HST and the Double Barrel Shotgun

Tuesday, May 24, 2011 03:45 AM

By Peter Ewart

The provincial government is going hunting this spring, out of season, of course, and making up its own laws as it goes along. Crooked in its arm is a shotgun, and in the breech of that shotgun is a shell called the Harmonized Sales Tax (HST). Every time it pulls the trigger, pellets are sprayed far and wide, and just about every man, woman and child in the province winces from their sting.

Since the HST was first introduced, the provincial government has focused on the benefits these little HST steel pellets will supposedly bring to the economy of our province - once they have penetrated deep beneath our skins, of course, and remained lodged there for many years.

It has been a hard job. Convincing people that being spattered with steel pellets is somehow good for them is not easy at the best of times.

One of the problems that the government faces is that the HST is a type of "consumption tax", where people are taxed for services received and purchases made. Why is the government and its big business backers so eager to impose such a tax on the people of British Columbia at this particular time?

The answer lies in what government at all levels are doing with the tax system as a whole. It is well known that the big monopolies and multinationals that dominate the British Columbian, Canadian and world economies have long favoured reducing or even eliminating corporate taxes of any kind and jacking up consumption taxes. For example, the OECD, a leading big business organization, has made the claim that corporate taxes are "the most harmful kind of tax", and that "consumption taxes" like the HST are much preferred. Similar statements have been made by other big business think tanks in Canada and abroad.

Why are consumption taxes so favoured by big business? Well, the fact of the matter is that the HST and other types of consumption taxes are "regressive" in nature, i.e., they tend to penalize the vast bulk of the population rather than the corporations and the corporate elite.

For example, say that you are a mill worker, grossing $250 a day from your job, and you buy a meal for spouse and family at a neighbourhood restaurant. The bill happens to come to $100. As a result, you will end up paying the government an additional $12 in HST. That $12 tax amounts to almost 5% of your pay for that day - just for the meal alone and not counting other purchases.

On the other hand, if you are the CEO of some big corporation, making $27,300 a day or about $10 million a year (which is not unusual among the top corporate and banking elite), the tax of $12 on the meal amounts to an infinitesimally small part of your $27,300 daily income. Even if the CEO buys an expensive steak dinner, the portion of the tax he pays for his meal remains extremely small, relative to his overall income. What to the worker is a painful "sting", to the pin-striped suit and diamond-ringed CEO is a harmless fruit fly.

Of course, at the level of the corporation, the beauty of the HST is that it shifts the entire tax from big business onto the populace as a whole. Thus the big corporations come away virtually unscathed, while everyone else is peppered with buckshot. It is not hard to see why the corporate elite is so in love with the HST and consumption taxes in general.

But the HST is not the only consumption tax. Other types in place at this time include "airport improvement" tax, fuel tax, carbon tax, tobacco tax, liquor tax, hotel room tax, and so on.

However, in that regard, there is another thing about the beautifully engraved "shotgun" (a gift from corporate friends) that the government has cradled in its arms, and which it doesn't like to talk too much about. The weapon is double-barrelled.

If you look closely, fitted snugly in one barrel is an "HST shell". But right alongside, in the other barrel, sits a shell packed with pellets just waiting to be fired. On it is stamped the words: "User Fees". The fact of the matter is that "user fees" very much resemble consumption taxes.

Here is how it works. When we buy many products and services now, the HST is added on to what we pay. This HST is then forwarded onto the provincial government and is counted as "revenue".

User fees are the same. We get a "product" or "service" of some kind from government and a "user fee" is tacked on just like a consumption tax such as the HST. Once collected, this "user fee" is also counted as "revenue" by the government. It is an identical process, i.e., we pay the government for "consuming" something. However, this payment is registered not as another imposed "tax", but rather as the more innocently termed "user fee". But it’s just another face of the same coin.

Here are just a few of the bewildering array of "user fees" that British Columbians must pay to various levels of government: MSP premiums, Pharmacare, medical test fees such as the PSA, ferry rides, public transit fees, hunting and fishing licenses, inspection fees, tuition fees, parks and recreation fees, school fees, public transit fees, hydro fees, highway tolls, motor carrier licenses and registration, and a whole slew of other "permit", "registration", "licensing", "application", "service", "rental", "improvement", and "administration" fees and charges.

And the list keeps being added to year after year. For example, last year British Columbians had a "convalescent care fee" imposed on them by the BC Liberals. What this means is that, while recovering in a short term residential care bed after a major operation or illness, you will now be charged $29.40 a day for "personal care support". So, precisely at a time when you are most vulnerable, the government lets off another volley against you.

