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April 19, 2010

HST fault: Campbell or Harper?

What would Stephen Harper do if Gordon Campbell announced that the HST was a bad idea and BC wanted out of the federal-provincial agreement? Sticking it to BC and insisting on not breaking the HST agreement until 2015 could cost Harper all of his 22 out of 36 seats in BC, and possibly any chance of clinging to power.

The petition against the HST is a political process; technical and legal arguments are irrelevant. Claims that little would happen if it succeeds miss the point. When the Recall and Initiative Act was drafted (I sat on the legislative committee and worked on the legislation), we believed that any government faced with a successful initiative petition would have to have a death wish not to comply with the will of the people.

While 10% of all registered voters in each of BC's 85 constituencies must sign in order for the initiative to succeed, it appears that the anti-HST petition could have more eligible voters signing than the number of people who bothered to vote. If that proves true, this could be an important rejuvenation of citizen involvement and democracy.

It is possible that by May 15th, the petitioners will be able to announce that they have already exceeded the 10% requirement in all 85 constituencies, with over 7 weeks to go before the deadline for the petition. A smart government would recognize the political train wreck it was facing and bailout.

Campbell has maintained that the HST will raise less money than the PST. All he has to do is renounce the HST and revert to the system BC has "enjoyed" since the 1950s, when the provincial sales tax (technically called the social services tax) was brought in to finance hospitals. The sales tax allows the government to specify what goods and services are taxed, hence determining what to favour by waiving the tax. Legal services are taxed but most services are not taxed. In 2002 the Campbell government eliminated the sales tax on "production machinery and equipment", although it has no studies or data on whether that "tax expenditure" resulted in any increase in investment.

In the legislature last week, Finance Minister Colin Hansen admitted that the Campbell government was about to flood every BC household with a piece of direct mail promoting the "benefits" of the HST and identifying misrepresentations made by its critics. Such a mailing might be a violation of the Recall and Initiative Act; no one registered as an opponent to the initiative. If the proposed pro-HST mailing is legal, it is likely to be counter-productive, further angering BC voters and encouraging even more people to sign the anti-HST petition.

Claims by the Campbell government about "misrepresentations" are laughable, coming from a political party that promised not to implement the HST, only to do so within days after the election. The supposed misrepresentations were put in context by Michael Smyth in his column in Sunday's Province (April 18th). There is a long list that the HST will apply to; it is easy for all but a handful of experts in the Ministry of Finance to misinterpret some of the fine points. Nit-picking on those fine points is not misrepresentation by anyone; it is simply irrelevant relative to the massive tax shift that the HST would cause - taxing most services and some goods that were previously exempt from the PST. If the Campbell government is so foolish that it believes an argument over minor technical points will sway the debate, it deserves to be down 18% in the polls.

There is a way out for the Campbell government. It can shift the problem to Prime Minister Harper by announcing that a mistake was made and it wants out of the HST agreement; Harper couldn't withstand the pressure. That kind of announcement would restore the tax system to what it was at the time of the election; the deficit might have to be more honestly stated, but no harm would be done by that.

If the Campbell government ends up being defeated over the HST, it will be because it failed to shift the problem to the Harper government, which offered a $1.6 billion bribe to harmonize Mulroney's tax.