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June 12, 2011

This article was written for publication in the Times Colonist.

I'm Voting YES

I am voting YES to extinguish the HST and reinstate the PST/GST system because the system we had until July 2009 was better for my family and for the BC economy.

There are hundreds of things that used to have no provincial sales tax and now cost 7 percent more: vitamins, basic cable TV and telephone, concert and sports tickets, energy efficient appliances and dozens of services from haircuts to lawn care, from veterinarians to accountants. Voting yes will reduce the tax on a large part of your family budget from 7 percent to 0; compare that to the government’s promise to reduce it to 5 percent in July 2014. Estimates of what the higher HST cost means to the average family are subject to debate, but you don’t need to reply on economists since you can look at your household expenses and determine what the HST costs you. If you didn’t paint or re-roof this year, look ahead and see what it costs then.

Tax changes create winners and losers. The PST did not apply to most labour, so services like lawn mowing, house cleaning and restaurants (the service of cooking your dinner) weren’t taxed. The HST increases what is taxed, applying it to those services. Even pro-HST economists know that increasing prices means reducing demand; higher prices equal lower sales. That is why the HST reduces employment in the service sector of the economy. The government listed HST winners in its July 2009 news release, but unless your family builds a lot of roads, it probably isn’t a winner. There is an enormous difference between capital intensive construction like road building and labour intensive construction like roofing or painting. The PST favours labour intensive construction; the HST hurts it.

The government originally claimed that the HST was “revenue neutral”, meaning that government took in as much with either tax. Now it admits that the HST raises more money and it is trying to spin that as an advantage for the tax. Of course that means you are paying more tax and have more reason to question the credibility of their promises.

The government says that if you vote yes to stop the HST, it will have to repay $1.6 billion to Ottawa. Of course negotiations will occur, but even if that were true, it only means that the provincial debt would have to be honestly restated as it would have been given the promises made to you during the 2009 provincial election. Adjusting the province’s balance sheet doesn’t hurt you the way shifting $1.9 billion per year (forever) in taxes from corporations to families does.

Supporters of the HST claim that businesses have rapidly passed through their tax savings in the form of lower prices. You might have missed that in your family budget. In a technical article available on my website, I demonstrated that the Business Council study that makes that claim is fundamentally flawed.

Supporters of the HST claim that it will stimulate investment and thereby economic growth. They ignore the fact that ten years ago investment in production machinery and equipment was made exempt from the PST. The independent panel on the tax reduced claims about the HST’s impact on job growth over the next ten years to a level that would not be measurable against normal growth. Those forecasts are for 2020; the immediate impact is negative on the service sector.

I will vote yes because the PST is best for my family and for the economy. There is also an argument that a yes vote is best for democracy. This is the first time in BC history when voters can tell the government what they think about a surprise tax announcement just weeks after a provincial election. If the government gets away with imposing the HST on you, are there any limits to what it can pull-off?