benefit of making property more affordable; a typical family here now has no hope of being able to afford a house due to high land prices.
- a tax on financial transactions would have many benefits. Such a tax at 0.25% may bring sufficient revenue that it could replace the GST and provincial sales taxes. It would also be simpler to operate than these (3). It would have other advantages such as taxing the gambling that goes on in the financial world, and perhaps reduce the number of people doing this gambling, which is not productive, and releasing the gamblers to engage in more productive enterprises. The amount of 0,25% does not seem large when one realizes, as my financial adviser told me, that he takes 1% off the government bonds he buys for me, or from an annuity he sells me. He also charges me for transferring money to another institution, an amount that turns out to be about 0.1%. One would probably want to set the rate at 0.1% initially. I think you will find people are in favour of replacing GST and PST by a financial transaction tax; the bankers and money traders will scream, but just let them do it.
- subsidies and tax breaks to corporations should be philosophically unacceptable to a capitalistic government, yet they exist. This is an example of corporate welfare in which money is transferred from the people to the rich. It should not occur, except in occasional instances when a clear public good is to be served. For example, there is no excuse for giving subsidies and tax breaks to oil and gas companies; eliminating them would add about 1 billion dollars a year to the treasury.
- tax havens are parasites on our society because corporations and people hide their money in them and avoid paying taxes that would otherwise be paid. It is hard to know exactly how much tax is evaded by Canadians and Canadian corporations but it seems likely that it is over a billion dollars a year and could be 10 billion dollars a year (4). Governments in general are clearly not addressing this seriously. The Canadian government may not be able to solve this world-wide problem alone, but there are surely steps that it can take. It could, for example, forbid Canadian individuals, corporations and financial institutions from having any financial transactions with financial institutions etc in tax havens.
footnotes.
1. Examples of suggestions can be found in recent issues of The Canadian Centre for Policy Alternatives Monitor; e.g. the articles by Garth Woodworth (February 2009) and John Courtneige (October 2009 to March 2010).
2. Christopher Friedrichs: Urban Society in an Age of War: Nördlingen, 1580-1720. Princeton University Press, 1979.
3. Walter Stewart: Bank Heist. Harper Collins, 1997, p.212. (A very readable book on the Canadian banking system)
4. Peter Gillespie: “Tax havens siphon $500 billion a year from gov’t revenues. Canadian Centre for Policy Alternatives, Monitor v.17 No.7, p.1, December 2010/January 2011.
VoxPop // Aug 31, 2011 at 6:49 pm
All excellent ideas, David. OK, CCPA draw us up a budget for BC based on these ideas – over to you.
Neale Adams // Aug 31, 2011 at 9:34 pm
Great post, David. It used to be that obtaining a charter for a corporation, which granted the right to conduct business with shareholders to assuming only a limited liability, was accompanied by obligations to the King or the kingdom, not to just the shareholders. They were to comply with the purposes expressed in their charters. Very quickly corporations expanded their powers – aided in particular by the judiciary – and the public good was forgotten. I’m not sure how, but I think we have to get back to the idea that a corporation should have a charter only if it engages in activity to the benefit of society.
VoxPop // Aug 31, 2011 at 10:22 pm
Spot on, Neale. In addition (particularly in 19C US) the charter was only valid for a finite time, often only 10 or 20 years, when the company had to be disbanded & assets sold & monies disbursed to the shareholders. Unfortunately, the clever lawyers got involved between 1855 & 1885 when all these restrictions were removed & the world has suffered increasingly ever since.
Iglika Ivanova // Aug 31, 2011 at 4:43 pm
Sorry guys, my last comment about revenues of $229 million was confusing. I wanted to say that the cutoff to make it to a top 100 corporation was revenue of at least $229 million.
VoxPop, you had asked for info on corps with revenue over $100 million and I just wanted to make the point that there are more BC corps in that category than the top 100. We just don’t have easily accessible info on them (that I know of).
