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June 4, 2010

Pro-HST Nit-Pickers

Supporters of the HST, and the government that brought it in, are frantic as they try to reverse the damage they've caused to their grasp on power.

First out of the gate was Finance Minister Colin Hansen with his claims that the BC Liberals did not promise not to bring in the HST. The Restaurant and Food Service Association and the BC Homebuilders believe they had a promise, and what's worse for the BC Liberals, the public believes that government shouldn't have done a 180 on basic policy days after an election without mentioning the shift during the election. Attempts to deny that there was a promise not to implement the HST are laughable and just dig a deeper hole for the BC Liberals.

A second line of defense is found in the claim that most economists support the tax and it was just the broken promise that is the problem. There is a small handful of local economists who have gone public in support of the HST and there are a few dozen more who have written opinion pieces over the past several decades expressing support for consumer based (value added) taxation. There aren't any surveys of large numbers of economists, and, much more importantly, there is little quantitative work on the effects of a value added tax. Studies cited by the Campbell government are either full of statistically insignificant results (Smart et al) or contain numbers that can't be replicated because they don't specify a model or the estimation techniques used (Mintz). What is clear is that even economists who support the HST admit that it involves a substantial tax shift from businesses to BC families. That is why the argument fails to convince voters that it is a "good" tax.

A third line of defense was trotted out by former Attorney General Geoff Plant in his opinion piece published in the Vancouver Sun on June 4th. He argued that the anti-HST "initiative petition is fundamentally flawed" and cannot possibly achieve its purpose because British Columbia has no ability to extinguish federal legislation. Like some pundits, Plant went on to quibble with the preamble to the initiative petition's proposed Bill, arguing that the HST does not contravene the constitution, but not mentioning that the preamble to the Bill is not relevant. He also noted that the proposed Bill fails to specify in what form the PST would be reinstated. Plant concludes that the legislative committee should refer the Bill to the legislature, at which point the government should refer it to the court for a constitutional opinion.

Geoff Plant is much smarter than is suggested by his legalistic column; he is a skilled politician who deserves much credit for changing the Campbell government initial antagonistic position with respect to First Nations. Plant is wise enough to know that the initiative petition is about politics, not what is constitutional, legally correct or bureaucratically easy. I sat on the legislative committee, and later the cabinet-caucus committee, that produced the Recall and Initiative Act. Our thinking was that, in consideration of the enormous difficulty of producing a successful initiative petition, any government facing a successful petition would have to have a death wish not to find a way to satisfy the public's demands. Plant's legal advice, or at least the advice offered in his op ed piece, would put the government in a "dead-right" position, perhaps correct but politically dead. The initiative petition is not about technical details of a proposed Bill; it is about putting sufficient political pressure on the Campbell government to force it to withdraw from the HST. By repaying the federal bribe money, agreement or not, Campbell could make the HST Harper's problem, and together they would work out a way to return to the tax system that existed at the time of the 2009 election. Of course, Campbell is stubborn and his caucus consists of powerless puppets, so it is dead-ahead for the BC Liberal ship.

This leads to the fourth line of defense, a province-wide blitz and ad campaign to begin a year too late. Believe it or not, after the public has made up its mind, after 73% of those polled say they have either signed the petition or want to sign it, and after more people have signed the petition than the BC Liberals got votes, the BC Liberals think they can convince people that the government is right and the public is wrong. Talk about spitting into the wind! However much money they plan on wasting on that sure to lose campaign could be better spent on virtually anything else.

The fifth defense is for the legislative committee to refer the petition to an "initiative vote" to be held in September 2011, as opposed to Plant's option of referring the Bill to the legislature. The argument is that, according to the Recall and Initiative Act, to be successful the initiative vote must have "more than 50% of the total number of registered voters in British Columbia vote in favour of the initiative, and more than 50% of the total number of registered voters for each of at least 2/3 of the electoral districts in British Columbia vote in favour of the initiative." Some say, let the petition proceed to a vote because it surely will fail when not enough people turn out to vote, after all only 62% of registered voters bothered to vote in 2005. That's a brilliant strategy! Imagine what would happen to the government if in every constituency in the province the intitiative gets 80% support from those who turn out to vote, but it fails on the technicality that voter turnout is too low. The subsequent provincial election would likely wipe out the BC Liberals.

There is no easy way out for the BC Liberals. Campbell can resign, but his successor will be left holding the bag, especially since his caucus is solidly on record in Hansard supporting the HST. If they want to save themselves, they must listen to the voters and get out of the HST.

Their last line of defense is to hope that the economy will turn around and they can attribute it to the HST. That hope was evidenced by Small Business, Technology and Economic Development Minister Iain Black who responded to the loss of 10,000 jobs in BC in May by saying that is just part of the expected fluctuations coming out of a recession but looking ahead to July the HST will turn things around. He should tell that to the food and beverage industry, where 10,000 are expected to lose their jobs because of the HST. Meantime, almost every family in the province will see a rise in their cost of living immediately as a result of paying 12% HST on goods and services currently taxed at 5% GST and no PST (with the exceptions of those goods that receive instant rebates, e.g. gasoline).

The BC Liberals are conducting an exciting experiment for both economists and political scientists. Ten years from now there might finally be enough data for economists to statistically hold other things constant and measure the effects of the HST, but just months from now political scientists will be able to look at opinion polls and see whether base support for the BC Liberals plummets to never before seen lows.