Jun 19, 2011

To HST or Not to HST


The campaign to save the HST is rather shameless, not to mention bad public policy. We won’t, as HST spin masters would have it, pay less tax with the new and improved HST. The amount of tax we collectively pay depends on the amount of services and support government provides — total government spending– not the manner in which taxes are paid.

True, different types of taxes affect people differently and the fairness of different tax policies is a valid concern. But don’t tell me we are going to pay less overall by instituting one tax as opposed another. It is a silly reason to support of the HST in the same way that it was a silly reason to support the ‘revenue-negative’ carbon tax.

In any case, by almost any sensible measure we need more, not less public investment. So let’s not try to figure out how to pay less; we need to think about the most efficient and equitable ways to pay more.

Which brings me to the HST vs PST quandary we currently face. There is no question that the manner in which the HST was introduced was duplicitous, and that there is little reason to trust the government’s latest plan to to make it more equitable between households and business in the future. But those are reasons for voting for a change in government, not to restore the PST.

The fact is, despite all the good arguments of my old school mate David Schreck, the PST is an inefficient tax. There is the obvious duplication of tax collection and payment with the our very own PST. And there is the more subtle, but still significant problem of charging sales tax on goods whose prices already  include sales tax paid on the B.C. materials they use — an economically distorting tax on tax.

There is as well the impact of the narrower tax base of the PST as compared to the HST. Whatever is taxed has to be taxed a lot more to make up for everything that isn’t taxed, without any consistent reasoning or principle determining why some things we consume should be taxed and others should not. I like to go out to eat, but I can’t understand why government should treat that more favourably than buying tools or clothes.

Don’t get me wrong. I’m no great lover of the HST. If someone wants to implement higher energy prices, natural resource  royalties, congestion charges, solid waste fees– a serious effort to capture resource rents and to tax environmental and social costs — I am all for it. There are better alternatives. But going back to the PST is not one of them.

So I can’t see voting ‘yes’ (meaning ‘no’) in the upcoming referendum. And that is not because of the silly ‘lower tax’ argument being made in defence of the HST. It is because the HST is better than what we are being asked to go back to.



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