VoxPop, have you tried to copy/paste the data from the pdf file into a spreadsheet? It usually works pretty well.
VoxPop // Aug 31, 2011 at 5:16 pm
Thanks, Iglika.
Almost got it but the data came over in comma delimited format. I’ll have to play around to put it into the cells.
Iglika Ivanova // Aug 30, 2011 at 11:32 am
VoxPop, according to Statistics Canada, total pre-tax profits in BC were $18.3 billion in 2009. That’s quite a bit below 2008′s $23.2 billion, but that’s to be expected in a recession year. The 2010 numbers will be released in early November. http://www.statcan.gc.ca/pub/13-018-x/2010001/t/tab0159-eng.htm
If you’re only looking for the largest companies, you may be interested in BC Business’s Online Top 100 ranking. They don’t show pre-tax profits, but provide data on net income (i.e. net profit). The top 100 companies have revenues over $229 mil in 2010. http://bcbusinessonline.ca/files/Top100/Top100_Overall_2011.pdf
Neale Adams // Aug 30, 2011 at 8:10 pm
That second figure seems off. While it’s profit after taxes are paid, I can’t imagine it’s only $229 million for the top 100 companies. (about 1 or 2% of total pre-tax profits???) If that’s true, there isn’t much to collect from the corporate sector.
VoxPop // Aug 30, 2011 at 9:00 pm
Thanks for the reference – is this available as importable spreadsheet data?
The columns are in 1000′s so for example Telus gross revenue is $9 billion.
It’s a pity that there are no column totals.
Also, the ‘Net Income’ must reflect some very lucrative write-offs; e.g. LionsGate Entertainment had a $30 MILLION loss on revenues of $1.6 billion; HSBC made only $500 million on revenues of $2.5 billion, etc.
Pity that the profits of the private companies are not listed (I don’t see why not if they are doing over $100 million a year).
It is not likely that their revenues are only $229 million as BC’s GDP is closer to $200 billion, with the BC government pulling in $60 billion.
VoxPop // Aug 29, 2011 at 5:32 pm
Neale, it is important to remember that only a small percentage of shareholders (& bond-holders) of the large corporations operating in BC actually live in BC & therefore pay personal income taxes to BC. It is necessary to tax the corporations at source so that all of their profit stream is taxed for the benefit of ALL BC citizens.
Iglika, do you know what the total annual profits are for large (say, with annual revenues over $100 million) corporations operating in BC?
kate dyson // Aug 29, 2011 at 5:54 pm
Exactly, VoxPop…tax at source…
VoxPop // Aug 29, 2011 at 1:39 pm
Neale, you are right to question personal income tax from the wealthiest 20% as sufficient for all the revenue that is needed to fund a modern, socially just society. The middle-class will have to pay some more income tax (not much but there are many of them), say an extra 10% on incomes over $70K per year.
This is why CORPORATE income taxes are key to the balancing act & why BC needed to bring in the tax-grab known as HST – to fill the giant holes left by reducing taxes (and royalties) on the very largest corporations that exploit our natural wealth.
Neale Adams // Aug 29, 2011 at 4:37 pm
But from the analysis I saw, corporate income taxes are within that 20%. At least I think so. Income for the very rich included corporate dividends and the increase in value of their holdings, at least as I read the figures. I could be wrong…
Neale Adams // Aug 29, 2011 at 11:29 am
The question I have is, where is the potential tax revenue? I hear a great deal about how the rich have many multiples of wealth than average families, but the problem is, wealth is not the tax base, income is. As far as I can tell, and hard figures are hard to come by, but it seems to me that on an annual basis, the rich (income over, say, $150,000 a year) collectively may get only about 20 per cent of all income – the great bulk of middle class people earn most of it.
