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Corrected May 29th: Ontario families can receive three payments totally up to $1,000, NOT up to $3,000 in the form of three payments of as much as $1,000.

May 25, 2010

BC vs. Ont HST Impact on Families

A comparison of the Ontario and BC HST websites provides more reasons to doubt the credibility of the Campbell government. The websites yield widely different figures for the impact of the HST on typical families. Ontario says it will hurt, and attempts to mitigate it, while BC denies the pain.

The BC Liberal's argument for the HST is based on a contradiction. The 2010-2011 budget documents (around page 100), claim that in its first full year, the HST will raise $6.9 billion but, after various point of sale instant rebates for things like "motor fuels", that is reduced to $5.4 billion. The HST is expected to save businesses $1.9 billion in taxes; the HST shifts that $1.9 billion to BC families. Simple arithmetic suggests that dividing $1.9 billion by BC's population of 4.5 million yields a shift of $422 per person, or $1,688 for a family of four. The contradiction in BC's figures lies in reconciling provincial revenue from the HST and the cost shift from business with the impact on families.

If the province is going to raise about the same amount from the HST as it does from the PST, and if businesses are going to save $1.9 billion, then BC families are going to make up the difference, for an average of over $422 per person. Notwithstanding that simple math, page 100 of the last provincial budget claims that a family of four with $30,000 income will pay $227 more because of the HST (before tax reductions and credits), and a single person with $80,000 income will pay only $394 more.

Compare BC's estimates to the HST estimates Ontario provides: Ontario's tax is 8%, BC's 7%; Ontario taxes fuel but BC doesn't (BC has the carbon tax); Ontario previously taxed restaurants, in BC that is new with the HST. Allowing for the differences, Ontario's website provides examples of the impact of the HST on typical Ontarians (scroll to the bottom). It says that in Ontario a single individual with $30,000 in income will pay $285 more (before tax adjustments), and a senior couple with $80,000 income will pay $895 more. Ontario has provided transition benefits of up to $1,000 over three years to mitigate the impact of the HST. They argue that it will take that long for the market to adjust to changes; others argue that some businesses will never pass "savings" through to consumers.

One way or the other, there is an enormous difference between BC and Ontario when it comes to estimating the first year impact of the HST. BC provides no example of anyone paying more than $400 because of the HST, while Ontario's website offers examples of families who will get hit with over $800 in first year. If BC is going to raise as much from the HST as it did from the PST while businesses save $1.9 billion, a typical family of four is going to have to pay more than $1,600 more - either that or the BC Liberals have to redefine basic arithmetic.

BC's accounts don't balance. Ontario's tax may be as unpopular as BC's, but at least Ontario admits that families require assistance, up to $1,000 per year for three years, in order to adjust to the shock of a major tax shift. Ontario went through a consultation on the HST; unlike Campbell, the McGuinty government didn't say one thing before an election and something radically different several days later. The particulars of the tax shift may take years to assess, but almost everyone can recognize an election lie as blatant as Campbell's HST.