Add these "user fees" on to the multitude of existing consumption taxes, and we have literally hundreds of "pellets" hitting our bodies every single day of our lives without mercy. "Hunting season" is now all year round. And what started as a small gauge shotgun has now morphed into the size of a blunderbuss or "elephant gun". And now, of course, the government wants to enlarge the "bore" of the gun even further with the HST.

But the "double barrel" of consumption taxes and user fees have still another "useful" purpose for it. Over the last few years, the provincial Liberal government has strutted around in plaid shirt and hunting vest, crowing far and wide that it is the "big white hunter", bringing down taxes for all British Columbians.

But this is the claim of a poacher. While the BC government was lowering income and corporate taxes, it was also raising user fees substantially for British Columbians and bringing in new consumption taxes.

Indeed, right when it was supposed to be "cutting" income taxes, it was jacking up MSP premiums and Pharmacare charges, imposing the "convalescent care fee", as well as a host of other fees. According to the provincial government's own "Public Accounts", it raised $4.1 billion from "fees and licenses" alone in 2009/2010, an increase of $438 million from just 4 years before. Even that amount does not capture the full extent of these "user fees" as some are undoubtedly hidden in other revenue streams and categories. All in all, it amounts to "taxation-by-stealth".

And then there was the carbon tax, which, "wrapped in green" was imposed back in 2008 by the Campbell government and now brings in almost $1 billion a year.

There's an old saying that applies here: "If you throw a tax out the front door, watch it fly back in again through the window." The current provincial government has carried out this little trick again and again throughout its entire term in office.

But now, with the imposition of the HST, it has stumbled headlong into a bramble bush of public opposition. With no clear way out of the thorny bushes clawing at it from all sides, the government has been forced to conduct a provincial referendum on the tax. In an attempt to rescue its tattered, torn and bleeding image, the Clark government is now claiming that British Columbians must choose, for all time, between the HST and the old Provincial Sales Tax (PST). But even on that so-called "choice" it has got it all wrong.

Like the HST, the PST is a consumption tax. One crucial difference, however, is that the PST is not as "broad" as the HST, i.e., it taxes a fewer number of products and services, and, as a result, people pay less. But it is still the same kind of overall tax "system", i.e., one that is regressive in nature and based on consumption.

What we need, as British Columbians, is a process through which we can discuss, debate and decide upon whether we want to have a regressive consumption tax system at all or whether we want to adopt another kind of tax system that favours the interests of ordinary British Columbians (and there are alternatives).

The provincial government and its big business backers do not want to have that kind of discussion. They want to keep it within the parameters of a "double barrel" consumption tax / user fee system, with no other choices presented than the HST or the PST. In that regard, they especially want the HST because it shifts more of the tax burden away from corporations and onto the backs of ordinary people.

One thing is for sure. If the HST is voted in, there will be no further discussion. Instead, the government will take it as a mandate to cut corporate taxes even further while hiking up user fees and other consumption taxes.

However, by voting to kill the HST, we will have forced a defeat on an arrogant government, and at least the door will be open to considering what kind of tax system should ultimately replace the old PST.

It's about time we stopped this "double barrelled" taxation. Let's spike this blasted Liberal scattergun and put an end to the HST, once and for all. And, while we are at it, send that "big white hunter" packing also.

Peter Ewart is a columnist and writer based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca

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Posted on Tuesday, May 24, 2011 03:45 AM in Views by Peter Ewart

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Comments

Posted by: Born in BC on May 24 2011 5:29 AM

Have you ever lived in another province? Try it! You will learn quickly.

On your other point I would suggest that corporations never really endure a tax burden. If they pay something it will simply be passed on. All costs find there way to bottom of the pyramid, and that means you and me. It is a political and financial illusion that works on people that lack understanding to tax a corporation. If Canfor pays $1 in tax then the price of lumber simply rises OR they close a mill. Either way it is the purchaser of the good OR the worker that pays.

Posted by: Born in BC on May 24 2011 5:39 AM

Lets compare the two types of taxes. Income tax and consumption tax.

Income tax, especially the incorrectly named "progressive" income tax discourages productivity. Why work harder and harder and sacrifice more and more to earn a smaller part of each dollar? Do the voters like it? Generally yes. Is it good for an economy? Generally no.

Consumption tax is so much more appropriate for so many reasons. Does consumption have huge costs on the enviroment (and the people)? YES. Should people be encouraged to consume less? YES.

Your arguments are always left wing rants disguised as tax issues. Is wealth unevenly distributed? Yes. But how well is communism working? (Hint - not well).

Lets have the debate here and now!

