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April 25, 2011

HST Robo-Calls

Only 1 out of 4 British Columbians receive an HST credit and the average credit for those who are eligible is just $52.75 per person per quarter, $17.58 per month. Compare that to the HST you pay on your monthly phone and cable bills, let alone everything else.

A major part of Premier Christy Clark's campaign to continue to impose the HST on BC families depends on understating the extent of the tax shift from businesses to consumers and overstating the value of HST tax credits.

The government has said that 1.1 million individuals benefit from the provincial portion of HST credits; that is approximately 25% of the population. Notice that sometimes figures are cited with respect to individuals and other times with respect to families which makes it hard to compare since there are many different economic families: seniors, single parents, couples with children. The examples offered by the government focus on low wage workers with large families so as to maximize the HST credit.

The budget tabled by Colin Hansen in February 2011 (Table 1.4), said “Elimination of sales tax and introduction of BC HST tax credit” cost $232 million. Dividing that by 1.1 million individuals receiving benefits yields an average HST credit per eligible individual of just $211 per person per year, $52.75 per quarter. Rather than using as an example large struggling poor families who might receive hundreds of dollars in provincial HST credits, the government should disclose how many families receive HST credits and how much. It should acknowledge that other credits will remain if the HST is extinguished. For example, they could say how many families receive under $100 or under $200. They shouldn't try to make people think that many families receive much over $300 and they should try to compare that to what those families pay as a result of the broader reach of the HST, a new tax on most services and some previously exempt goods.

There can be no question that BC has many families who are working poor, although that has been denied by successive BC Liberal welfare ministers. They can't have it both ways, claiming that many low income families receive significant HST credits while asserting there are few such families under their low wage policies. The government knows precisely how many families of various sizes receive HST credits; they should disclose how many are in distress because of poverty. They shouldn't mix the statistics on those who receive nominal HST credits with those who are in real poverty due to the BC Liberal low wage policies.

The counterpoint to overstating HST credits is understating the extent of the tax shift from business to consumers. The government initially stated, and I confirmed, that $1.9 billion per year is shifted by the HST from business to consumers. Some argue the semantics and say it is a matter of consumers paying more and businesses less, but if it quacks like a tax shift and walks like a tax shift, it is a tax shift – just like MSP going up while business taxes go down

One of the chief apologists for the tax shift, SFU professor Jonathan R. Kesselman, published a paper in February 2011 for the Business Council of British Columbia in which he argued that a change of just 0.089 per cent in the all items, excluding energy, CPI between July and December was a measure of a small impact of the HST. Notwithstanding issues with the CPI as a reliable measure, and with no test of significance, on the basis of comparisons on tenths of a percentage point change in the provincial CPI, Kesselman would have us believe that almost $1 billion in business cost savings due to the HST have been rapidly passed through to consumers in the form of many small price changes. Kesselman wrote: "Public skepticism on this point is widespread. Admittedly it is difficult for consumers to identify small price cuts across a vast array of goods and services-whereas it is easy to see the HST, which is printed clearly on every sales receipt."

The only reason Kesselman appears to have for using the December CPI figures for his argument is that is when his BC Businesses Council report was due; why pick July to December over July 2010 to July 2011, or any other period. It is ironic that Kesselman's magic ratio of a price decrease of 0.089 per cent between July and December changed when January was added to the numbers showing it increased by 0.089 per cent between July and January. We now have CPI data through March, showing an increase (all items less gas) of 0.89% (ten times greater than January) in BC and 0.74% in Alberta. If Kesselman’s argument is right, the impact of the HST has more than doubled in the past three months; however, his approach may not be the best indicator of the impact of the tax. Most people can see the impact of the tax in their household budgets: cable and phone bills are up, eating out costs more, and watch out if you have a big bill for home upkeep –painting or re-roofing! Kesselman is right that it is easy to identify the HST and hard to believe that there are any savings to offset the tax grab.

The government’s propaganda campaign to sell the unpopular tax is moving into high gear. They moved their robo-town-hall-phone-calls by a day to avoid game 7 in the Canuck’s playoffs, but those who get one of the unwelcome calls will notice that no one is on the phone line to criticize the government’s position. You not only get to pay the HST, but you get to pay the millions the government is spending to try to convince you to vote in favour of its tax.