Taxing Questions: What to Make of BC’s HST Debate

May 30th 2011: Wednesday, the BC government unveiled its plan to “fix” the HST and make it more palatable to the public in time for its June referendum. Premier Christy Clark is offering cash to families and low-income seniors: 560,000 families with children will receive $175 per child under the age of 18, while 200,000 single seniors and another 30,000 senior couples with low-to-modest incomes will get a maximum of $175 each.

The government has also promised to cut the HST rate to 10 per cent by 2014 if British Columbians vote to maintain the tax next month. The cut would come in two stages: to 11 per cent on July 1, 2012 and to 10 per cent on July 1, 2014.

The tax cuts will be financed with an increase in the general corporate income tax rate from 10 per cent to 12 per cent on Jan. 1, 2012 and an increase in tobacco taxes. In addition, the reduction in the small business tax rate to zero, which was to have taken effect on April 1, 2012, is being postponed indefinitely.

It’s difficult to know what to make of all this: since the HST was introduced economists, politicians, former premiers, think-tanks, commentators, columnists, taxation experts and members of the public have all weighed in and it seems that amidst all the noise there is no consensus to take to the bank.

What’s more, there is a deep sense of distrust with the way the politicians have handled the HST. At the outset, the BC Liberals had said they would not bring in the HST. But once elected, they implemented it anyway. They also oversold the HST, relying heavily on a report from Calgary economist Jack Mintz who said that it would trigger 113, 000 new, “better-paying jobs”. Now, it turns out that the government-appointed panel has undermined several of the government’s selling points for the HST. The four-member panel found the HST will bring more modest benefits to the B.C. economy than initially believed, create nowhere near the 113,000 new jobs hoped for when the tax came into effect last year, and is far from revenue-neutral.

“Buying them with their Own Money”

The day the proposed changes were introduced, NDP leader Adrian Dix led off question period with a quote from Premier Christy Clark herself. It came from a March 21, 2011 interview on CKYE radio during which Clark said: “We aren’t going to be talking about trying to reduce it by a point or two before the referendum. I mean, I think people will see that as buying them with their own money.

“Also, though, too, cutting the HST by one point is more than $800 million out of the budget this year and every year after, $1.6 billion for a two-point cut, and we need to ask ourselves where we’re going to get that money, because either we’re going to have a $1.6 billion bigger deficit or we’re going to have $1.6 billion fewer heart operations, special needs teachers, school facilities, hospital emergency rooms. I mean, that’s where the money comes from, ultimately.