There is a great deal of data the CCPA has generated on tax rates and how these aren’t very progressive with income (and may be slightly regressive), but even if you made them highly progressive and imposed a 50% provincial tax on incomes over $150,000 (imagine the squeals!), would there be enough revenue to pay for what we want in health care, education, public transportation, etc.? I don’t know, but I doubt it.
My point is I wonder if there’s a rich uncle who can save us. We should have a fairer tax system, I heartily agree, but even when we achieve that commendable state, will we have enough revenue? Won’t we have to tax ourselves? And then we run into the problem, everyone’s for a fairer tax system—but the other guy is the problem, not me.
Iglika, are there any figures as to the amount of potential tax revenues we’re missing?
(Wealth could be a tax base if we reinstituted an inheritance tax. How many middle class families are up for that?)
Iglika Ivanova // Aug 29, 2011 at 11:12 am
Happy to see that this post has generated so much great discussion. These are the kinds of conversations we need more of. Keep it going!
Roald Anderson // Aug 28, 2011 at 8:27 pm
If we are serious about developing a fair and equitable tax system for BC the discussion has get beyond “the rich and the corporations”. A fair tax system means we all contribute, yes the system needs to be progressive and contrary to what some have said consumption (VAT) taxes can be structured in such a way as to be progressive. This can be done through rebates set at income thresholds high enough to be meaningful, and the exclusion of neccesities from taxation.In the end a progressive VAT will act as luxery tax in that those that can afford high end items will be taxed with no “loop holes”available.
I certainly agree that resource should not be priced as a loss leader to get short term economic development, we have too many examples of that from previous administrations.
Unfortunately we have such a convoluted tax system with write-offs, tax credits, deferals’etc. that simply adjusting rates is not enough to get us there. Many years ago a Federal Liberal finance minister did a major review of the Canadian Tax System, he recommended eliminating all exemptions, deferals, etc. and said a dollar earned should be a dollar taxed under a progressive system. Not surprisingley the recommendations were never implemented and the study is never mentioned.
VoxPop // Aug 28, 2011 at 5:48 pm
Kate, you have my vote. We can only let the NDP try one more time. If they don’t run on this type of platform AND then implement it in the first two years, then it’s time for a new party.
kate dyson // Aug 29, 2011 at 11:21 am
I agree….I’ve been voting NDP since I could vote…1973…and have been increasingly disappointed in their drift to the right…they’ll get this one last chance from me…
Denise Holmen // Aug 28, 2011 at 3:13 pm
The Times Colonist on Aug. 27th stated that “The [HST] tax was warmly welcomed by forestry, mining and other sectors when it was first introduced …as it saved those business $2 billion a year and established BC as an attractive place to invest.” “Resource industries look for Plan B”, p. A4
I was amazed that the federal and provincial governments thought that non-renewable and green-house gas causing resources should not be taxed. Surely, in the interest of sustainability (environmental and long-term economic), these are the very items that should be heavily taxed.
Iglika Ivanova // Aug 29, 2011 at 12:49 pm
Good point, Denise, and one which is often overlooked.
One of the main attractions of the HST was that it offered a tax break on BC’s exports industry, which is primarily resource-based.
Seth Klein wrote a blog post about this shortly after the tax was introduced in 2009: http://www.policynote.ca/hst-why-do-the-feds-want-it-so-bad/
Barb Taylor // Aug 28, 2011 at 10:19 am
Thank you for this article, Iglika, and the ones you and Seth wrote in BC CCPA newsletter earlier this year before the vote.
Yes, now is an opportunity to look at the larger taxation picture, one of fair and progressive income and corporate taxation in moving our society toward greater equality and well being. I certainly agree with the last two comments by Kate Dyson and VoxPop.
kate dyson // Aug 28, 2011 at 12:05 am
There is no creative of CHALLENGING thinking required…progressive taxation precludes VATs…because they are regressive…it includes boring old progressive tax brackets…where the richer you are the higher percentage you pay in taxes and this redistributes the wealth so that the least able to provide for themselves are provided for by those who are the most capable…a narrowing of the gap in incomes is created however, rest assured that a doctor will always make more than someone who sweeps floors…but the Wall Street investor or the hedge fund manager may find themselves without the huge bonuses…and the corporate oligarchs may not find the tax loopholes they love to jump through…and the welfare they receive would end….
