Tuesday, October 5, 2010

HST: Talking Taxes

This week I’m doing something different. Like a decent cover band, I’m taking requests. Not at all like those lame bands that refuse to play Rage Against the Machine for my friends and I, imbibing respectful social drinks. I was asked to look into the HST.

Harmonized Sales Tax. It’s one of those innocuous phrases that really doesn’t reveal too much about it on the surface. The tax has been harmonized between the federal GST (Goods and Services Tax) and Provincial Sales Tax (of whichever province you are discussing).

I was linked this article discussing the tax. To be truly honest I had not given the HST much consideration. I consider myself an informed and active member of the citizenry, but I didn’t really may much heed to the HST while it was in the height of the debate nor when it was introduced. Why not? Well, I think people often overreact to taxation. That’s not to say that tax increases should not be challenged, but there are some people out there that seem to think there is no such thing as a good tax increase. Clearly that cannot be true, there has to be a justification to, at times, raise taxes, temporarily or permanently.

In the province of Ontario we have structural deficits. That means that our government now spends more than it takes in in revenues, putting the recession aside. The deficit, the annual shortfall is presently at $20 billion. The HST was introduced to close this gap and streamline the taxing process. So, I pose the following question. If we are not to increase taxation, what $20 billion worth of spending and programs would you like to cut? Education? Infrastructure? Healthcare?

As the article’s author, Tony Wilson, points out, the HST is more progressive than the GST, that is it ‘punishes’ low-income individuals less through greater compensation, at least in British Columbia, the case in Ontario, I’m not familiar with the details.

In a way, an increase in the sales tax is the fairest way to increase taxation. Think of it this way. If you increased taxes on income, you’re either employing class warfare and targeting the rich, or you’re pressing on the middle-class, who already have a significant tax burden. Corporate taxes? Well, in the Age of Globalization provinces must remain competitive to ensure that international business is drawn to our shores. Corporate taxes can hurt employment and future investment. Fees almost never raise a significant amount of money. Sales taxes are paid by everyone – citizens, businesses and governments. It’s a tax on everyone because everyone in society buys things. That’s the beauty of a value added tax.

As Wilson points out, the marginal impact of the tax may be very small. Overall, people of British Columbia and Ontario may see very little change in the amount they pay in taxes.

Taxes are a really sensitive issue for some. See, United States of America – Tea Party Movement. I see taxes as the price we pay to live in the type of country and province we do. I find the tax rate my family and I pay reasonable, and when I make a decent salary and government runs off with a good chunk of it, I’ll likely nod and say, that’s the price of living like I do, where I do, and as happily as I do.


Jake said...

That link was an interesting read. Being of rather low income, with utilities included in my lease, I have not noticed much, if any, of a loss of money.
My father complains a lot about the rise on his hydro bill, but never seems to discuss how it affects his small business. This makes me want to bring it up with him some time.

Also, Ive been reading this since August but have neglected to say much. Your blog is very interesting. Im glad to see you've been keeping it up, and look forward to more.

SJL said...

Thanks for the comment Jake. I agree with your assessment that HST has had a marginal impact on our day-to-day lives.

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