But remember taxes pay for services. And I can tell you BC services are generally better and cheaper than other provinces. So dont tell me that there is a better way unless you have an example. No one likes paying tax but we need solutions no whining! Saying "less tax more services" is silly and pointless. We need to pay for what we get AND WE GET ALOT!

Posted by: Eagleone on May 24 2011 6:10 AM

If Canfor is exporting 85% of their product, then it is the export market that is having the additional tax (user fee) passed on to them. Then the export market are paying their fair share as foreigners for the tax burden to have access to the infrastructure that provides the resources they benefit from. If its about paying ones fair share that is... and if its not about tax slavery for the domestic 'citizen'.

I think Peter sums it up well.

The thing about taxing the corporation directly with an income tax is that first that corporation has to be making a profit to be taxed... then that tax is progressive to the level a corporation profits from doing business in our society.

However with HST the small business owner is taxed directly on their services and labor costs to employ people based on their revenue and not their profits (pass directly to the consumer)... this benefits the large monopolistic corporations that are well established at the expense of free enterprise grass roots looking to make it past start up when profits are slim and growth of the enterprise is the objective.

HST is anti free enterprise and anti entrepreneurial in its insidious flat tax on revenue.

HST would be more acceptable if it was on true value added and not mostly made up of taxing labor costs the equivalent flat tax of 12%. Make all labor costs deductible and one removes a large portion of the flat tax penalty on the working class... then the problem becomes that the HST is an inefficient way of taxing the true value of a business enterprise income.

Posted by: Beanman on May 24 2011 7:08 AM

Born in BC you say taxes pay for services so let us ask some people what they think of the services they have received. How about we start with the lady recovering from brain surgery who spent three days in a hospital hallway or the numerous people laying in a converted coffee shop,and of course the elderly gentelman,who has probably done more for this province than you and I ever will,spending his time being cared for in a converted storage room. Are these services? I agree we need taxes and maybe you can answer this? Why does the plough horse feel the whip more?

Posted by: Palopu on May 24 2011 8:47 AM

My experience is that most people Born in BC included make reference to the need for taxes to pay for services, however they never go into detail as to how much is spent on actual services, and how much is spent on the **administration** of these services.

In addition they rarely make reference to the Billions wasted on such ventures as the Olympics, the Sea to Sky Highway $500 Million and counting. The extremely high cost of Government itself.

As outlined by Peter why is the Govenment taxing us for services, and then putting in users fee's to pay for these services.

In every Country in the world, Govenments get carried away with taxes, to the point that taxation becomes detrimental to the Country. The old argument that the Government needs the money for services is not a valid argument, mainly because the money usually goes into General Revenue, and then is dispersed willy, nilly, and we dont know where the hell it goes. We can however if we chose find many projects through out the Province that are not necessary, but are eating up huge dollars.

The tax man has been eating at our flesh forever. There is no problem rendering onto Cesear that which is Cesears, however there is no need to render to him that which is not his. It takes a Robin Hood to come along and kick the S..t out of the Sheriff of Nottingham, every once in a while to get things back in perspective.

Most European Counries that have experimented with the Value Added Tax, in addition to income taxes, excise taxes, etc are now basically bankrupt. The whole Eurpean model of taxation, and services, has been a dismal failure.

We have avoided the VAT or HST type of tax to some degree, and what we now need is a reduction in taxes, in Canada, and a better distribution of tax dollars, to provide services that are **really** needed to those people who **really** need them.

The day of Governments spending Billions of dollars on stupid projects, just to get re-elected needs to come to a halt.

Smaller Government, less taxation, and more fiscal responsibility would be a refreshing change.

Posted by: gus on May 24 2011 9:20 AM

"why is the Govenment taxing us for services, and then putting in users fee's to pay for these services."

Perhaps they do not want to raise taxes to the extent that everything ought to be free to everyone.

I mean, why not just raise taxes and provide free mail services instead of going through the expense of printing stamps and distributing them, weighing packages, etc. Why not get rid of all that "administration" and simply drop the mail into the nearest box and get it delivered to wherever you want it to go within Canada.

Why not have free parking? Up the property taxes instead. Free water, up the property taxes.

Or ....... provide nothing, reduce taxes to zilch, and let free enterprise take care of the rest.

Posted by: gus on May 24 2011 9:23 AM

Born in BC has it right. One way or another, those who live on this earth and consume have to pay whether with money or sweat equity.

So, what we are haggling about is what? How that payment is to happen. To some, equity is important. To others, it is more "every person for themselves".