VoxPop // Aug 28, 2011 at 9:34 am
I agree, Kate that revised income tax rates are central to a fair tax system. In BC, we must not forget royalty rates on our natural resources and the widespread elimination of fees, such as hospital parking, camping in provincial parks, MSP, etc.
We also have to INDEPENDENT reviews of ‘crown’ corporation pricing like BC Hydro, ferries, etc.
kate dyson // Aug 28, 2011 at 11:31 am
Absolutely, VoxPop…royalties on resources that are owned ‘by the people’ though you’d never know it…and user fees as well…as far as the ‘crown’ corporations go…are they not mostly victims of the PPPs where public money is thrown willy nilly at the private sector in a lovely corporate welfare set up….?
VoxPop // Aug 28, 2011 at 11:47 am
Yes, we’ve suffered 10 years of corporate welfare as Gordon Campbell rewarded his party’s major contributors: they give him a million, he gave them a billion back in lower taxes & royalties.
kate dyson // Aug 28, 2011 at 2:56 pm
…so the next question is…when we throw the bums out of office…will Mr Dix and the NDP (the party that used to practice democratic socialism…but is simply ‘progressive’ now) rescind the regressive taxes take back the crown corporations from the Private parts…and make these corporate oligarchs pay royalties that are not offset by tax credits…beef up our single payer health system to include dental and get rid of the user fees in health care as well as other government (taxpayer) owned entities…and attempt to close the income gap through easier access to higher education for lower income and poor families…personally I’d like to see higher education free for anyone who wishes to increase their knowledge through education…my niece has 4 kids and the extra fees she pays for each of her children in the public system is ludicrous…Campbell has cut taxes on income while piling on ‘user fees’ and those who can least afford it pay huge portions of their so called increased disposable income on what is nothing more than taxation. This tactic helps the rich…but certainly not the poor!
VoxPop // Aug 27, 2011 at 8:44 pm
The only fair SALES tax is a luxury tax (items that only wealthy people buy, like autos over $50K, restaurant meals over $50 per person, etc.)
VAT taxes do not help the ordinary consumer, who ends up paying 100% of the accumulated tax.
Business does NOT need tax subsidies (aka corporate welfare).
C’mon guys, don’t buy all this standard ‘economist’ BS – it’s just a smokescreen for the rich who own & manage the large corporations.
Let’s see some creative, CHALLENGING thinking like Neale Adams requested above.
Marvin Manley // Aug 27, 2011 at 10:28 am
I agree with the author. While the HST was implemented dishonestly (some might say fraudulently) and constituted an unfair tax shift, the concept of a single tax was still a good idea. The HST should have been reformed, not scrapped.
The populist movement led by Vander Zalm (now there’s a people’s hero!) and supported by the Conservatives and the NDP was crass politics of the worst sort. We need intelligence to rule over emotion and that didn’t happen.
I would group the majority of the anti-HST crowd into one of three camps:
- right wingers (tea partiers from the north) who think that the best government is no government
- people who don’t understand basic economics and think they are going to be saving a whole lot more than they are when the tax is scrapped (and some of them will actually pay more without it)
- NDPers and their partisans who reflexively attack everything the Liberals do, no matter what it is
We need and deserve more intelligent politics in this province.
VoxPop // Aug 29, 2011 at 1:30 pm
Sorry, Marvin your tripartite division of the opponents to the HST does not cover everyone. Our friends & I opposed the HST from the very beginning on the grounds of equity & fairness and we do not fall into any of your politically-spun categories.
Pete McMartin in Saturday’s “Sun” addressed your type of ‘argument’ in his column on ‘name-calling’. He correctly pointed out that the pro-HST side suffer from excessive hubris – the arrogance that they are smarter than the opposition & if the anti-HST ignoramuses would only listen to ‘educated’ people (Marvin?) then this would never have become an issue.
The HST, like all VATs, is a regressive tax that pushes taxes onto the backs of the very people who can afford them the least while giving major cash benefits to the existing winners in society who do NOT need any more assistance. I would bet that you, Marvin would place yourself in the Winners’ Circle in today’s world.
Robert Slomen // Aug 27, 2011 at 9:58 am
I wonder what would had happen if Gordon Campbell had decided to run his platform on bring in the HST. Would the Liberals have gotten elected.
If the answer is no, then you have the NDP in power, who also would need taxes to run needs. so here you have two parties one for the rich as some people seem to think or you have the other party that is union based and not so poor.
What we need is a party that caters to both sides
but makes sure that everyone in the country, rich or union or whats left of the middle class pays their fair share of taxes to look after the ones that are not so fortunate in how they live.
Roald Anderson // Aug 26, 2011 at 8:48 pm
Defeat of the HST is a political victory for the citizens of BC, it sends a message to all politicians in the province that major public policy issues need to be presented to the electorate prior to and during election campaigns. The referendum that really counts is on election day. I look forward to proposals for a fair and equitable tax structure for BC which will include a mix of progressive income, corporate and consumption taxes. It is criticle, in my opinion, that these proposals be available for debate during our next election.
kate dyson // Aug 26, 2011 at 7:02 pm
The real problem is regressive taxation in the form of any kind of value added or goods and services taxes. Dollar for dollar spent on any goods or services by a person in a low or fixed income bracket pay a larger percentage of their income on Sales or VATs or GSTs…than one in a high income tax bracket. Fair and progressive income tax is far the better way to assess each person’s tax obligation to society. That along with substantial corporate tax rates will then serve to redistribute the wealth properly through decent pensions, increased unemployment and welfare funding…not to mention enhancing our single payer health care system to include dental and to reinstate other therapies that now require a user fee. I am tired of corporate welfare at the expense of middle tax brackets and the poor.
Neale Adams // Aug 26, 2011 at 5:37 pm
I know the CCPA has been calling for a Fair Tax Commission, and I support that. But what I’d like to see now is a comprehensive proposal from the CCPA that gave what a fair tax system might look like. To be helpful, it would have to be practical, recognizing there a limits to how much the province can tax not only individuals and families, but also the corporations they work for. In other words, a CCPA proposal should be more than tired class warfare rhetoric that the rich must always pay more–yes, taxes should be progressive, but if we want decent government services the middle class has to pay them too. We need something concrete and realistic to chew on.
Iglika Ivanova // Aug 29, 2011 at 11:04 am
Neale, you’re quite right to say that a progressive tax system goes beyond “the rich must always pay more”: at any point of the income distribution, those earning more should contribute a higher share of their incomes to the common pool than those earning less.
I also agree with you that the middle class would have to pay higher taxes. I personally think the rich have gotten a huge tax break over the last decade and must pay more. Looking at the evidence, it’s hard not to come to that conclusion. Taxing the super-rich would address some of the issues with income inequality, but it likely won’t generate enough revenue to pay for the investments we need to make as a society for a greener future, poverty reduction and giving all children a good start in life through a high quality, public childcare system.
We need to decide if we want to pay for services like healthcare and education by pooling our resources together as a society, or if we want to shift the risk to individual families and have everyone pay for their own use. Pooling resources ensures equity in access. It also happens to be cheaper overall. If British Columbians want to make these investments, most of us would have to pay somewhat higher taxes.
That said, I believe that all taxes need to be carefully assessed on efficiency and equity grounds. Not just personal income taxes, but also corporate income taxes, property taxes and natural resource royalties. You’d be happy to know that we are working on hashing out some options for fairer taxes.