Posted by: jakeadoo on May 24 2011 11:35 AM

I think you have to be very careful as to how governments place the onus of paying for all services and the products we consume.Granted we were getting carried away as to the amount we consumed,but be careful what you wish for,as it could have a very detrimental effect on everything and everyone.Let's just say we started to only consume only the things that were for each and everyone to sustain life from today.So little Joey breaks his XBox and mom and dad say no more,he also wants to buy some new music,no once again.Little Jenny wants some make-up and hair products,no can't afford it.The car finally gives in,well we can't afford a new or used one.This kind of thinking is applied to everything except,food,shelter,clothing,fuel,heating,health,and medicines.This kind of living would have a disasterous effect on how our world functions today.People would lose employment,businesses would close,basically everything would come to a grinding halt and would be far worse than applying some taxes to corporations and the elite.Just my take on things if you push things too far in the corporations and the elite's favour.

Posted by: gus on May 24 2011 12:02 PM

I think you are totally right jakeadoo. I do not think that the push is in either the coprorations' or the so-called elite's favour at all.

Want to hear the corporations protest? Drop the tax on personal vehicles under say $25,000, increase it to 15% on those from 25,001 to $35,000 and and 10% additional for each $5,000 after that. A personal car over $80,000 will be taxed at 105% ... so it will cost $164,000.

Adjust it to suit the general population's acceptance of this, but I think that the notion is one that addresses the real issue.

We are moving form income taxes which are variable based on the income of the individual. The accepted method of applying an income tax has been to start of with 0 at the low end of the income scale and eventually end up at a 30% o 50% tax rate at the highest income level, depending on which country and jurisdiction one looks at.

We seem to be slowly dismantling that and replacing it with user fees and consumtion taxes which are equal to everyone. Well, a whole basic principle applied for almost a century is going out the window without any real input as to why and what the end effect will be.

It is trial by error. And the error will be primarily borne by those on the low end and middle of the income scale. The upper 10 percentile of earners, for the most part, do not care.

Posted by: Outwest on May 24 2011 2:07 PM

I don't care what you call it, the Fact is you are being Taxed twice, first when you earned the Money and now when you spend it, so many Countries are doing this now that we think it's normal, way to go Government .

Posted by: ski50 on May 24 2011 3:33 PM

Let's all agree on one thing. The government needs money to provide services. The question is who do they get it from. If they've raked in tons of cash from the HST, then we haven't borrowed that money which is good. Remember, we're in a deficit. There is no pile of money somewhere with Christy Clark rolling in it. We're just falling into the hole a little slower.

The sore point is the tax burden has been shifted from corporations to us. Now, if it's true corporations are using that extra money to grow, or to compete internationally, and that translates into jobs for us, we should probably suck it up. But, if the corporations instead are paying the extra profits to foreign shareholders, or bigger bonuses to managers, we're getting screwed and tatooed - possibly. If the corporations are able to give a better return on money invested, they attract more investment capital - and grow - and provide jobs. Problem is no one really knows, and no one can really tell. But what thing is sure. The second the HST goes out the door, the PST will come right back in again, and the government will still need a crap load of cash, and they will likely just have the PST apply to a broader cross section of goods and services to get it. So we'll win the battle, but still lose the war.

Posted by: NMG on May 24 2011 3:47 PM

"Income tax, especially the incorrectly named "progressive" income tax discourages productivity. Why work harder and harder and sacrifice more and more to earn a smaller part of each dollar"

It's quite simple really. People who have the drive to earn more and more money, generally do so out of a sense of pride, accomplishment and desire to succeed at whatever it is they are doing. Their motivation is internal and the higher earnings are usually a by-product of that drive. These people don't even think about tax rates and tax brackets as they are working their butt off to get ahead.

Generally speaking, I'd even go so far as to suggest that the people who say "I'd work harder but the tax rates don't make it worthwhile", don't have the ability or drive to get to that spot in the first place. That line is nothing more than an excuse and in no way do I believe that progressive rates and brackets have any REAL impact on our society's ability to take advantage of the people who have that drive to make more money and pay more tax as a result.

I have no problem whatsoever with paying progressively more in tax as my income rises. It's fair. If I make more, I can afford to pay more as a percentage of my income. Somewhere along the line I think we've let individual greed and interest come ahead of our support for a healthy and collective society.

This is a relatively new phenomena in our recent history and it's leading us down a very bad path IMHO. The problem is that many people have been brainwashed into thinking that this is the best system, even though we never really had this type of thinking supported on a really large scale until the last five years or so.

How is it that our country functioned perfectly well for decades and decades under this "oppressive" system of higher tax rates than what we have now, yet all of a sudden that system needs completely thrown out? Is it any coincidence that there has been more and more instability in our economies and societies at the same time that this "needed" change in philosophy has been adopted? Is there any coincidence that this philosophy is also contributing to a rapidly shrinking middle class and that we now have user fees for things that used to be covered by our tax dollars?