Arthur Scott Parker // Aug 26, 2011 at 3:58 pm
I would like to see the CCPA address the increase in wages in BC and inflation over he last 20 years workers. The article states “Wages for those who are employed are barely keeping up with inflation.” Is this true or are wages falling behind. 7.3% unemployed sounds normal to me what has it been over the last 20 years. What is the gap between the rich and the other 90% in BC. Richest few percent and the percent of wealth they own and what was it like 20 years age. Also how has the tax structure shifted by percentage of corporations/rich pay from the Good old days of capitalism, as far back as 1940( the war) in BC to today. I am sure the CCPA have the data to answer these questions. Peace Scott
Iglika Ivanova // Aug 29, 2011 at 10:48 am
Scott, you pose a lot of interesting questions in your comment. The CCPA has published many reports on these issues over the years, but let me try to address some of your questions here.
At 7.3% the BC unemployment rate is lower than it has been in the 80s and 90s recessions, but it’s considerably higher than the 4-5% unemployment rate we enjoyed for a few years in the mid-2000s. In addition, more people work part-time (and likely part year) today then ever before, which is putting stress on family budgets that cannot be captured by just looking at the unemployment rate.
In terms of the gap between the rich and the bottom, the CCPA has written extensively about that. I recommend Armine Yalnizyan’s “The Rise of Canada’s Top 1%” http://www.policyalternatives.ca/publications/reports/rise-canadas-richest-1 . Reliable data on wealth and incomes of the top 1% is hard to come by for the provinces, which is why most of our provincial analysis only looks at the top 10%. You may be interested in this report on family income inequality in BC that I wrote in 2009: http://www.policyalternatives.ca/publications/reports/bcs-growing-gap
What’s happened to wages depend on whose wages and how you want to measure them. We know that some wages (CEOs, upper management, etc) have increased quite substantially over the last decades.
Hourly wages can show different patterns from weekly wages because of changes in the average hours worked weekly over time. I often prefer to look at annual earnings, because these are more closely related to people’s quality of life than their hourly wage.
It also depends whether you want to look at average wages or median wages. High wages at the top can skew the average, which is why I often work with the median (the mid-point of the distribution).
Annual earnings for full-year, full-time workers in Canada have grown slightly faster than inflation between 1976 and 2009 (the span of the data available). This is true both for average earnings, which rose by 9% (after inflation) over the period and median earnings, which rose by just over 3%.
In BC, however, annual earnings for full-year, full-time workers have actually fallen since 1976. Average earnings fell by 2% while median earnings fell by 9%.
And that’s for full-time, full-year workers. Part-time and part-year work has increased in prominence over this period. Some of it may well be by choice, for example, some women with small children prefer to work part-time or part-year only, but some definitely is not. In the late 1970s, 55% of all wage earners worked full-year, full-time but in 2009, we were down to 42% of all wage earners working full-year, full-time in BC.
VoxPop // Aug 29, 2011 at 1:17 pm
Good response, Iglika and you are right to emphasize the median data when it comes to earnings. But you have to be careful NOT to buy in to official data on ‘inflation’. This has become one of the most politically manipulated numbers in today’s world. The only number that counts is the total expenditures made by a median family over 12 months; then compare this to year over year. The CCPA needs to do its own measures & sampling to hold governments to account on this key number.
I also don’t believe the huge increase in part-time work is by choice; again, the CCPA could do some of their own sampling.
Reliance on Stats-Canada is a mugs game.
VoxPop // Aug 26, 2011 at 3:33 pm
Taxes are always about politics, just as are economics. Abstractions, like “the economy” are meaningless – what counts is how we ALL live.
Yes, it’s time to talk about fairness but as long as BC has a party that represents the interests of the rich & Big Business this type of discussion will always be given a spin by the media (just watch CTV on the HST vote for example), so the general public never get all the right info (see HST effort).
The real issue is class war – the rich know this & only pretend to play nice. Time for the CCPA to bite the bullet.