Be careful what you wish for folks, it isn't always as it appears.

Posted by: Andyfreeze on May 24 2011 4:44 PM

Good post at 3:47 NMG!
And yes,we do need to be careful what we wish for.
Very careful,indeed.
It is interesting that the little,warm fuzzies just keep coming from the Clark Liberals.
Today,Blair Lekstrom(remember Blair Lekstrom?)put a cap on ferry rate increases of 4%.
Too little,too late,but then that likely isn't why he did it anyway,is it?
All designed to impress in their favour.
The Liberals are NOT going to allow the HST to be defeated.
It is NOT and option for them,and one way or the other...it is staying, regardless of what anyone else thinks or votes.
Just watch.
Now don't we just love Liberal democracy?

Posted by: Beanman on May 24 2011 5:42 PM

helping Businesses grow so that they will employ more...this maybe true but those being employed are not in this province or even in country. When was the last time you made use of a call center or a help line and spoke to someone in India or the Phillipines or some other country where wages are paid daily and not hourly

Posted by: Pojeb_sa on May 24 2011 8:43 PM

I disagree business will always pass on a tax or a fee to their customers. If all business operated without profit, this would be true, but business is completely concerned with profit. Nearly everything we buy is imported from China or India, for an incredibly small fraction of what it would have cost to produce it domestically, but sale prices haven't come down nearly as far as the cost of production.

You can shop online and order things directly from China shipped free to your door for often 10% the cost of buying the same thing locally. People
have little idea how much markup there is on items produced in these overseas factories.

Here is an example. I have an old gas weed whacker which has a very small piece of rubber/vinyl for a gas line inside of it which had gone rotten. The same was true of the primer. Other than this, the weed whacker is fine. The cost of a new primer and about 6 inches of gas line works out to $15 at Canadian Tire, plus taxes.

A brand new Gas Powered trimmer was on sale for $99. The actual parts needed in all likelihood cost $.02 in China, and could have been resold in Canadian Tire for $2 each and still have been a very handsome profit.

By the way, I ordered both parts directly from China for $2, with free shipping to my door. The global economy can hurt businesses the same way it's hurt labour, and since we don't have any real manufacturing jobs left, I certainly don't mind outsourcing my purchases to the places business have outsourced our jobs to.

Business can threaten to pass on any additional costs they bear onto us, but more and more of us plebs are beginning to wake up to what the cost of things truly are, and how business are ripping us off. Mcdonalds are still making a profit selling their garbage for the same price across the country.

Here are some places for my fellow plebs to comparison shop.

http://www.buyincoins.com/
http://www.focalprice.com/
http://www.dealextreme.com/
http://www.priceangels.com/

As our business friends like to tell us, "Enjoy!"

Posted by: socredible on May 24 2011 11:17 PM

The move to 'consumption taxes' enables the government to tax you on your spending, not only from what you've earned, but also from what you've borrowed.

With Canadians, on average, now in hock to the tune of $ 1.40 for every $ 1.00 they have left in disposable income, and this ratio likely to rise still further in future, it's easy to see the attraction. Both to the government, and its bankers.

Unfortunately, for both them, and us, such taxes are longer term recipes for disaster unless we're willing to also make changes in our financial system that would enable it to be more fully 'self-liquidating'. Instead of as it is at present, where it is becoming ever the less so.

Posted by: Harbinger on May 25 2011 9:26 AM

Paying a tax on a tax kinda sucks too.

Posted by: gus on May 25 2011 3:32 PM

Overheard at the latest HST forum:

You are earning money? We will need some of that so that we can provide common services to everyone. The more you earn, the more you pay.

Oops, we are not collecting enough for medical services, so we will need to charge everyone some $60/month extra for the MSP. I don't understand what you are asking. Why should you pay the same amount as a person making 10 times as much? Hmmm. How about "we want to treat everyone equally"?

The sales, oops, sorry, value added tax? Well, yes, your salary went to adding value to something and you are right, we are taxing you for the benefit you received for that effort. So why are we taxing you once more when you buy something that someone has added value to and has already paid a tax for doing so? Gee, how about that we want to treat everyone equally. Yes, I heard all about your argument regarding the gal who is earning 10 times as much as you. But she is going to be buying 10 times as much stuff too, so will be paying ten times as much tax as you.

So, I walk away, enough of that already. Too many dummies in high places making dumb decisions based on junior people suggesting a few times too often "hey, why don't we try this."