Heather // Aug 26, 2011 at 1:54 pm
Excellent blog. And thank you for pointing out so eloquently that it is the middle class who suffered under the HST system.
What I don’t understand is why will it take almost 2 years to reinstate the GST/PST?
Iglika Ivanova // Aug 26, 2011 at 6:21 pm
The HST is a federal-provincial agreement, so I suppose some of the delay comes from having to negotiate terms with the federal government.
The 18-24 month estimate comes from the Independent Panel Report on HST, which in turn says that’s what “officials told us”. The estimate includes time to rewrite federal-provincial tax laws and regulations, hiring back 300 tax collectors, rebuilding a provincial PST
office and helping businesses readjust their
accounting systems.
I suppose it takes longer to rebuild something than to dismantle it.
VoxPop // Aug 28, 2011 at 9:45 am
Please don’t be naive. These excuses are just the kind of lies & ‘spin’ that the BC Liberals dish out every day. One of the biggest lies is that the HST Panel was ‘independent’ – check out the biographies on each one of them, almost all of them are professional shills for Big Business (by design). Negotiating with the Feds could be an endless exercise – how about another 4 years? Just tell them Harper’s plan didn’t fly & the BC voters will retaliate against the Federal Conservatives in the next election if they don’t cancel the HST asap. Or just: “we’re not paying.”
The real reason this will be dragged out is the hidden truth behind the tax in the first place – it’s a giant cash-cow for both governments & their election-backers in Big Business.
The BC Liberals will now try to drag out the reversion back to the way BC operated on June 30, 2010 because they will still collect billions more while they “solve” this problem. Give us a break, Christy. This is NOT difficult. We only need re-activate everything we were doing a year ago, our memories are not that bad. We could be back to normal in two months. Dragging your feet will only result in an even larger defeat at the next BC election. Your choice – our votes.
Martha O'Brien // Sep 2, 2011 at 4:39 pm
Two things. You wrote your piece before the figures on vusiness investment in the second quarter came out – up 31%, which might be partly to do with HST in Ontario and BC.
Second, it takes longer to reinstate the PST than to harmonize with the GST because the CRA already had everything in place, and so did the businesses that collected GST, and were just adding the 7% provincial portion. Now we have to go back to complying with two systems, with two tax bases and two administrations, filing deadlines, and exemptions and rates.
It disturbs me that so many British Columbians appear to have been attracted by claims by Vander Zalm and others that the HST was somehow worse for the poor and old. The CCPA’s Ontario branch’s report dismissed that claim pretty thoroughly. If what we were really upset about was 7% on restaurant meals, it seems we are a pretty stingy lot.
But you are right; BC needs to consider higher income taxes on the well-off and very well-off, perhaps to replace the MSP premiums that are not very efficient or fair.
I thought your commentary was very balanced Iglika, well done.
VoxPop // Sep 2, 2011 at 6:43 pm
This is just another bogus argument. The CRA has to deal with provinces that have the HST & PST as well as Alberta that has zero sales tax. So, bringing in the CRA is a total red herring.
Almost every business today, even the smallest use computerized accounting: these programs in Canada also have all these options so it’s just a matter of picking the PST option – just like companies did prior to June 2010 – so again, don’t bring up another dead fish.
No, it’s not about HST on restaurant meals (but a luxury sales tax on restaurant meals over $50 would be OK for most of us).
The CCPA’s Ontario branch needs to visit BC to get a dose of reality. Where do you think BIG Business was getting the $2 billion annual tax break? Time to read Jim Sinclair’s article in today’s “Sun”. Of course, the HST was a rotten tax grab!!
Sylvia // Aug 26, 2011 at 12:52 pm
Thank-you for this reasoned and balanced opinion.
You’ve highlighted what needs addressing; rising poverty and income inequality are what are on the minds of most people. Food, clothing, a place called home, a living wage are what people care about.